HKHSI and NASDAQ Downturn (5/5/2000)

Major Correction in the Horizon (4/15/2000)

Prof. Kai Keung Mark is a retired professor, Dept. of Biology, The Chinese University of Hong Kong and Dept. Head and Principal Lecturer, Dept. of Science, Hong Kong Institute of Education. He has three biotechnology patents. He uses his understanding of high technology to forecast market movements . He has published 13 articles in Financial Trend, and leading Hong Kong stock analysis journal plus many other Mark's letters since 1987. His prediction reliability rate reached 80%. He accurately predicted the October crash (10/18/87), the bottom level of 1990(3/5/90), the peak level of 1994 (5/11/92), the peak level of 1997 (2/12/96), the peak level of 2,000 (8/22/99), the peak in March 2000 (2/20/2000), the bottom in September, 2001, the US bottom in 2003 (5/28/2003), the HK bottom in 2003 (6/13/2003), the US peak in 2007 (11/14/2007), and the HK peak in 2007 (1/9/2008).

Bull Sign for HK stock Market

The author's last article (5/28/2003) deals with the US stock market, and touches only slightly on the Hong Kong stock market. Now let us switch our focus to the Hong Kong scene, Before going to the future, let us first look back. HSI formed a double head in 2000 with tops around 18000 points (see fig.), and with neck line (NL) around 14,000 points. The index break this neck line down side confirming the double head top formation.The double head formation also provide reliable estimate on the extent of drop (or rise). The distance between the peaks of the double heads to the neck line (NL) will be equal in distance to the minimal drop below the neck line at the point of the break. This means that the minimal drop will reach 10,000 on a linear scale, but on a semi-log scale, it will reach slightly above 9,000. Now looking back, one appreciate the reliability of the forecasting ability of the double head formation, but even the author could not believe the indicated out look at the time when the index penetrated the neck line down side. The take-home lesson in this case is that "never ignore the implications of the head and shoulder formation and the double head formation."

Now let us look for the bull signs. One found a very long fan line III (see fig.) which place seven points on a straight line, so breaking such a long fan line means a significant break. Breaking fan line III is a standard bull sign for bear markets. Therefore, breaking this long and well challenged fan line III is a good and clear declaration that bull market has return to Hong Kong. Besides breaking the fan line III, there are other technical and psychological implications for the bull's return. This include the confirmation of the head and shoulder bottom formation of DJIA in the author's last article (5/28/2003). This will bring confidence to world wide investors including those in Hong Kong. The Hong Kong stock market was in bear market for over three years, a very long one, so the pendulum should swing toward the other way. There are also many fundamental factor that favors the stock market to go up, and they are listed below:

1. Low interest rate. This is always the major economic recovery force.
2. China wants to help Hong Kong out of economic recession, and several favorable fundamental elements are coming.
3. Weak USD promote more export. In the past, Hong Kong economy has been export driven, and export has already been good.
4. The past recession has significantly reduced Hong Kong's property and other prices, so it become a even more attractive center for business and tourist.
5. The up move of US economy will help Hong Kong.
6. Long term oil price should go down. This helps world economy including Hong Kong.
7. Hong Kong is the front gate of China which enjoys a 7% growth, best in the world. This will help Hong Kong in many directions.