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), and the bottom in September, 2001.

Correction is likely for HSI

The author noticed that both in US and HK, the fundamental economic indicators (lagging indicators compare to stock market) are improving steadily which promote confidence among the investment community. Given the extremely low interest rate which is highly likely to last for this year, the author expects that the US and HK stock markets to move up wards on the medium term, but a correction for HSI is likely for the following reasons:

1. For HSI, the 14,000 points is a historical resistant point in the past 7 years for both the up moves as well as the down moves (see fig.1 showing 3 years), therefore, 14,000 point or this range has gathered a very large selling pressure. As a result, the first attack will not penetrate it.

   

2. HSI rise steadily for 5,700 points without any clear correction from the very low point of 8,300 point (see fig. 1 ). This is not the normal behavior of stock movement. For example the HSI rise during 1998 to the historical high of the 2000 took three waves to go up.Given these reasons, it is logical to expect that HSI would correct below the 14,000 point, and the extent of correction will be around the standard 1/3 of the rise, that will correspond to 1,900 points.
3. From technical analysis, HSI is now seems to be forming a wedge formation (see fig. 2). The wedge is a common top formation such as the HSI top in March, 2000.
4. NASDAQ has broken the long up moving channel down side ( see fig. 3 ), implying that it will take a flatter movement. DJIA is still within its up move channel, but it failed to touch the upper return line before turning downward ( see fig.4 ). This hint that its low point may break the channel lower line, a bad sign.

Given these reasons, the market may peak around 14,000 point. Investors may consider buy them back during the correction. For those investors that are still hesitating whether bull market has come to HK, the author's response is that he had already declared that the bull had come to HK by June 13,2000 with his reputation behind such statement, so this correction will be an excellent chance to get in.