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).

HSI will challenge the 15,000 point

In the last article (Mar. 3,2004),the author forecast that HSI would reach 14,000 points, but a big correction will follow. Now both forecasts were fulfilled.

Now the author forecast that the big correction will end, and the HSI will resume its upward movement which it will penetrate the 14,000 point barrier this time, and proceed to challenge the 15,000 point.

The reasons for such forecast are outlined below:

1. With US interest rate still on its forty year's low, and the bull phase of the business cycle is going strong. Stock markets should continue its bull phase untill interest rise to a moderate level which is likely to be two years ahead. As for now, it is quite safe to say that stock markets are in its bull phase.
2. From the technical analysis, one noticed a turn signal in HSI. From the recent HSI, one noticed the wedge formation described in the last article (Mar. 3, 2004) as the chief evidence for the forecast of the turn. This wedge formation (see fig. 1) was confirmed by breaking the lower line. HSI index then rise again, hitting this lower line from below, and this pattern is named by the author as the kiss good bye (KG) meaning that it will proceed away from home as the term implies. With two peaks, one can draw a significant line. Using the 14,000 pt top and the KG pt, one draw a line for the correction pathway (see fig. 1), and HSI did slide downwards just below this line. After droping over 1500 points,but slightly below the expected 1/3 of the rise, HSI rise sharply to penetrate this downward line. The author read this as the sign that the big correction will end, and HSI will proceed back to its rising path, and will penetrate the 14,000 barrier.
3. In the last article (Mar. 3, 2004), it was mentioned that NASDAQ had broken its long channel down side, and this also was cited as an important sign of weakness. In fig. 2, one noticed that NASDAQ is forming a perfect correction channel, but by now has reached the channel's upper line, poised for a break through upside. In the last article, the behavior of DJIA was also mentioned, and the author also point out a weak hint, but it also turn out to be true. DJIA did break its long channel down side, and also formed a correction channel with a well defined lower line (see fig. 3). Now DJIA is still inside this correction channel.

Base on the technical analysis of HSI, NASDAQ, and DJIA in the past three months,all three index have roughly the same trend, but give out different turn signals. The author can sense turn signals from HSI earlier than NASDAQ and DJIA in both the peak and the end of the correction, and in both cases, DJIA is the last one to provide sign of turn signal. Therefore, HSI can be used as a leading indicator of DJIA.

Finally, the author believes that now is a good time to buy more stocks.