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).

Prof. Mark's speculation on the coming peak of Hong Kong stock market

The author has been quite accurate on his forecasts on the movements of Hong Kong stock market for the past three years. ( May 28, 2003; June 13, 2003; Oct. 1, 2003; Dec. 29, 2003; Mar.3, 2004; April 1, 2004;June 24, 2004; Feb. 8, 2005; July 22, 2005) This led him to challenge himself with a even tougher question: When will HK stock market peak, and how high it will reach.

The following describe how Prof. Mark approach this tough question, his logic, reasons, and references, and the crucial thing is how he arrive at his conclusion or speculation.

The author believes that in stock market, history usually repeat itself in roughly the same way. He also believes that stock market behaves like a dog with many habits or patterns that do not change with time. Using the 94/95, 97/98, 00/03 peak/trough as reference, Hong Kong stock market demonstrated clear business cycles of bull and bear periods. It is these believes or understandings that allow him to make accurate forecasts in the past three years. From the past three business cycles in HK, he noted that bull markets last longer than the following bear market, and with slower rise compare to the speed of drop in bear market. In each bull rise, there seems to be three major waves, and each major wave is constituted by three smaller waves. This magic number of three is fascinating, but is described in Eliot wave function, a universal feature in the living and physical world. One can check the author's model with the past three business cycles as well as the current cycle. It turn out to be true in most cases. Now look at Fig. 1, one can see a 13 month cycle bull phase I from May, 2003 to May, 2004, with three consecutive up move waves ( 1, 2, 3 peaks ), followed by two down move waves ( 1, 2 bottoms ). The bull phase II from May, 2004 to May, 2005, lasting 12 months, also contain three consecutive up move waves (1, 2, 3 peaks ), and followed by two sideward waves ( 1, 2 bottoms ). The bull phase III was initiated by June, 2005, and the author's recent article ( July 22, 2005 ) has described it. By now the first wave of bull phase III has completed its course including the correction phase, and the big rise ( 240 pts ) of Sept. 1, 2005 indicated that the second wave of bull phase III has started. Base on the above description of market movements, it is very straight forward, very logical, and very easy to understand, and yet only 20% of investor win in stock market while 80% with a lost ( realized or by the book ). The reason is very simple: very few believes in such formula! Most investors use tips and advise from brokers, but are unwilling to do his home work.

The completion of wave one of bull phase III give us many references for speculation. First, wave one can be estimated to start around late May or mid June, but clearly ends by the end of August, thus the length of wave one is between 2 1/2- 3 1/2 months ( see Fig. 2). According to Eliot wave theory, the third or final wave is usually longer. If we assign three months to wave one ( realized ), three months to wave two, and four months to wave three, the final wave, that would put the final peak on March, 2006 with one month allowance to April, 2006. Therefore, Prof. Mark's speculation is that the Hong Kong stock market peak will be around March to April, 2006.

To estimate the height of the peak, several references are used. First, the HSI for the peak of 1994 is 12,500; 1997 is 16,820, and 2000 is 18,100. There is a steady trend of rising peak value, and the author's estimate for the 2006 peak is between 18,000 to 19,000. The second approach is from the lower limit of the peak provided by the support lower line drawn between the two lowest points of July and end of August, 2005 (see Fig. 1 and Fig. 2 ). By the end of April, 2006, this support lower line should rise above 18,000 pts. Besides, the support lower line derived from wave two of bull phase III is likely to attain a steeper slope, and reach a even higher level by end of April, 2006. Therefore, Prof. Mark's speculation for the height of the peak of 2006 again fall between 18,000 and 19,000. Obviously, such speculations can be spoiled by sudden events such as extensive oil price rise, another Asian financial crises, or the duration of the rise being lengthened or shortened.

The author hope that the investors who happen to come across this article, will at least be impressed by his scientific approach to stock market, and investors will harvest their big profit before the market collapse catches them.