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).

The first confirmed international bear signal

The author has written a series of three articles ( July27,2007; August 14,2007; Sept. 2, 2007) in recent weeks, and it is unusual because the author only writes when there are important stock movement signals appearing in the market.

To be successful in stock market trading, the hard job is to detect major turn signals, and have the courage to act accordingly.

The author now can claim that he sounded a very early bear warning by July 27, 2007 in his article "market top warning", at a time when the index of all major markets were close to the all time high, and most investors were very bullish, and with investment advisers in the media forecasting that the bull run would continue, and a small dip is good opportunity for further buying.

Now Japan's NKY index have demonstrated the following BEAR features

1. The formation of a major double head is completed (see fig. 1). NKY produced the first head in Feb.,2007, and rise above 18,200, it then drop very fast and reach 16,700, the neck line (NL) level.
   
   
2. NKY then form a long and perfect up wedge from Feb.-July,2007 with the second peak again at 18,200 level. So the double top feature is already very clear and very troubling.
3. Near the second peak, there are small peaks. The first peak (H1') appears in June and the second peak (H2') in July, and again this second peak is composed of a double top ({H1'' and H2''), so the chart is saying " I am toping out" three times, but most investors ignored such vital signs.
4. The wedge lower line was challenged 9 times (see fig. 1), so it is a very strong support line. When such important support line is broken, one should recognize its significance. This wedge lower line was penetrated down side on late July. To the author, the NKY chart keep on giving bear signals. It goes so far as to make a good bye kiss before the plunge. The author called it Kiss Good Bye or KG or contact pt. 10 from below.
5. The plunge come when the US housing problem worsen, but NKY drop more extensive than other major markets which imply that NKY is a weaker market. The first wave reach the neck line (NL) level of 16,700, rebound and held for a few days, and the second wave of panic selling penetrated the important neckline down side, and reach 15,300.
6. After two panic selling, the rebound appear as forecast by the author (the rebound is coming, August14,2007). The most vital bear signal that the author has to wait for before writing this article is that the rebound cannot penetrate the neck line upside after some time. This imply that the neck line is real, and the double top formation is significant.

Knowing that the world economy and stock markets are closely linked, when one falls, the others are likely to follow suit, casting a bearish outlook on other major markets. With this signal at hand, it is wise to reduce commitment when the market makes new high which is still true for HSI.