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.

International Bear Signs Strong and Clear

The author has been able to forecast the movements of major markets quite early in the development. His "Market top warning" article (July 27,2007) was released just one day when DJIA and NASDAQ had broken the wedge formation down side, but turn out to be a significant correction. His "Market rebound is coming" article (August 14,2007) was released before most markets reaching bottom, because he obtained early signs from his fan lines system. He released his "The first confirmed international bear signal" article by September 9, 2007 which is two months ahead when DJIA, UKX, DAX, and CAC now demonstrated bear signs with different degree of certainty.

Now the author comments on the bear signals from different markets.

1. Nikkei(NKY). The Japanese market show the earliest confirmed bear signal by September 7 (Sept. 9, 2007), because it produced a good double top formation, then drop through the neck line, but rebound below the neck line. Now NKY did rise above the neck line(NL) (see fig.1),but form a peak much lower than its double heads (H1 & H2),thus it is the right shoulder (SR),and then drop below the neck line again. As a result, the bear sign is further confirmed. If one look at NKY with a longer time span, say 4 years, (see fig. 2) then one see the down side penetration of the rising fan line I.II. & III. If you believe in the author's tool of fan lines as illustrated in " The magic behavior of fan lines" (Sept. 2, 2007), one should realized that the end is near.

   

2. CAC. The French market made an extensive fall during the international market down move (see fig. 3), and produced weaker rebounds during the up swing resulting in the formation of the right shoulder (SR). The right shoulder also composed of two double tops. The up swing did form a good channel with five contact points with the lower support line, and also five contact points with the upper return line. Now this up channel was broken down side meaning that the up swing has ended, and a down swing is taking over. Therefore, this is the second bear sign in the international market scene after the NKY.

   

3. UKX. Both UKX and DAX produced double head formation, and each major heads are again consist of two double tops. Such consistency in chart features strengthen their message. UKX did drop extensively during the down swing, but also made strong up swing (see fig. 4), and produced the second head at about the same level. It is important to note that the first head (H1) and the second head (H2) consist of double tops (H'1 & H'2). This imply that the chart language is yelling TOP! TOP! many times. If such expressions are given both in English, and in Deutsch, they should mean more than independent expression. The up swing also form a good up channel with four contact points with the lower support line, and also four contact points with the upper return line. However, this up channel was broken down side suggesting that a down swing is taking over. If the down swing can penetrate the neck line (NL) down side, then the bear signal can be confirmed.

   

4. DAX. The German market is stronger in the second leg of the down swing,and also made fairly strong rebound afterward (see fig. 5) forming the second head. As remarked in the UKX section, the two heads again consist of double tops making the bear signal stronger. The up swing produced a good up channel with five contact points with the lower support line, and also five contact points with the upper return line. This up channel was also broken down side, and a down swing is starting its move just like that in UKX.

   

5. DJIA. The DJIA drop considerably less during the down swing, so the US markets are more bullish than the European markets and the Japanese market. During the down swing as well as the up swing,DJIA made extensive one day up or down move during this period, but such feature is rare,and usually appear at the bull market end (see fig. 6). The up swing bring DJIA to a level, slightly higher than the previous peak, but is still a double head formation.In recent days, a right shoulder (SR) was formed in symmetry with the two left shoulders (SL1 & SL2) of the first head. The neck line can be drawn using the lowest closing in August, but this line is a well established support level. This DJIA double head formation do post a significant bear thread, but with the bear signals also from other markets, the signal is clearer. However, the bear signal has bot been confirmed like Nikkei(NKY).

   

6. NASDAQ. NASDAQ perform stronger than DJIA. When DJIA produced a turn with the formation of a new down channel (see fig. 6), NASDAQ did not follow. Instead it just continue on within its up channel with seven contacts with the now important lower support line. By Nov.9, 2007, this important support line was finally broken down side (see fig. 7). Therefore, both DJIA and NASDAQ give bear signals together.

   

7. HSI. In the author's August 14 article "market rebound is coming", the author stated that" the author come to the expectation that a market rebound is imminent. This rebound may form the right shoulder, a double head or even rise further". The forecast is fulfilled in that an extensive rebound did come, besides, the rebound in NKY and CAC did form the right shoulder, while in UKX, DAX and DJIA did form their double heads. To the surprise of the author,HSI made dramatic rise starting from this rebound (see fig. 8). This extensive rebound come in the form of an up channel with three contact points with the lower support line, and also four contact points with the upper return line. This up channel was also broken down side at last. Because extensive rise (12,000 points) did build up strong profit taking force, therefore when this up channel was broken down side, the profit taking force alone is enough to push the index down by 4,000 points which was also reached. However, this 4,000 points drop can due either to standard correction or real bear sign, thus no signal can be drawn yet.

   

   Now HSI is significantly influenced by Chinese stocks, and the general feature of HSI (see fig. 8) resembles that of the major Chinese stocks i.e. China Mobile (941)(see fig.9). One should note that both China Mobile and HSI took off in a steep linear path by August, 2007, while the conventional blue chips, i.e. HSBC holdings (5) just move sideways in the past one year, and form well separated double heads (see fig.10),which is a clear bear signal.

   

8. The Chinese Market, to the author, is in an expanding bubble (Jan.4,2007), and also reached the third major wave which will usually turn at such stage (see fig. 11). Because HSI is heavily influenced by the Chinese market, if the Chinese market bubble explode, it will not only bring down HSI, but also the world markets might go down with it too. The trouble is that it is very difficult to pin point the moment of market explosion from past experience.