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.

HSI rebound is coming

Most people believe that stock price rise and fall in response to current news efficiently, and also depends on fundamental factors like P/E on a longer term bases. However the current news is random, and the fundamentals do not change for months, so these facts are not consistent with the index price patterns which form very regular and meaningful patterns if one knows how to read them. So the author believe that there is an overtone on top of the short term random news, resulting in the meaningful chart patterns. After years of hard work and careful analysis as a scientist, the author has mastered this overtone to some extent. With this understanding, the author seems to be able to forecast the future stock index movement quite successfully in the past (Jul 27, 2007; Aug 14, 2007; Sep 2, 2007; Sep 9, 2007; Nov 14, 2007; Jan 9, 2008; Jan 31, 2008; Mar 30, 2008).

During the bull-turn-bear period, the first bear phase is called bear I. From the author's past experience, bear I usually has drastic and fast down falls as observed recently in most major international markets (Jan. 31, 2008). The down fall also come in three waves, but after the extensive fall, rebound (up move in bear market) will appear just like the fall in July, 2007 but in a smaller scale (July 27, 2007). The author now wants to forecast that another rebound is coming as large number of investors are waiting for. However, the author's advise is to treat this opportunity as an escape window rather than opportunity to increase holding because in the author's mind, bear phase II (bear II) may set in with even lower index level, after this rebound (up move). The reasons of the author's forecast are as follows:

1. Elliott wave function describe the pattern of waves. The up move (bull phase) usually consist of three up waves followed by two down waves (corrective waves). Alternatively in down moves (bear phase), it also consist of three down waves follow by two up waves (corrective waves). The author believe that Elliott wave function does apply to stock index patterns.
2. HSI has already form the first down wave (see fig. 1) from the very top (the head) of 32,000 points, and drop to 26,000 points during Oct. to Nov. 2007, a drop of 6,000 points.. The index then developed into a triangle (T1). The second down wave started from penetrating this triangle (T1) down side, and drop below 22,000 points with a drop of 5,000 points during Jan. 2008. Then another consolidation triangle (T2) was formed during Jan.-Feb., 2008. The third wave down was started again when triangle (T2) was broken down side by the end of Feb., 2008. The down swing is smaller and shorter in time, and turns above 21,000 points. Then the upswing appears, in line with the international markets, and ignored the down swings in China. Now the HSI chart patterns produced three turn signals: 1) broken the major fan line up side. There is a major fan line drawn from the very top, the head, and was challenged 8 time by the following peaks, thus demonstrated to be an important resistant line. Breaking this fan line up side implied an important turn: 2) As this fan line is moving downward, and the line drawn between the two lowest points of wave two and wave three are also moving downward, so these two lines constitute a down wedge formation. The up move just described also penetrated this down wedge up side, and also signal an up turn; 3) double bottom formation confirmed. The lowest point of the second down swing (H1) and the lowest point of the third down swing (H2) do not differ significantly, and thus can be consider as double bottom (H1 and H2). A neck line (NL) can be drawn base on three closing and one intra day high to complete the double bottom formation. The index rise above this neck line level , and thus confirmed this double bottom formation indicating that further significant rise may come.
   
   
3. All 5 other international markets including DJIA, NASDAQ, NKY,UKX, CAC also form this three-wave-down bear phase one (bear I) patterns. They also produce the double bottom formation, and broken the major down fan line, both of which signal an up turn.
4. HSI did produce rebound after bear I three wave down patterns during the past as observed in 1994, 1997, and 2000. 1994 peak on Feb., 1994, followed with three down waves (1,2, 3) (see fig. 2), then the rebound appear in two up waves (I, II). After the rebound, the index goes down again.
   
   

   1997 peak by August, 1997 (see fig. 3), then the bull turn bear. Bear I has three down waves (1,2,3) during 1997 and 1998. After the three wave down, an upswing followed around Jan. to March, 1998.

   2000 peak in the form of a double top (see fig. 4). Bull turn bear after the second top on July, 2000. One noticed that there are clearly three major down swings (I, II, III) between 2000 and 2001, followed by significant rebound. However this series may be too long to be classify as bear I. One also noticed that there are also three smaller down swings (1,2,3) in the first major down swing (I), and this down swing also has significant rebound.
   
   

   Therefore from the past 1994, 1997, and 2000 bear I down moves, the pattern is three waves down followed by 1-2 wave of rebound. Now that HSI seem to have completed the three wave down moves, thus the author anticipates that the rebound is coming. The rise may reach 26,000 points, another 2,000 point rise.

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   The information above is supplied by the author specially for InTechTra's Hong Kong Stocks Report. The opinions in this special column is solely that of the author and may or may not represent the views of Hong Kong Stocks Report. InTechTra is indemnified for any damage or loss that might be associated with the use of the information.

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