Hang Seng Index shows weakening momentum as it hits new high

After hitting recent high of 24283, the Hang Seng Index (HSI) is showing potential weakening signals based on three technical indicators that i am using.
First, MACD histogram hits lower high when HSI hit higher high on 5th September – I consider this as a sign that underlying momentum could be weakening. I say “could” because the confirmation will come from price action at the end of day, that is when hang seng index close below certain support level. In this case, one near term support level could be 23487, the intra day low on 31st august.

Second, Stochastics for HSI is also forming lower highs, signaling potential weakening momentum and cutting downward from over bought level.

Third, if you look at another technical indicator, the parabolic SAR signal for HSI, it is still POSITIVEbut the gap between SAR and HSI is narrowing since it turned positive 14 days ago….the narrowing gap could be another signal that HSI recent rally is losing steam….it could take a few more days for HSI parabolic SAR signal to turn negative.

I consider all these signals as potential correction for Hang Send Index in the near term. Having sais that, we till have to watch the hang seng index recent support level closely. The correction will only happen if the support is broken.

If HSI do see a sharp correction in the coming days, it could spill over to the Singapore stock market which has rebounded significantly lately. We just have to be on high alert again as we trade such volatile markets.