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.

Cash Is King !

After the US regulator surprised market with the rate cut, Chinese regulator gave a better surprise on Monday by announcing that mainland individuals can buy Hong Kong shares under a new scheme to be implemented in Tianjin’s Binhai New Area, now considered the country’s third special economic zone after Pudong and Shenzhen.

The State Administration for Foreign Exchange (SFE) – the official regulator of capital inflows and outflows – said those investing overseas must open an account with the Bank of China’s Tianjin branch and transact through the bank’s brokerage in Hong Kong, BOCI. This means only Hong Kong stocks are available for investment at the moment.

The liberalization move could possibly help to lessen upward pressures on the Rmb, narrow the widening gap between A and H shares and provide some stability to Hong Kong’s volatile market as international funds pull money out of Hong Kong to cover fund redemptions lately.

The announcement by SFE said investors would not be subject to the US$50,000 cap on foreign exchange outflows for individuals. Assuming that 1% of the personal savings of about US$2.2trillion flow to Hong Kong stock market in the next 12 months, we are looking at an eye-popping US$20b.

The irony of the back to back announcements…….US government lowering rate to lessen the burden of people who are heavily in debt while Chinese government "had" to open the door for fund to flow out since they have too much money!!

STI : Short term positive, Medium term still negative

STI 3100 support level that I highlighted as the 15% correction from recent high was tested last Friday and successfully defended.

We have seen the market rebounded strongly today, to pull away from 3100, meaning that 3100 should be a short term good support level.
STI closed 3322 today, which is exactly 50% retracement from 3688 to Friday low of 2962. Near term resistance could be the 61.8% Fibonacci retracement level about 3410, this will coincide with the 8th aug rebound day high of 3416, making it a stronger resistance for the near term.

There is a good chance that index will try to touch the 61.8% retracement level as we are seeing more short term positive indicators :
1.Parabolic SAR trending indicator turned positive today for the first time after being in negative zone for 16 days
2.Stochastics have formed higher lows and just cut up today, near term upside is likely with such signals
3.MACD histogram formed higher lows indicating that the selling pressure have eased for the near term

Two other trending indicators are still negative :
1.MACD still negative - this is a lagging indicator, more for medium term signal
2.Multiple moving averages - this is also a lagging indicator, more for medium term signal

In summary :
What we are seeing now is that SHORT TERM signals have turned positive but medium term signals are still negative. All these possibly mean that STI could have stopped the downward slide for the near term and could move sideway or upward in the near term.

We are not out of the woods yet since medium term signals are still negative. If you are short term traders, enjoy the fiesta while it last ;)

Good websites with Singapore stocks newsflow

I came across two websites which provide good newsflow for Singapore related stocks. Quite useful for me as I have been busy lately with work myself so I just login whenever I have a few minutes to spare to see what are the latest news related to Singapore stocks. Two of them are www.mojostock.com and www.shareowl.com

www.shareowl.com tend to provide more in depth analysis for stocks, more useful for mid-long term traders.

As for www.mojostock.com it is quite good and straight to the point. Especially useful for traders with lots of newsflow about initiate and upgrade reports which are mostly posted in the morning, much faster than most other forums or stock sites. It also has a section which updates about upcoming events such as investor conferences and results release dates :
http://www.mojostock.com/phpBB2/viewforum.php?f=8

For traders looking for newsflow, certainly worth checking out.

SINGAPORE STOCK MARKET NEWS
Play with the dogs.....woof! woof!

12Sept06

It’s been awhile since I last updated the blog.
I have been trading, albeit in small position since I expected broad market to be weak (pls see last blog).

It’s interesting to see lately that stocks like labroy, china sun, asiapharm, fung choi charts have turned weaker while stocks like MMI, Seksun, Hong Fok (what the heck is this, never heard before) turned bullish.

Needless to say we can see the spillover effects.......short term negative for certain china plays, oil and marine, shipping stocks, while positive for small-mid cap HDD/plastic plays and some “mini” property stocks (I like to call them gems cos many people overlook them).

Already, stocks like fuyu, meiban, fischer, sunningdale, first engineering, huanhsin are rebounding and their charts look promising. But one should still be careful since some of them are unlikely to show any strong earning recovery in the near term. So I would consider some of them as “trading” ideas, not for long term investment......not until they show earnings growth!

Now that we are into september/october (the traditional weak season), I will be more selective in my trading choices. Since 3Q pre-results rally is still sometime away, better relax a bit and trade small position on the performing sector ie small-mid cap HDD/plastic/tech plays and mini property stocks.

The pulling back of oil prices may be slight negative for certain stocks, but definitely positive for the plastic guys......they have been dogs for a long while......but everydog has his day.....woof woof!

SINGAPORE STOCK MARKET NEWS
China stocks mostly in correction mode

28Aug06
Many readers asked what happen to me la past 2 weeks.
Sorry, have been busy at work recently and have not provided market update for sometime. But I don’t think I have missed much since my last update on 3aug. I mentioned that I expected market to see some correction after rallying for 2 to 3 weeks from mid-July, where the rally was supposed to end in the first week of Aug06.

If we look back, although the STI index recently peaked on 18aug, many hot china stocks have actually peaked much earlier as I expected.

To name just a few, for example,
Celestial recent peaked 3aug 1.65
ChinaSun peaked 3aug 0.89
ChinaSky peaked 2aug 1.10

Of course some stocks continued to reach new highs after first week of aug but these are selective stocks with company specific newsflow or events (eg. results or conferences). On the broad market sense, I hope I have provided some useful insights (and also warning) to my readers for this on-going correction, especially for broad china stocks.

If we look at the STI, despite hitting recent higher high on 18 aug, STI actually showed slight negative divergence because STI hit higher high BUT the stochastics showed lower high. This MAY BE a sign of peaking and possible correction soon.

And if we look at most second liners and china stocks, many of their volume is now only a fraction of what they were few weeks ago. And many of them HAVE NOT reached oversold levels yet.

So I decided to be patient and wait lor ! Wait until we see MANY hitting oversold levels then I will feel more confident of re-building positions.

By the way, I have added one new feature (shout box) in the blog. Feel free to ask questions or post comments directly inside the box. So that readers can interact with each other.

Happy Trading.

SINGAPORE STOCK MARKET NEWS
Overbought signals in place but not distribution signals ……

3august06

Slight profit taking today is expected since many stocks have moved from oversold into overbought levels (stochastics). When we see a Group of stocks moved into a particular position eg many now in overbought levels, the odds of a correction is high. As long as the correction is shallow and on thin volume, the market may still have a bit more upside since many stocks have yet to release results.

I have mentioned earlier that we are in the 3rd week of upward move which started mid july. Again, based on historical data, the mid july rally usually loses steam after 2 to 3 weeks.

Also, I have not seen the negative broad base distribution signal yet (ie volume expansion, day range expansion and close near day low). If we see that, beware !!

Until that happens, specific stocks may still have upside potential. As more and more stocks report their results, we should see the market beginning to lose its momentum. I believe expectations on many stocks are high, so even if they report good numbers, there will not be many upgrade reports.