Hang Seng Forecast: Has Explosive Return to Action

• The Hang Seng initially drifted lower during the trading session on Tuesday, but then turned around to take off to the outside.
• In fact, we are well above the HK$20,000 level now, and perhaps even more impressively, above the 200-Day EMA.
• Because of this, the market looks as if it is ready to continue to go higher, perhaps because there are thoughts that the Chinese will start to stimulate even further.

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At this point, the HK$21,000 level is my next target, perhaps even the HK$22,000 level. The size of the candlestick is rather impressive, as the Hang Seng gained almost 4%. Ultimately, this is a market that I think will continue to find plenty of buyers, with the HK$19,000 level offering a bit of support, right along with the 50-Day EMA which sits just below there. Ultimately, this is an area that we have seen a lot of noise in, but now that we are breaking out to the upside, it’s likely that we go much higher.

I Have no Interest in Shorting this Market

If we were to turn around and start selling off if we were to break down below the 50-Day EMA, that opens a big move down to the HK$17,000 level, perhaps even lower than that. However, I think at this point the Hang Seng has shown itself to be much more positive than many other indices around the world, mainly since monetary policy is going to continue to be supported in China, and of course, a lot of the mainland shares are traded in Hong Kong now.

Markets had been grinding higher for a while, and now that volume has picked up, we should consider this move to be the “real deal”, so I think it’s much more likely that we continue to go higher. In the short-term, the HK$20,000 level could offer support, but ultimately, it’s unlikely that we will see that level broken down, and I think a lot of “market memory” is to be found in the general vicinity. I have no interest in shortening this market until we break down below the 50-Day EMA because quite frankly I think there are plenty of other indices out there that will be easily shorted in the current environment, so there’s no point in trying to fight the current.

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