The Hang Seng Index is an interesting one to trade in that it has performed negatively over the past 1 year, but its year-to-date performance is improving dramatically. Consider that the 1-year return of the index is -16.81% and that the year-to-date return has essentially halved (improved) to -8.72%. That shows that there has been an appreciation in the value of stocks across multiple sectors in the index. The turnaround began in the middle of February when the Hang Seng Index reached a year-to-date low point, and it has since rallied to over 20,000 within the space of a month. On March 2, 2016, all 50 members in the Hang Seng index were up, a positive reinforcement for the almost 600 point gain for the index on the day.
If we wind the clocks back over a period of 1 day, 5 days, 22 days and 66 days, we see some interesting data presented:
Over the short-term, the Hang Seng index displays positive elements, but its medium-term prospects are largely negative. Consider the technical chart above which displays the short-term strength of index since it broke through the price ceiling on a downward pattern. The rate is declining, but at a declining rate. It appears that the market is moving in a horizontal direction as evidenced by the stabilisation close to 20,000. The fact that the index has risen through the 19,700 mark indicates that further increases over the short-term are likely. While the positive sentiment for the rest of the week and the month ahead is somewhat subdued, it is nonetheless positive. The difference kicks in over the medium term. After the index break through the price ceiling, its rate of decline will slow and the next resistance level will be at 20,500.
Hang Seng Performs Poorly Against US Major Averages in 2016
We can expect some stiff resistance at this point, but the relative strength index (RSI) curve indicates that this could be the start of an uptrend. Viewed in perspective however the medium-term performance of the Hang Seng index is technically negative. Extrapolating beyond that time frame, we can see that the Hang Seng index is strongly positive over the long-term. Once it breaks through the 19,800 resistance point it will rise further and remain technically positive over the long-term. For the purposes of March investments, it should be noted that the investment perspective of short-term investments is 1 – 6 weeks, medium-term is 1 – 6 months and long-term is 1 – 6 quarters.Therefore the bulls are charging on the Hong Kong Hang Seng index during the month of March.
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