Hang Seng Index Closes Lowest In 4 Years

The medium-term outlook is illustrated by the daily price action, shown in the chart below. Sellers should be careful as the relative strength index is indicating oversold conditions in the market. The Ichimoku cloud acts as resistance going forward around the 22,000 area. A bullish outlook will only be validated is there is a close above the conversion line, currently at 20,832.66. A close above the base line will then give further confirmation. Otherwise, the outlook is bearish since the cloud is red and trending downwards. The price action is below the most recent buy fractal at 21,010.26 suggesting bearish momentum will continue to dominate and now provides resistance.

The longer-term outlook is shown in the chart below, showing the weekly price action for the Hang Seng index along with some indicators. First of all, looking at the Ichimoku indicator we can see strong downward momentum. After remaining green for the period 2013 to 2015, the Ichimoku cloud has now turned red and starting to trend downwards, indicating that a possible bear market is beginning. Also, the conversion line and base line are trending downwards, supporting short positions for the index.

A bullish outlook is only validated if the price action closes back above the conversion line, currently providing minor resistance at 21,248.85. Immediate supports are found at 19,260.30 and then 19,076.70. With the price below the Ichimoku cloud it suggests sellers are dominated and a move to the fractal support at 16,170.30 looks to be the next move.

More negative developments or data out of China is likely to see more selling pressure on the Hang Seng Index. Chinese data on Tuesday 19th January could influence the index significantly. A batch of data from China is due at 02:00 GMT including December’s retail sales, industrial production and gross domestic product.

Retail sales are forecast at 11.3% and the Hang Seng Index could see further downward movement if the actual figure is lower. Also, industrial production is anticipated at 6.1%, similarly a lower figure will see selling pressure strengthen. Finally, the gross domestic product growth is expected at 6.9% (annually). For the quarterly growth rate, it is anticipated 1.8%.