HSI, Hong Kong index update and review.

HSI march 24 2016


We have been rather prescient with our calls on this index and , and by extension, the Shanghai index as well.  So a review of the EW reading for this index might just be appropriate.

Our big picture take on this is that the index made a B-wave high last year and is now falling in wave C which should take the index down by about 2/3d’s, to the 4th wave of previous degree or even the 4th of 3 of previous degree, and, as is often the case, to a level that corresponds with C being equal to A in the “flat” A-B-C.  All of those things are somewhere between 1000 and 800 on the index, all three of them, so they form a nice cluster. Moreover we already seem to have broken through the lower boundary of the 40 to 50 plus channel that has contained this index for most of it’s existence, the only clear exception being the 2008 peak. A swing to the other side now would not be an unreasonable expectation if you think of the pendulum overshooting the lower boundary by a similar amount, more or less.

In short we remain as bearish as before even if we are not entirely sure of the short-term EW position of this index, that is is it wave 2 of 3? or are we still in wave 2 of the 5 wave sequence that wave C should follow? In any event, I doubt that the index will be able to re-enter the channel, roughly at about 22500. Before that 21000 if exceeded, would cause a number of overlaps that are highly unlikely.