What is happening to Bitcoin?

 I am going on a journey tomorrow. It is going to be a surprise visit to my parents place with my daughter. I told them that I am only going back on a much later date for my father's doctor's visit. 

Just a lesson to those who are not in sales and marketing. This is called " under promise, over deliver". It is a very useful trick.

Anyway, there is not going to be any trading in the coming few days.

Now let's move on to Bitcoin. I was watching the mid day news when I saw a reporting on the tumbling of the markets due to Powell's speech, the news placed some emphasis on Bitcoin holding on to around 20,000 mark.

Bitcoin was actually a great hit when it came out and many trainers in investment courses were very positive about this counter. they all feel that it is going to the next form of currency replacing the existing form of currency. That was 2017, this was after it reached and retreated from a high of 20,089 in 2017. 

Even the platform I am doing my trading on once housed Bitcoin and few other crypto-currencies, I am not sure when but it later have all crypto-currencies removed. 

Why I got interested in Bitcoin today? The news segment placed Bitcoin line chart on its background.

To be honest, I am neither shock or surprised by what I saw,  I have no interest in the counter since I have no venue in trading it, further more, I always consider it to be too high of a value for trade, I am a little taken aback when I noted its peak at 68,789.

Fig 1. Bitcoin Weekly Chart

Without referencing to Bitcoin, for those who with experience in charting will be familiar with the double top formation in this chart. Moreover, I am seeing the 55-week moving average crossing 89-week. 

This is very bad for Bitcoin.

Using simplest form of double top measurement, the minimum objective is sub-zero! 

Yes, I am indeed surprised, but in came after I received a negative number for Fibonacci expansion after I have entered all necessary values.

Based on the expansion, The objectives are between 6,664 to -7,075. Could this be possible? So I get paid to hold on to Bitcoin and I have to pay to sell?

It happened on Crude oil before, so it is plausible.

Let's be a little more optimistic, Let's use projection for measurement instead.

As long as projection is concern, it has reached the 100% (32,820) and even crossed the 127% (23,036) level that I normally used. The next level of support is 161.8% projection at 10,591.

Looking at its set up during the recent weeks, I say that there are more possible downside. Using projection again, the support levels are 16,148 to 10,594.

What is the upside? To be honest, I have not seen any possible signal so far, I am not sure if it is because I am bias? 

Well, if I am to imagine, it is possible that Bitcoin going to correct back to the neckline, which is around 28,893. Where was a minor congestion here before, so it may go back there. Best scenario would be going back to touch the 55-week moving average presently at 33,471.

Dow Jones Reversing downward....

I was more positive on Dow Jones in my past post Follow up on Dow Jones behavior and comparison with Nikkei and Hang Seng  However, its move this week fully cancelled all my justifications for a bullish tendency.

Fig 1. Dow Jones Weekly Chart

I was watching Dow Jones throughout the week and I did not notice abnormality. Dow broke every moving average support getting in its way. I could not see much in the weekly chart, so I switched to the daily chart for more detail.

Fig 2. Dow Jones Daily Chart

On daily chart, it can be seen that Dow started falling until Tuesday when it was supported by the 21-day moving average and was reversing upward by Thursday.  The plunge came suddenly on Friday and even on daily basis, it broke through all the moving average support levels. What happened?

While I am working on this entry, I come across this video on Youtube.com that explain what is happening, it all ties to the Federal Reserve.

I believe he explain everything about what happened to Dow Jones. 

So what happen next?

I suspect that it may pause in the coming week as many are unsure what just happened, it may even attempt to climb back up but this time the moving average supports turning resistance, stopping its ascend. 

It will then continue to fall after a week or more. 

Using weekly data, the projection support are between 30,672 to 28,442. Using daily chart on the other hand, the most immediate support based on expansion is between 31,930 to 31,375, while projection support at 32,466 to 31,911.

I believe that all other markets are closed when this announce is made. So we may see jitters on international markets on Monday, starting with Asian indices.

China warning banks not to short CNY?

I have come across this Taiwanese discussion forum 年代向钱看 on youtube.com quite a while ago, partially due to my interest in Hong Kong's event during 2019. It has in depth discussion on  China and one of the guest is actually quite reputed on his knowledge of Chinese political arena. 

I have moved on to other forums until last week when I saw this picture on their video promotion. The picture showed a title " Beijing warning banks! Don't short CNY!" It got me curious, what is happening to CNY? 

For a while, I have considered CNY as a regulated currency. It was only until recently on my article The complexity of Hong Kong Dollars (HKD) - personal thought that I realized that CNY is one of the most traded currency presently ( ranked 8th in traded currency ).

Unfortunately the video did not include the discussion on what had happened. Even so, it made me curious about the currency.

Fig 1. Complete historical monthly chart on USDCNY available on yahoo.com

I attach this chart as it shows when CNY began its unpeg from USD, which is during the mid of 2005. I can recall at that time that USA was calling out China for artificially controlling its currency to ensure a very low exchange rate. This was to make China artificially cheap in everything.

I was temperorily located to Dong Guan China for half a year during 1998, I still remember that for a meager RMB100 ( USD12 ), I was able to treat a group of 10 person to a sumptuous dinner with fish, chicken and meat, if taken else where, it would have cost at least USD100, it was very cheap indeed.

True enough, CNY continued to rise against USD since it "unpeg" ( I still believe that the Chinese government control their currency to some extend ), reaching a level of RMI6.03 to USD1.00 by 2013. Since then, CNY hovers between RMB6.00+ to RMB7.00 per USD, I believe this oscillating range of CNY.

Interesting enough, it started to weaken, it is also during this period that I started receiving new of factory shut down and unemployment within their economic zone, Xi JinPing became the president of Chinese government.

Fig 2. USDCNY (CNY=) Weekly Chart ( Zoomed in )

Fig 2 shows a more recent development in CNY. I have included some technical analysis including the mirror image, the double top versus double bottom. In fact, based on the double bottom measurement, CNY has reached its minimum objective, corrected back to 8-week moving average and on continuation thereafter.

So where is CNY heading? 

The correction seems to form a pennant, using projection measurement, next level of resistance is between 6.948 to 7.144.

Why am I interested in CNY? because it was only as recent as last week that China lowered its interest rate and increased the money supply to the market. Yet, if what the picture of the discussion forum has shown is true, isn't the government contradicting itself? 

To be frank, I am sure that China is in a lot of trouble now, the property crisis leading to banking issue and government short of cash. Just recently there was another forum that mentioned certain city in China issuing fines to its citizens so much so that some citizens went to the police station to ask them to issue a monthly statement and payment to be made on monthly basis.

Above that, the climate is not helping, with heat wave and serious drought in progress causing water shortage. In the process affecting electricity generation by the hydro-plants. 

This causes electricity shortage throughout China, Shanghai has to switch of its nightlight display and the whole city went into darkness. 

Worse yet, people are advised to stop turning on the air-con while factories are on ration as there is not enough electricity to go around. 

To me it is a serious mismanagement of the country, so what is Xi doing? maintaining lock down to clear Covid-19 while other countries are all opening up. He is either an idiot without a hawk eye view of the country or he is very afraid that if he would be over thrown should lock down ends.

After all, lock downs are easiest way to limit citizens' mobility, as demonstrated by how the local government turning the health code yellow, which stop the people from taking any public transport and protest against the banks. 

I understand Chinese government's intention to relax interest rate. They need the people to continue feeding property development, it is too big an issue should this market collapse. However, this also make people with less confident with CNY, dumping the currency to avoid more losses. 

Where have I seen this before? Let's go back to this article Is this the end of the China miracle?

In fact, I have come across these video on youtube.com that can better explain the decline of Japan market than I do.

If I use the principle of technical analysis, the third rule states that "history repeats itself". But this time, I believe it is China's turn. The question is: How would the people react?

Is crude oil creeping up again?

 Well, it is close to mid of the week and by right I am not supposed to have any entry. I just could not help myself, I have to type in something . 

So I went through the charts to take a look at those I have previous entry. I saw Crude Oil. My last entry Crude oil up-date 16/7/2022 was just more and a month ago, I guess it is worthwhile talking about it,  especially WHEN IT HAS JUST HIT A SUPPORT LEVEL!

Fig 1. Crude Oil Weekly Chart

In my last entry on this counter, I measured using projection with a support level of 86.11, which coincidentally near the neckline and the 55-week moving average support level. Apparently there are sufficient number of support to pause the descend.

It is presently resisted by the 8-week moving average @ 94.51 with neckline at 92.93.

So what now?

It seems to me that crude oil has been either congest or into minor correction since 7th August 2022. It is creeping higher this week. In fact an engulfed candlestick pattern. However, as we have yet to reach mid of the week, the formation is incomplete until the end of the week.

It is also worth noting that the trade volume on the rise when the price was coming down and receded upon congestion and rising prices. This is a good sign. What about the bad? MACD is about to cross, if it does so, we might see a larger correction with resistance between 109 to 115 ( retracement resistance ).

 My take is that as long as it does not supersede 98.65, which was the high of 31st July 2022, the chance of continuous descend is still higher.

Let's cross our fingers that it may continue downslide after week, just a reminder to pump fuel by Thursday just in case the gas station increases the petrol price.

 

Follow up on Dow Jones behavior and comparison with Nikkei and Hang Seng

I have mentioned Dow Jones Industrial Index ( DJIA ) in my entry Are we in a bear market already? yesterday. while doing so, I have noticed the latest up-date of Dow, it reminded me that I  have expressed uncertainty on Dow in Dow Jones, Hang Seng & Nikkei Up-dates - 13/8/2022 and I thought I need to follow up on Dow Jones direction before I move on.

Fig 1. Dow Jones Weekly Chart & Comparison With Nikkei 225 And Hang Seng

For the chart in Fig 1, I have included Nikkei 225 and Hang Seng index. I have found that it might be a good idea to put 3 charts into 1 as we can see how each counter perform compare with others.

First, let's talk about Dow Jones. Dow Jones just broke the 55-week moving average upward last week. It is possible that the penetration is weak and there is a possibility to retrace 100% with continuation downward.

It did not happen, instead the formation of a shorting star. However, I believe the shorting star does not signify a reversal but a correction. I am likely to see Dow Jones heading down in coming week and may congest the next 2 or 3 weeks before continue up-ward. 

Reasons for my deduction are as follows:

1. It is supported by 8, 21 and 55-week moving averages at this point of time;
2. 8-week moving average just crossed 21-week moving average with a golden cross, meaning a possible short term uptrend;
3. The size of shooting star is small and less significant as a sign of reversal;
4. The climb of Dow is steep, there are momentum heading up;
5. It crossed the previous high (  minor wave );

The next significant level to me the peak at 36,952 and 35,410, which the Bollinger envelop presently lies.

With putting the 3 indices together, we can see when they start to disconnect with DJIA and each other.

Beginning of 2018 for instance is where we see the beginning of  Hang Seng's decline. While Nikkei and DJIA entered a correction phase, Hang Seng tumbled. In fact, Hang Seng seemed to used a 3-year spread to form a double top with failure swing and began to plunge by 2020. It was saved by the Covid-19 lock down, stopping at the neckline, other wise I believe the depreciation would have been worse.

However it is not helping Hang Seng, because by beginning of 2021, it began to disconnect with Dow Jones and on its descend again. It has crossed the previous low which now become the new neckline of a much larger double top. At this point my article The HSI monthly chart applies.

While Nikkei traces the progress of Dow Jones between 2017 to 2020,it failed to reach new height and plunge by 2020on double top completion, again it was saved by the Covid-19 lockdown.

It is interesting to note that like Hang Seng, Nikkei also disconnect from Dow in 2021, but unlike Hang Seng, it corrected and by beginning of 2022 it reversed and continued its upward climb. It is also interesting to note that it is also in the beginning of 2021 that Nikkei overtake Hang Seng.

Base on the present set up, we can use projection to measure the next level of resistance, which is between 33,603 to 39,118.

Are we in a bear market already?

 While surfing on youtube.com recently ( Yes, I still use surfing, I am THAT OLD ), I have come across a few advertisements about training programs on trading. 

The spoke persons are normally young with attempts to demonstrate how successful they are in trading. 

I have seen the guy's advertisement before, he sat on a beach bench next to a swimming pool and the first thing came from his mouth was" stop buying stock!" I clicked "skip" straight away.

The woman on the other hand talked about the seminars she conducted and tried featuring some successful students of hers. She even featured a trip she made oversea while still making money. 

Both promoting trading using options, claiming that this is also the same strategy used by Warren Buffet.

What they are reluctant to show is that to be successful in trading, you have to first experience failure to prepare those people thinking of entering the market. 

They all come with a single message this time, " we are in a bear market..".

The message puzzles me, are we seriously in the bear market?

Let's bring in a reversal scenario from the past, the one I get to know when I first met technical analysis, the Strait Times Index.

Fig 1. STI Weekly Chart from 1992 to 2003

I have purposely pulled out the period between 1992 till 2003. That is the period when we encountered the Asean market euphoria, the Asia financial crisis, US Enron and Worldcom scandal between 2001 and 2002.

This is where we see signs of reversal starting with steep climb of above 60o angle, top formations that last 2 to 3 years before breaking the neckline before we can claim that it is a bear market, as can be seen from the chart in Fig 1. You will also notice a larger fluctuation of individual bars, overlapping each other.

I believe the speakers in the advertisements are referring to US market. So let's take a look at Dow Jones Industrial Index ( DJIA) to see if all these signs are present?

Fig 2. DJIA Weekly Chart

In DJIA, I see a steep climb and patterns of erratic movements with bars overlapping each other. However, I have not yet seen the completion of top formation, neither am I seeing signals indicating a reversal behavior such as a failure or non-failure swing.

Further more, after the recent reversal from the 89-week moving average, DJIA is seen creeping upward with momentum. In my earlier article Dow Jones, Hang Seng & Nikkei Up-dates - 13/8/2022, I am still bullish on this index ( with some reservation ). 

I can't use the formation in 2021 to determine a reversal and confirmation of a bear market, the double top in 2002 have already met its minimum objective.

There is still some way to go for top formation, DJIA might still go higher or congest to complete the pattern. 

Having said that, when was the most recent bear for Singapore STI?

Fig 3. STI weekly Chart

I have not been on STI for a while as I am not trading this index, and I have to admit that I am a little surprised to see this on STI. 

A top formation completed between  2017 to 2020 and it was on a free fall after that. If not for the lock down in March 2020, I can't imagine how low it would have gone. If lock down have not happened, the government would not know what to say about how the market could become so bad. No wonder they were so desperate to conduct the election in the midst of a pandemic lock down. 

The problem that I see with STI now is the similarity it has with the period of 1998 to 2002 ( refer to Fig 1.), a sharp plunge, recovered but failed to hit previous high. What followed  was a second recession until 2002, 911 and invasion of Iraq led to a slow market recovery till 2008 ending with the Lehman Brothers bankruptcy.

Will the same happen this round with a top formation till end 2022 or 2023, then another recession takes place?

HKD situation is improving...or has it?

 I did an article After thought of HKD and China indices last week to follow up on my article The complexity of Hong Kong Dollars (HKD) - personal thought. The HKD chart was only an observation that the market continued to test the HKD7.850 /USD1 limit. As it is a pegged currency, I do not expect it to break while on the technical side it should go further.

It was during the same weekend that a Hong Kong commentary on youtube.com that situation on HKD has improved. I have decided to take a look. Based on on the daily chart (Fig 2), the relax of HKD choke hold started on 10th August 2022, three days after my article.

For the convenience of writing this article, I will describe the chart at it is, So a descension means HKD getting stronger, while ascension means HKD going down. A red bar on the chart means HKD strengthening while green bar weakening.

Fig1. HKD Weekly Chart

Based on the weekly chart on Fig 1, it was a quick descension, however, it was also a quick recovery, with HKD losing 2/3 of its gain, leaving a long tail. To me there is a reluctance for HKD to go up as it stayed above the 21-week moving average at the end of the week.

The only support of continuation is that the bar remained red by the end of the week, supporting down trend continuation (HKD going stronger).

To be honest, I do not like to use the weekly chart in the middle of the week. The last bar that is green in color is the bar of this week, it is still incomplete. It is actually misleading as I tend to include the unfinished bar for my read.

Little can be observed with the weekly chart, it will be good to look at it in more detail.

Fig 2. HKD Daily Chart

More can be seen with the daily chart, with a strong descend for 3 days breaking 89-day moving average. However, it ended the week with a dragonfly hogging the moving average. It went into a congestion this week while climbing back up slowly. 

This to me is a minor counter trend after partial completion of a main trend, there is a high possibility of continuation downward. The next level of support (based on flag formation) would be between 7.8202 to 7.8299.

However, it is still too early to say at this moment since the 21-day moving average might be reluctant to cross the 55-day moving average. There is some indecisiveness here.

Fig 3. HKD Hourly Chart

The hourly chart seems more alive the bars have body! 

At the same time, I am seeing 3-wave formation since its descent on 10th August. The reversal started on 12th August 2022 seem to me is a counter trend to the descend started 10th August. It has not yet completed though.

Based on its projection measurement, I should see the resistance at between 7.8439 to 7.8473. Using its more recent move (today), its objective might be as far as between 7.8431 to 7.8448. This would also coincide with the retracement resistance of 7.8450.

Dow Jones, Hang Seng & Nikkei Up-dates - 13/8/2022

 I am supposed to have more regular up-dates on these 3 indices since my trading revolves around them. I was lately distracted by things happening with other components of the market that I did not conduct any up-date, till now of course.

My last up-date on this was Dow Jones, Nikkei & Hang Seng Up-date 3/7/2022, which is more than a month ago. A lot has happened, most notably the rise of interest rate, an external influence to the behaviors of the indices.

Interest rate rise by theory should restrict money circulation with heavier cost on borrowing. Lower circulation should then lead to less money in stock market and therefore limiting the upward movement of financial market. With lesser circulation also also means less spending and helps to slow down inflation.

The truth however is the opposite for stock market, because it is driven by anticipation. I remember that Alan Greenspan kept increasing interest rate during early 2000 while the market was spiking up-ward. However, the market spiked further because the player took this that the market is going higher. So what stopped the market?

When Alan Greenspan said no more interest rate hike and the existing interest rate level was sufficient. It caused the market to tumble.

So what has happened to the 3 indices while I was distracted?

Fig 1. Hang Seng Weekly Chart

Let's start with Hang Seng, I have ranged the chart to include a huge double top formation. As I have  written in an earlier article The HSI monthly chart on 24th July 2022, the objective is at around 8,440 with another support at 13,244.

For the time being, Hang Seng created a double doji supported by its Bollinger envelop as well as the 61.8% retracement line., does it mean that it is reversing upward?

I have experienced in the past that a counter can retrace to close to 100% before continuation, but there are a few observation that make me ponder if it is actually reversing upward. 

First, there is a double-doji which failed to climb higher., the bodies of the dojis are quite small. They are resisted by the 61.8% projection support turned resistance. It has yet to reach the 100% mark.

Second, the moving average formations are too determined on downward continuation, at the same time, the gradient of descend is steep. 

Finally, the previous high of Hang Seng did not supercede its predecessor. 

The possibility of further descend is high.  I would see support at between 18,063 and 19,028.

Fig. 2 Dow Jones weekly Chart

In my last entry on this counter, I remained bearish with Dow Jones, that was right after  the week with an interest rate hike . The counter maintained congested for the next 2 weeks before it broke through and shot upward.

With the latest interest rate hike on 26th July 2022, it broke through the 55-week moving average this week, and the up-trend is steep, indicating momentum in its movement. It is only stopped by its 161.8% projection resistance. while supported by its 127% projection line.

I have included a retracement measurement on this chart and I would expect resistance at 78.6% retracement line @ 35,432, coinciding with its present Bollinger envelop.

If we take a further step backward to as early as 22nd March 2022. I can see a projection with resistance @ between 41,266 to 48,422. The question is: Can this even be possible for the near future?

May be we should not go so far for the time being.  The most immediate threat of its ascension is the 55-week moving average that it has just crossed. It is possible that it makes a 100% retracement. So the coming week is very important to determine if it is going to be a continuation or reversal.

Fig 3. Nikkei Weekly Chart

Nikkei was the counter that gave me the most dilemma, In my article Dow Jones, Nikkei & Hang Seng Up-date 26/6/2022, I was most positive about Nikkei, but the "failure" the subsequent week made me questioned my competency. 

It has since reversed, broke through 55-week moving average by 17th July 2022 and presently on its way up. Its move this week is only stopped by its Bollinger envelop. However, the band is reversing up  and it is possible for Nikkei to move higher the coming week.

So where am I seeing resistance? 

Using projection measurement, its resistance is between 29,664 to 30,776. Now, this is the most immediate resistance level. Like Dow Jones, it is on continuation after a congestion and we may even see it go higher, but let's allow it to reach  30,776 first. 

Where is the level that the set up might fail?

Using retracement measurement, it has just crossed the 61.8% retracement line and the 78.6% retracement at 29,460. I am likely to see some resistance at that level.

Contradiction, contradiction.....

 I have not been sitting down quietly conducting my trading since last week.

I was assisting my daughter on her landscaping competition  ( dealing with plants and flowers, not  body hair ). Sending her to the event site to  take care of the plants before starting her school session. Th event only ended yesterday. Yet, we have to collect some of the plants from the site this morning.

Since I did not manage to conduct any trading activity, I have decided to type up this entry. Partly because I feel that this is necessary since the last one, because it is related. 

In my last entry on China, After thought of HKD and China indices, I have left out Shen Zhen Stock Exchange composite index (SZSE Composite ). One reason was because the chart from finance.yahoo.com have a huge gap on this index  between 2015 and 2022. As a result, I could not use it for study.

However, I have found the chart from Investing.com today. I would like to add this entry to complete the picture on China, because it is interesting and contradict the direction of SSEC.

Fig. 1 SZSE Composite Index Weekly Chart

As can be seen, there are similarities between SSEC and SZSE, both with double top and have retreated back to neckline after breakout. 

SZSE managed to climb to higher high while SSEC not. In a way, we can classify SSEC with failure swing while SZSE non-failure swing.

While SSEC seemingly retreated from the 55-week moving average, SZSE seems to be attached to 55-week moving average after stopped by the resistance. SZSE seems to be in a counter trend congestion. The bars are small and overlapping. 

While SSEC retreated to below the neckline, SZSE is for the time being supported by its neckline.

As a result, there is a possibility that SZSE on a continuation after the present congestion, compare to SSEC.

Presently I can see 3 different possibilities for SZSE:

1) Strong 55-week moving average forcing SZSE to continue its descend. As such, support for SZSE will be between 1,399 to 1,722.

2) SZSE manage to break through 55-week moving average but fail to break through the Bollinger band, as such 2,304 is an interesting level to watch out for. The support thereafter should be similar to case (1).

3) SSZSE break through 55-week moving average to fulfill its flag objective. The resistance to watch out for is between 2,430 to 2,629.

While I am negative on China, SZSE is interesting. If it continues on its up-trend, We should see China economy to last a while longer. My suspicion is that SZSE might develop the second top or head of head and shoulder since I still cannot shake my bias thought that China economy is not performing. 

After thought of HKD and China indices

In my last post, I mentioned of thinking about an after-thought entry on HKD. One of the reason was that I felt something is lacking. This mainly about the point that China needs USD. 

It is my belief that China economy has not been doing well for years. Its market in saturation, overcrowding competition leading to price focus and a lack of innovation even though with such large population. 

The events that follows such as trade war with USA and China's obsession with country lock downs to tackle during Covid-19 did more harm than good to the economy.

However, the one and only killer to China is the 5,000 years of Chinese culture itself.  Many might think that with 5,000 years of history, Chinese culture is rich and diversified.  Yet as a descendent with Chinese lineage, I find Chinese culture to be very closed and confined, drawing a line to confine Chinese to within our community. 

In Psychological term, we can classify the Chinese behavior as centripetal nature, it is hard for Chinese to break out of the gravitational pull while rejecting foreign influences. Since young we Chinese are taught the tradition that we have, the rules we need to follow. 

Chinese New Year for instance, while with grandiosity and richness, is a very suffocating event for me for years. To be honest, the Chinese New Year during Covid-19 lock down was in fact the best I had, with no burden on me to perform my duties. I actually  longed for another Covid-19 like lock down.

While pursuing my career, I once resided in China for over half a year in 1997, I witnessed the death of Deng Xiao Ping and the hand over ceremony of Hong Kong on TV. I also experienced the propaganda machine first hand.

On one hand, China longed for foreign investments that the country needed desperately. On the other, they loath the increasing foreign presence in the country. If you watch TV in China, you will definitely notice the daily bombardment of anti-foreigner TV programmes glorifying how China beat any foreign invasions, especially that of Japan which China still deem as their mortal enemy. 

In fact based on a study from China Uncensored The Ridiculous Japanese Devils of Chinese TV | China Uncensored demonstrated over a billion of Japanese killed in WWII.

The purpose of Chinese propaganda is not because they hate foreigners, they need the foreigners. What they want is to avoid the locals to engage positively with foreigners, telling people of the evil of foreign corruption instill fear in people of outside influence and only follows the direction set by the government itself.

Enough of detours that happens every time I work on articles involving China. Let's go back to the main point of this article.

If you go through the glorious history of China,  you will find one common pattern. While the emperors are deemed the  sons of heaven, there is never a short of threat to overthrow and kill them. They constantly suspect people around them and strike down on anyone who even voice objection to their decision. 

The outcome is having people who not only understand but to embrace this mindset to their advantage. They constantly praise their emperors, gaining deep trust and power, thereby becoming the person " below one person but above others". Fame and riches follows.

Yes, nepotism and corruption are the only cultural inheritance of Chinese culture. It is infused into every aspect of China, be it  politics, businesses and families. We constantly see the working of inner circles to expel people of different views to ensure the continuation of the power that they gain.

This is also the reason I see why China ALWAYS go into a cyclical phase of dynasty change. Borrowing from a Buddhist philosophy: human consist of birth, age, sickness and death, matters consist of form, existence, deterioration and disintegration. 

Communist China is to me coming to a complete cycle. Closing down of manufacturing, property crisis, creeping unemployment and lately with banks refusing people of cash withdrawal, the golden era to me seems to be coming to an end.

At this point, I must say that my view point when it comes to China is personal, bias and with prejudice, therefore if any reader going through this work of mine might want to take it with a pinch of salt.

Enough of my rant on China, let's move on to charting. 

In my last entry on HKD, I mentioned that if HKD is without its peg, it should be heading lower against USD. I have been using the weekly chart for my read at the time, which give me a sense of its major direction. Of course the peg will continue to hold it back.

However, how is the Hong Kong central bank doing with its peg right now?

Fig 1. HKD Hourly Chart

Instead of the weekly chart, I opened up the hourly chart that provides detail into the progress of HKD. Never have I seen such a long series of hammers testing the limits of HKD7.8500. Earlier on I wondered what it meant by forex reserve of USD to maintain a stable exchange rate HKD. 

Then I recall similar pattern seen on penny stocks years ago when I witnessed block buy and sell to maintain the counter to remain within a narrow zone. So what the Hong Kong central bank do is not only having sufficient USD forex reserve, but to use this reserve to create a block buy of HKD at price of HKD7.85 to USD1.00.

Life must be tough for the Hong Kong Central Bank right now as the selling pressure on HKD is so strong right now. It is not because of some global funds trying to break the wall, it is a market dumping of HKD, meaning an exodus of investments.

While the the price of HKD7.85 remain intact, cracks is observed at some points when HKD reach a lower level of HKD7.802 and HKD7.803.

Let's move on to China. I mentioned the tight control of China indices in the past and it may not worth looking into. I have decided to take a peek into Shanghai Composite Index (SSEC).

Fig 2. SSC Weekly Chart

My last entry with SSEC was in January 2016 "Is this the end of the China miracle?". I mentioned of the potential of China heading lower with support at between 1,600 to 1,700.  

It went into a low of 2,638 before it congested, eventually descended further to a further low of 2,440 before it gradually climbed back to a high of 3,731in February 2021. 

Strictly from the pattern point of view, I continue to see a 3-wave movement for SSEC since Oct 2008.  and ever since January 2016, SSEC again on a side trend before the start of its descend by 12th December 2021.

For the moment, I am not seeing a bottom formation, but a long pause on SSEC. Translating to economical term, China has has been stagnant since 2016.

Is it going on its way to complete its move now?

Fig 3. SSEC Weekly Chart Zoomed in

I am limiting the time frame of the chart to between 2016 to 2022 to study the more recent development. As a whole, it looks less of a reversal and more of a possible continuation pattern. 

SSEC conforms more to the zig zag behavior. Using this as the basis for measurement. The next support level is 2,038 with worse case of 993.  

On a shorter term, using the more recent peak, on 12th Dec 2022, I can see support at 2,901 follows by 2,579.

However, whether SSSEC will reach the ridiculous level of 993 really depends on its reaction to the neck line at 2,440. At this point, it is possible that SSEC will rebound but not reverse, creating the right shoulder before commenting descend. If this is the case, the damage is less with support at between 1,584 and 1,731.