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.