Hang Seng plunge causing a stir from critiques

Hang Seng took a tumble on Monday this week dropping below 15,000. Critics of the Hong Kong government was quick to criticize the result of its incompetence. 

However, while Hang Seng opened much lower in the beginning for the week, it made a remarkable recovery. Even when it did not manage to supersede the high of the previous week, its gain within the week was spectacular. Something that has not been observed for quite a while for Hang Seng.

There is little news on Hong Kong, with exception on the trial of Jimmy Lai. While the Hong Kong government on appearance insist on pushing forth its Basic Law Article 23, it is lacking in will power to implement, thereby continued to delay the prosecution of Jimmy Lai. 

The Hong Kong government knows very well that it is in a chicken tendon situation: it is pitiful to discard while tasteless to eat. There is no gain going either way, especially when Xi Jin Ping has now abandoned Hong Kong. Moving ahead will result in escalating exodus of funds while retreating may demonstrate its lack of competence in the eyes of CCP.

As a result. the economy is being left alone.

This reminds me of the 4 little dragons of Asia during the 90s: Singapore, Hong Kong Taiwan and South Korea. Of the 4, Singapore and South Korea's economy with strong governmental intervention, Hong Kong with advantage through its relationship with China, enabling it to be the bridge between China and the world.

Taiwan was the only country where the government was weak, and businesses really need to depend on themselves to survive.

Fast forward to this day. South Korean government has weakened with businesses need to be independent, Singapore while retaining its tight governmental control, it no longer able to dictate the direction of its economy. Hong Kong has for years become addicted to its dependency to China and is experiencing its withdrawal syndrome from its addiction.

Taiwan is the only country which remain with a weak government. In exchange, an economy with companies having strong competence in their field. 

It seems to me that in order to create a strong economy for the country, the one necessity is a weak government that can only manage minimum function. This seems to coincide with the concept of the Republicans of USA.

Just back to the subject, what is happening to Heng Seng so far?

Fig 1. Hang Seng weekly chart

At first glance, it is quite clear that Hang Seng is moving within a channel. It has bounced back from its minor 100% projection and its violation of the Bollinger envelop. At the same time, there is yet divergence indication of from the chart.

What does this mean to me? 

It is possible for Hang Seng to move upward, but not yet a reversal. There is a higher chance that Hang Seng is in process of a correction and retest its 55-week moving average presently at 18,289. Should this level be breached, we may see resistance at its 144-week moving average of 21,219 and even its 100% projection target of 22,860.

What if it continues on its down trend? 

Then I will see support at 12,514. This coincides a major 61.8% projection and 127% extension support.

The British government of Hong Kong was barely involved with its economy before by 1997. This allowed organic growth for Hong Kong, creating a vibrant economy with strong and unique culture.

Most probably an incompetence Hong Kong government is a blessing in disguise for Hong Kong. The city will be allowed to be left alone to recover. But its culture has already been damaged badly and it will take a long time to recover.