Chart Chat's column

19th May, 2000

Hang Seng Index - has the Bull run already ended? Bearish si gnals continue to emerge from the market, suggesting that the bull run in the Hong Kong market has already ended. The Hang Seng Index started its bull-run at 6,500 in August 1998 and subsequently reached its all time high of 18,400 in March 2000. The support line AB has been tested three times since August 1998 and was finally broken yesterday, signaling the end of the 20-month bull-run. Coppock indicator, the long-term trend indicator, sent out a negative signal in April 2000 warning that the HSI was likely to break away from its uptrend. MACD also exhibited a negative divergence in January warning that HSI was peak. MACD broke its support line recently, which was followed by the HSI. This was confirmation that the HSI's uptrend has come to an end. Further evidence that the end of the bull-run can be found from the RSI chart. With the 9-week RSI failing to climb above 50-point then trended down again, this suggested that the HSI has failed to resume its uptrend. The above Technical indicators suggested that the HSI is exhibiting symptoms of a trend reversal pattern, Unless a sharp rebound happens soon, the HSI will be poised to enter into a downtrend. Applying the Elliott Wave theory, a 50% retracement will bring the HSI back to 12,500 level.