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Will Australian And Hong Kong Shares Turn A Bounce Into A Trend Reversal?

Written by John Kicklighter, Strategist

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Nikkei 225

Short-Term Technical Outlook



The Nikkei 225’s reversal is far stronger than we had expected considering the week was fast coming to an end and volatility has settled considerably. Since yesterday, the Japanese index has broken above its falling trendline that has ushered price action down for the past month. Are we seeing a long-term reversal? Unlikely. A higher time frame chart shows we are at the very bottom of a massive bear wave and we will need major bull confirmation to call a reversal. For the meantime, if recent volatility holds up through the final 8 hours of active trading, we will look at 9,630 as the next barrier to a developing advance at the 50% retracement of the September 22nd to October 29th bear leg.

S&P/ASX 200

Short-Term Technical Outlook



The first level of resistance has fallen for the ASX 200, but the trend is still intact. If we are to get a true sense of a short-term bull wave, we will need to see the falling trendline from the end of October-on fall. Currently, this trendline is matching up well with the congestion zone resistance read in 4,040, which makes the call easier to make. This is certainly a cross roads for the Australian benchmark; and we can definitely see this decision being made before the weekend.

Hang Seng

Short-Term Technical Outlook



Like the Australian benchmark, Hong Kong’s Hang Seng index has yet to break its short-term falling trendline – but it too is close. The reversal from the near 20-year rising trendline down around 10,500 has been aggressive, but there really wasn’t any technical resistance for bulls to deal with. Now, we are coming to a messy falling trend, but definition is found in the congestion low from October 8th around 14,400. Should this level break, we would be into a fib congestion zone and the weekend could change the market’s sentiment; but for now, this potential breakout could offer a good setup for Friday.

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