Stock Index Chart Patterns – Hang Seng, Singapore Straits Times, Malaysia KLCI – Nov 18 ‘11

The sharp bear market rallies on the Asian index chart patterns are clearly over, and the bears are regaining their control with a vengeance. Three weeks back, the strong upward momentum on the indices, backed by good volumes, had hinted at possible trend reversals. Those hopes have been belied.

Hang Seng Index Chart

The big gap in the Hang Seng chart – marked by the blue dotted rectangle – remains unfilled. The 200 day EMA has fallen below the gap. The two together are likely to provide strong resistance to any up moves in the near future.

Note that the 20 day EMA became entangled with the 50 day EMA, but failed to cross above it. The Hang Seng index is again trading below all three EMAs after spending some time above the 50 day EMA, and is technically in a bear market.

All four technical indicators have turned bearish. The MACD is below its signal line, and about to drop into the negative zone. The ROC is below its 10 day MA, and both are falling in negative territory. The RSI is ready to enter its oversold zone. The slow stochastic has already done so. A test of the Oct ‘11 low of 16170 is a distinct possibility.

Singapore Straits Times Index Chart

There are two gaps on the Straits Times index chart – marked by dotted rectangles – which remain unfilled, and the 200 day EMA has slid below both gaps. Note how the two rallies in Aug ‘11 and Oct ‘11 stopped short of the lower (smaller) gap.

Like on the Hang Seng chart, the 20 day EMA failed to cross above the 50 day EMA despite the STI spending several days above the medium-term moving average. The index is trading below all three EMAs and is in a bear market.

The technical indicators are looking bearish. The MACD is still positive, but is falling below its signal line. The ROC is below its 10 day MA, and inside negative territory. The RSI has dropped to the edge of its oversold zone. The slow stochastic has entered the oversold zone. The Oct ‘11 low of 2522 may be tested.

Malaysia KLCI Index Chart

The gap on the KLSE index chart formed well above the 200 day EMA, and remains unfilled. The index made a valiant effort to cross above the long-term moving average, but failed to do so convincingly despite strong volume support. The index retraced almost 64% of its fall from the Jul ‘11 top of 1597 to the Sep ‘11 bottom of 1311, and the 20 day EMA crossed above the 50 day EMA.

But the last two days’ selling by the bears seems to have undone all the good work by the bulls. The technical indicators are turning bearish, which means a deeper correction is likely. The MACD is positive, but has crossed below its signal line. The ROC has entered the negative zone, and is below its falling 10 day MA. The RSI and the slow stochastic have fallen sharply below their 50% levels. The index is trading below all three EMAs and is technically in a bear market.

Bottomline? The Asian index chart patterns have returned to their bear markets, after sharp counter-trend rallies last month raised the prospect of trend reversals. All rallies and up moves are being used by bears as selling opportunities. Time to conserve cash. A long winter is ahead, but the bears are not in a hibernating mood.