Hang Seng and Nikkei Drop 5% Today

Feb 6, 2008: 7:47 PM CST

Hong Kong’s Hang Seng ($HSI) Index plummeted 5% today, after ejecting out of a moving average squeeze pattern following a descending triangle technical pattern.

The Index fell 1339 points to close at 23,469. The frequency of gaps in the chart from StockCharts.com is due to how the software records prices and times, keeping in mind that the Hang Seng is open during periods where the data from StockCharts.com counts the market as closed.

Let’s look at the technical picture and what this damage may mean:

We saw the major decline near January 22, which marked a short-term bottom and corresponded with the US Federal Reserve’s decision to cut key interest rates by .75 to stem a potential global sell-off.

It appears that the global indexes beyond the Hang Seng have a further pathway to the downside (at least odds now favor that possibility) and this leaves global markets in a much more bearish position than they were only a few months ago.

Let’s compare the Hang Seng to the nearby Japanese Nikkei:

Notice how the Tokyo Nikkei Average, which fell just shy of 5% today, is printing a very similar technical picture to our own Dow Jones Index (and the S&P 500).

Notice the recent new momentum low combined with a near picture-perfect bear flag pattern into moving average resistance. Price failed directly at the declining 20 period moving average, which is a key spot that often sets up bear-flags and the “Impulse Sell” style pattern.

Global markets are far more connected than most investors want to believe, as evidenced by the current technical structure unfolding.


3 Responses to “Hang Seng and Nikkei Drop 5% Today”

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