Stock Trading: Will Asian Equities Trigger Nov. Sell-off? Shanghai & Hang Seng Project ‘Danger Period’ From Nov. 7 – Early-Dec.
10/30/19 INSIIDE Track: “China’s Shanghai Composite did set a 2 – 4 week low on Oct. 4 – 8 – perpetuating a ~60-degree cycle that could produce a subsequent low in early-Dec. That time frame holds significance from multiple perspectives…
A drop into the first half of Dec. ‘19 would fulfill a ~4-month/17 – 18 week high (early-April) – low (early-Aug.) – low (early-Dec. ‘19) Cycle Progression. It would also fulfill a higher-magnitude, but very similar (fractal-like) ~11.5-month high (mid-Jan. ‘18) – low (late-Dec. ‘18) – low (early-Dec. ‘19) Cycle Progression.
From a price/time perspective, the Shanghai Comp is trading inside its ascending weekly 21 MAC, having just rallied back to the high of that channel and quickly selling off. However, beginning on Nov. 4 – and lasting for four weeks – the inversely-correlated weekly 21 MARC will surge.
Considering that calculator’s proximity to current price action, it could quickly become a negative influence and help turn the direction of the corresponding weekly 21 MAC down. That negative pressure should increase into early-Dec. ‘19!
And that is corroborated by the weekly trend pattern. As discussed last month, the Shanghai Comp rallied sharply into early-Sept. while twice neutralizing its weekly downtrend. It could not turn that trend up, signaling the culmination of that rally and the time for a new wave down (with a minimum target of retesting the early-Aug. low of 2863/XGY).
It has just re-entered its weekly downtrend, ushering in the time when a drop to new lows becomes increasingly more likely with each passing week. That, too, could spur a decline into early-Dec. ‘19… and down to the lowest lows since Feb. ‘19.
(The monthly trend acted similarly during the rally from Dec. ‘18 into April ‘19 – projecting an ultimate drop back to 2555/XGY – the low of Dec. ‘18. Since that indicator and projection is not constrained by time, other indicators need to hone that outlook.)
Hong Kong’s Hang Seng Index’s weekly trend pattern still projects a drop back below 25,000 and to (at least) the Aug. ’19 low. In August, it plunged back to its intra-year low, retesting the bottom set in early-Jan. ‘19 while fulfilling a ~40-week high (Jan. ‘18) – low (Oct. ‘18) – low (Aug. ‘19) Cycle Progression. Based on that action, and its monthly trend signal, the Hang Seng entered the time when a reactive 1 – 3 month rally was most likely.
It is in the process of fulfilling that and has twice rallied back to its descending monthly 21 Low MAC – an indicator that should provide pivotal resistance for this bounce. As already discussed, the latest phase that 40-week cycle projects the next 3 – 6 month bottom to wait until May 2020. (The 20-week midpoint could corroborate or clarify this.)
That is intriguing since a larger-magnitude ~51 – 52-month low (Oct. ‘11) – low (Feb. ‘16) – low (May/June ’20) concurs – with the corresponding quarterly low-low cycle focused on 2Q 2020. And, if an intervening high is set in Nov. ‘19, a drop into May ‘20 would complete a ~180-degree (6-month) decline from that peak. If a high is set in the early part of Nov., a corresponding (29 – 30 week) high-high-(low) Cycle Progression would concur.
If that analysis is accurate, it could be showing that a greater escalation of China vs. Hong Kong turmoil could erupt in the interim. The initial downside target (and level that would need to hold in order to prevent a meltdown) is around 21,300/HSI.”
Asian equities could be one of the factors spurring a sell-off in US equities after a rally into Nov. 11 – 15. China’s Shanghai Composite and Hong Kong’s Hang Seng Indexes pinpoint Nov. 7 – Dec. 7 as particularly vulnerable period when a new sell-off is most likely. Could Hong Kong tensions and protests intensify?
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.