hang seng index daily outlook fri 06 nov tolerate the excess and watch the 22700 support level for p

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What happened yesterday

The Hong Kong 40 Index (proxy for the Hang Seng Index) has inched lower and recorded a current low of 22758 in today’s morning session, 06 November. Current price has challenged the 22880 short-term pivotal support as “fear factor” is now building up in the “interest rate sensitive” Hong Kong’s economy due to an imminent potential interest rate hike by the U.S. Federal Reserve central bank in December and the “anxiety” of today’s key U.S. data release of the latest non-farm payrolls for October.

Please click on this link for a recap on our previous daily outlook/strategy.

Key elements

• Current price action has reverted back to the short-term trendline support (in orange) joining the lows since 02 November 2015 @9am.
• Today’s current low of 22758 @1150am also confluences with a Fibonacci cluster (61.8% from 02 November 2015 low @9am to 04 November 2015 high @10am + 1.00 Fibonacci from the high of 04 November 2015 @10am to the low of 04 November 2015 @1pm projected from 04 November 2015 high @10pm.
• The hourly (short-term) Stochastic oscillator has flashed a bullish divergence signal at its oversold region. This observation suggests that the downside momentum of the current down move has abated which is considered a positive signal as the Index is “flirting” at the 22880 pivotal support.
• The significant short-term resistance remains at 23530 which is defined by the swing high of 23 October 2015.

Key levels (1 to 3 days)

Pivot (key support): 22880/22700

Resistance: 23150 & 23530

Next support: 22530 & 22260/22180 (weekly pivot)

Conclusion

After a close examine on the current status of technical elements, this morning’s slide in price action is more like a potential “noise” and we will tolerate the excess at the daily (short) pivotal support to 22700.

As long as the 22700 level holds, the Index may see a recovery to retest 23150 before targeting the next resistance at 23530.

On the flip side, a break below the 22700 (excess) pivotal support is likely to invalidate the expected recovery scenario for a further slide towards 22530 and even the key pull back support of the “Double Bottom” bullish breakout at 22260/22180.

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