hang seng index weekly outlook 07 sep to 11 sep downside momentum appears to have abated above 20070

(Click to enlarge charts)

What happened last week

The Hong Kong 40 Index (proxy for the Hang Seng Index) has continued to decline as expected and almost met our downside target at 20070 (printed a low of 20479 this morning, 07 September 2015).

Please click on this link for a recap on our previous weekly outlook.

 Key elements

• Based on the Elliot Wave Principle, the Index is in a (a),(b),(c) “Flat” correction configuration of a larger degree wave B that has started from the high of 07 November 2010. From the 26 April 2015 high of 28600, current price movement is in the midst of undergoing the bearish (c) leg of the “Flat” correction that consists of a minimum of five waves from a lesser degree (see weekly chart).
• The Index is still holding above the “Black Monday”, 24 August 2015 low of 20070 which is also the low of the weekly “Doji” (see weekly chart).
• The daily (intermediate-term) RSI oscillator is still capped below by its trendline resistance (see daily chart).
• Since the  “Black Monday”, 24 August 2015 low of 20070, the Index appears to have evolved into an impending bullish  “Double Bottom” configuration with its neckline resistance at 22400 (see daily & 4 hour charts).
• On the shorter-term term, the 4 hour Stochastic oscillator has flashed out a bullish divergence signal at its oversold region which suggests that the recent downside momentum has abated (see 4 hour chart).
• The Index is now challenging a short-term trendline resistance in place since the 28 August 2015 high at 21000 (see 4 hour chart).
• The significant long-term support stands at 19400 which are defined by the mega long-term ascending trendline in place since December 1987 and a Fibonacci cluster (see monthly chart).

Key levels (1 to 3 weeks)

Pivot (key support): 20070

Resistance: 21000 & 22400

Next support: 19400 (long-term)

Conclusion

Current technical elements as per aforementioned suggest that the recent steep decline from the 21 July 2015 appears to be overstretched and downside movement has abated.

We decided to turn bullish above the 20070 weekly pivotal support and a break above the 21000 intermediate resistance is likely to trigger a push up to test the neckline resistance of the “Double Bottom” at 22400 in first step.

On the other hand, failure to hold above the 20070 pivotal support may negate the bullish expectation for a push down to test the key long-term support at 19400.

Source:  Charts are from eSignal & City Index Advantage Trader

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