More HSI musings here.
So, what does today’s fall tell us? Depends on the closing, but this could be quite a bit.
We’re trading above the last peak top (the little bounce around 2 weeks ago) and momentum seems to have came in from the upside. One word of caution would be with the close coming in lower, and what MACD will tell you after a few days.
What’s more interesting is that we have seen a small daily increase in volume. This is often a leader for larger moves, and not very mature as of yet. Though, if it builds, we could be looking at some strong valuation increases further down the line. The buyers are lining up and making a confident stand, something we did not really see before.
Still, there has been a lot of selling within the last month, and there is a lot of cold cash out there, so anything that looks like a sustained bounce will get the follow-up trades as everyone’s scrambling to get in first. Going back to the volatility analysis, this could lead to either the momentum play which would be a bull run bounce, or more bad news/political instability comes around and forces everyone to exit their positions again and keep the cash to the side, sending indexed volatility skyrocketing. If that process of a second major sell-off starts it is very, very hard to stop.
If you’re not into watching candle sticks, I’d be watching everything else I trust, and prepare for a forceful move (two weeks to a month time frame) one way or another.