Who here is placing buy-orders in Chinese and Hong Kong markets based on my posts? You should a) stop, I’m surprised you still have money if you follow the sentiment in my posts, and b) pay me commission for today! Haha, in all seriousness though, it was insane to see the Hong Kong and Shanghai markets rally literally one minute after I posted my bullish signals summary for China. Though I can’t even play with the thought that someone got influenced, since I have received no clicks from there today!
Anyhow, my jaw has been dragging around the floor the whole day thanks to Chinese market action. Let’s look at the reasons you might want to buy tomorrow, in one more of these standard-format Shanghai – Hong Kong Stock Connect updates. I’ll even throw in some technical analysis as well!
Note: Since futures contracts for November expire tomorrow, things are really, really messy on the futures prices. Please look at futures-implied data through a few barrel-sized grains of salt.
- Hang Seng Index:
- Closed at 24 112, up 1.12%, with a high of 24 177.
- Futures-implied spot had a high of 24 206 (during day’s trade) and closed at 24 176.
- Turnover was high at HK$87.6 billion, nearly reaching yesterday’s turnover. There was a significant overweight to the turnover past the 14:35 rally start.
- Hang Seng Volatility increased by 5.2% to 15.15% from 14.4%. It does really seem like we are riding volatility higher!
- Futures-spot spreads also blew out higher! They were trading near 10 basis points for December delivery, which is astonishing given that the time left to trade them is decreasing so significantly every day!
- Hang Seng China Enterprises Index:
- Closed at 11 051, up 2.49% (!), with a high of 11 075.
- Futures-implied spot had a high of 11 092 and closed at 11 082.
- Turnover was high today here as well, at HK$25.8 billion, massively up from yesterday’s value at slightly below HK$20 billion.
- Futures-spot spreads here are high as well, at 24 basis points for December delivery!
- Shanghai Composite (sit down for this!):
- Closed at 2604, essentially at the high, up 1.43%.
- Volume at RMB316.5 billion! That’s more than 95% of Monday’s turnover, when the PBOC had gone out and lowered interest rates and there was somewhere on the order of RMB1 trillion being invested in IPOs!
- Shanghai Composite A-Shares Top 50 closed at 8 085, or up 2.51%!
- The big story here is obviously why the market rallied at 14:35 local time… still no satisfying answers to this actually.
- Shanghai – Hong Kong Stock Connect data:
- Northbound quota use was at RMB3.3 billion and very consistent during the day.
- Southbound quota use was at nearly RMB315 million, and had a reverted spike right before the lunch break, implying someone possibly took a big round-trip trade with the first leg being a buy on some Hong Kong-listed stocks.
- About RMB72 million were used in Southbound quota during the latter half of the afternoon, after the rally started and when essentially only Hong Kong was open.
- Hong Kong monetary base data:
- The overall monetary base fell by nearly HK$800 million, to HK$1.338,842 billion, as per usual mostly due to the change in cash that the HKMA underwrites of issuance through other banks (Certificates of Indebtedness).
- Closing aggregate balances were up HK$21 million, but currently they seem to be fluctuating a few tens of millions every day.
- If you weren’t sitting down before, you really should now. OEFBNs (HKMA-issued liquidity) held by non-bank financial institutions decreased… by nearly HK$2 billion!! Not a typo. This value normally changes by between HK$200-500 million when it changes, so a drop this big is an unequivocal indication that the net long positions in risky assets has increased dramatically. NBFI OEFBNs currently is slightly higher than HK$75 billion (by a HK$50 million margin) which is a much lower value than this stash of cash has been at for the last 3 years, and probably much longer than that!
Now, time for technical analysis!
What you can’t find on my Watched Charts page, please see below.
Hang Seng Index:
What a day…
- 126 and 63 SMAs were bounced off at the start, along with the yellow trend line going lowerwith support from the 38.2% short-term Fibonacci level!
- We crossed the long-term Fib sitting right there, representing 38.2% of the 2007 – 2008 move. It is arguably “softer” after having been crossed relatively frequently, but breaking this level coincided with igniting the rally today.
- The 126-63 SMA cross is not positive however. it will probably add a bit of resistance as market participants target 24 375, and 25 415.
- The MACD[21,63] signal line went positive! The short-term EMA is now outrunning the long-term one and showing that traders have shifted rather significantly to a strong move upwards!
- We might be getting a Bollinger band expansion on the monthly bands as soon as this week, as we add points closer to the SMA and remove points further away from its current value. The upwards slope will also probably mean that the SMA baseline will appreciate considerably these days, so hitting the upper band should mean initiating a “surf” higher.
Overall, very, very good trading, and signal after signal indicating strength.
Hang Seng China Enterprises Index:
Yup, jaw = dropped.
- We rejected the 2007 – 2008 move’s 61.8% Fibonacci level!
- The shorter-term 76.4% of-move Fibonacci mostly served as fuel to take the index higher!
- The 21 SMA is crossing the 126 SMA from below, at the same time that the 63 SMA is crossing it from above! The 21/126 setup has more power here, and just shows how interesting the trend will be going forwards.
- MACD[21, 63] signal line crossing into the positive area here as well.
- “Bollinger band? What are they?”
- 11 000 psychological level? No worries!
11 250 looks like the next logical target right now, because we’ve also tested the middle of the channel given by the parallel trend lines, and gone above it. It seems as if there is a very high chance of getting a new high above 11 400 as our next significant peak!
Shanghai A-Shares Top 50:
There are times when things are simply too beautiful to comment on, and this Bollinger band surf off the 61.8% Fibonacci level from a downwards move is one of those times.