Hang Seng Index Enters Deeper Correction – 16,850 Could Be Next
Hang Seng index has been in a downtrend ever since it got rejected from the 18,920 points resistance level. Due to a recent sell-off in western equities, Hong Kong stocks are also suffering from a strong bearish sentiment. HSI has tanked more than 9% since its September highs.
The prolonged tightening cycle in the US is acting as a catalyst for not only the sell-off in US stocks but also the Asian equities. This week, the US reported an improvement in labor data that further put pressure on the equities. The benchmark index of Hong Kong stocks closed at 17,195 points on Wednesday after plummeting 0.78%.
Hong Kong Stocks Tumble On Positive US Labor Data
On Tuesday, The US Labor Department reported 9.6 million job openings for August, beating the forecast of 8.9 million. The positive job data, coupled with FED’s hawkish stance, led to fear in the market. The Hang Seng index currently stands 24.3% below its yearly high of 22,530 points.
According to data released last week, Chinese consumption rose by a small fraction during the summer holidays. The urban unemployment rate also declined slightly for the first time since April. However, these factors did little to lift the overall investor sentiment in the Chinese market, as the road to recovery still seems very long.
Hang Seng Index Forecast
As mentioned earlier, INDEXHANGSENG: HSI has been in a downtrend since September and is currently on its way to retest the key support level of 16,831 points. The chart also shows the benchmark index sitting 12% below the 200 MA, which is a bearish sign.
The index has a strong chance for a rebound from the 16,850 points level. However, the Hang Seng Index forecast will flip bearish if it breaks down below 16,850 points. In this case, a retest of the next major support level, which lies at 14,625 points, will be on the cards.