Could Hong Kong Disrupt China & The Global Markets Further?

Reading the news this weekend and watching the chaos in Hong Kong, one has to wonder how this violence and disruption in commerce is really affecting the Asian and global markets. Many different news sources are already reporting that Chinese economic data continues to show weakness over the past 4 to 5+ months. Additionally, Hong Kong, being a strategic source of income and business for the western world, has been disrupted with riots, protests and not violence as a result of a political battle between Chinese rulers and local Hong Kong residents.
Chris Vermeulen
Could Hong Kong Disrupt China & The Global Markets Further?

It seems obvious to anyone outside of this situation that neither side is about to stop their actions any time soon and that means we are going to experience even further disruptions to the global markets and local markets.  Right now, our greatest concern is that the disruption in economic activity in China/Asia will result in a “cold” in the US and other foreign markets.

Our August 19th call for a potential US market breakdown was stalled because of recent news that China and the US would begin talks again attempting to resolve the trade issues.  Yet, we know these talks may last many months with no real progress in terms of lifting tariffs or real concrete outcomes.  We don’t believe the US is going to remove tariffs or ease up on trade-related factors until we see real progress made by China.  This would suggest we are in for a long-haul in terms of real relief in the markets.

Our research team still stands behind our August 19th breakdown call.  Our super-cycle research suggests that the US and global markets are poised for a price breakdown and we believe the recent news events have stalled this price move.  Particularly, we point to the nearly -1100 point price drop on August 22 through 26, just days before the news that China was willing to engage in new talks with the US about trade.  This move would have likely continued to break lower, as we predicted, had the Chinese not announced their intent to try to relieve pressures on the economy and the global economy. Before we get into more details, be sure to opt-in to our Free Market Forecast and Trade Ideas Newsletter

We may have to give the Chinese credit for moving the markets by simply making an announcement that they were “willing” to engage in talks at a critical time when a price breakdown appeared to be executing.  That one statement changed the way the markets perceived the future.  Global traders rotated to a perspective of “hey – maybe the Chinese are finally going to negotiate a solution”.  We believe this is a stall tactic while the Chinese attempt to work another angle to protect their markets/assets.

HANG SENG INDEX WEEKLY CHART

The Hang Seng Index Weekly chart highlights the extreme weakness of price over the past 12+ week.  A dramatic downturn from $30,000 to $25,725 has transpired and support near a previous trend channel is now acting as a final floor for price.  Once this level is broken, we believe the Hang Seng Index could fall to $21,500 or much lower and set off a wave of corporate bankruptcies and bond defaults.

CUSTOM SMART CASH INDEX WEEKLY CHART

Our Custom Smart Cash Index Weekly chart is set up in a similar format.  It shows that the peak in value near early 2018 was the true peak in economic activity and price valuation.  Everything beyond that peak has resulted in weaker and more contracted price moves.  This suggests global traders have already been pulling capital out of the markets in preparation for some type of price correction.  It certainly does not align with the most recent “new price highs” in 2019 for many of the US major Indexes.

YANG FIBONACCI 100% MEASURED MOVE

We believe a very strong potential for a Fibonacci 100% measured move in YANG ETF exists on a price breakdown as a result of the chaos and turmoil that will likely continue in Hong Kong and China.  We’ve seen at least two of these 100% measured moves complete over the past 6 months and our Fibonacci price modeling system is suggesting a target level above $75 which happens to align with another 100% Fibonacci measured move.

Current support near $55 would be an excellent area for a stop level and targets near $65 & $72 would be appropriate for skilled technical traders.  The risk at this time is related to the support level near $55 and the potential for some positive outcome in Hong Kong or other trade-related news.  Any further deterioration of the situation in Hong Kong could result in a very quick price drop in the Asian markets.

CONCLUDING THOUGHTS:

As we’ve been suggesting for more than 12 months, 2019 and 2020 are going to be fantastic years for skilled technical traders.  The potential for big trades (20% or more), like this YANG trade, will continue to set up in different sectors and global markets.  All we need to do is stay on top of the opportunities to find ways to profit from these moves.

We would advise traders and investors to take advantage of these higher prices to pull profits out of open long positions and take some risk off the table at this juncture in price. We entered a new trade today and our portfolio is primed and ready for big moves going into next week.

Chris Vermeulen 
www.TheTechnicalTraders.com

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All

Top Promotions

Top Brokers

IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US