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FTSE 250 (ex. Inv. Cos) (MCIX)
Last year the second-tier index of UK stocks topped out at 12,848, a point away from the 12,849 level highlighted in this column at the time as being the Fibonacci 2.618 ratio target derived from the 2000-to-2003 bear market. spooky! Since that high the market has been bearish and has declined by over 25%, significantly reducing its premium over the FTSE 100. It has broken below the key bull channel lower support line and tested the bearish channel width extension (lowest parallel on chart) during which a mid-move flag developed and offered good guidance of the likely short-term low at 9,565.
This low had also seen the index drop to pressure the 38.2% retracement level of the 2003-to-2007 bull move and a likely first level of support from a Fibonacci perspective. These factors suggest that for the near term a potential base has formed. Now the index has bounced to test the 50-day average and minor trendline resistance close to 10,560. However, to get bullish I would prefer to see the index close clearly above 11,070 as this would break significant resistance and suggest further genuine upside potential, initially toward 12,000. Cautious bears should await a move below 9,550 before looking for 8,587 by way of 9,100.
Hang Seng Index (HIS)
I last looked at the Hong Kong market in the third week of November. With the index then at 27,600-odd I cautioned that a break below 27,130 signaled vulnerability to a move close to 20,000, should key support at 24,158 give way. In mid-January, the index gapped lower at 25,836, almost forming an island top pattern on the daily chart, and has since hit 21,709, testing support from my previous channel mid-line (for those of you doing the maths that was in excess of a 21% fall in little more than two months).
Is this the extent of the downmove? Not likely if you accept the top seen between November and January is in fact a large downward-sloping symmetrical triangle producesing a 4,000-point target move. This suggests 20,000 is most likely the level to focus on, coinciding with the rising trendline on my log scale chart, though congestion close to 21,030 may intervene.
Only a sustained push above the so long supporting but now very much resistive 200-day average currently at 24,685 would give any cause for cheers from the bulls.