There was an unexpected sell-off led by the information technology sector in Hong Kong markets yesterday, following Nasdaq’s path to trend lower. 

The Hang Seng index lost nearly 400 points or 1.5% to 25,389 points, breaking down the key support level of 25,440. Tencent (700 HK) – largest company listed in HK by market cap – tumbled 4.13%, triggering profit-taking activity. Technically, the index has entered into a bearish trend with both 10-Day Simple Moving Average and SuperTrend (10,3) trending downwards.

The long-waited technical correction is probably on its way. Most Asian equity markets closed lower on Tuesday. Singapore’s Straits Times Index lost 0.38% or 12 points to 3,211 points, with SGX’s daily trading volume shrinking to around S$800-900 million recently. Investors are probably taking a ‘wait-and-see’ attitude ahead of this Friday’s non-farm payrolls and upcoming earning season.

Geographical tensions rose in North Asia after North Korea launched its first intercontinental ballistic missile on Tuesday morning. The White House treated this as a clear threat to global security and thus expressed strong demand for economic sanctions against North Korea.

As a result, gold price rebounded for a second day to $1,226 from recent low of $1,219. If the geographical tension continues to escalate, there will probably more room for upside.

Technical analysis: Gold

  • 10-day Simple Moving Average sloped downwards
  • SuperTrend (10,2) remains in bearish set-up
  • Momentum indicator RSI has hit oversold zone below 30% and then rebounded, indicating technical rebound
  • ‘Double bottom’ pattern will be formed if the price holds above $1,219

Hang Seng Index

  • SuperTrend (10,3) flipped from green to red, indicating bullish reversal
  • 10-Day Simple moving average slopped downwards
  • Momentum indicator MACD is trending downwards, indicating bearish momentum dominates
  • Immediate support level is 25,500, next level 24,430 (61.8% Fibonacci extensions)

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