Chart of the day: Expect indecision as Hang Seng Index hovers

A month ago, we predicted the Hang Seng Index would drop to 18,500 points and commented on soaring futures volumes. January, with record volume and negligible open interest, backs up the view that foreigners are using this contract as a cheap and cheerful proxy for exposure to mainland China. Currently hovering at 19,600 points, a 50 per cent retracement level from 2008’s low, expect indecision this month, correcting the oversold situation and allowing other global indices to catch up. We continue to favour a drop to the 17,500-point area, 61 per cent Fibonacci retracement support, and maybe the psychological 15,000 level, making corrective wave C equal to the height of wave A. Volumes should drop if smaller weekly moves kick in.