THE Hang Seng Index has convincingly made a 100 per cent quantum leap from the lows of 5,000 seen not much more than a year ago, at the end of 1992.
It tried twice to break through 12,500 and has fallen back both times. The short-term trend is now slightly bearish as the index is below the 25-day and 50-day, moving-average line.
However, as the fundamentals of the market and the technical outlook of individual stocks remain healthy, we doubt that the 200-day moving averages will be broken, and the longer-term trends, which we call the secular trend, should remain resolutely positive.
In spite of this there remains room for corrections of between 10 per cent and 25 per cent.
The typical pattern to expect on the charts is damped harmonic oscillation.
The initial swings are violent, the next swing more modest, and a final one quite subdued. These will establish a line of falling highs but static or rising lows.
