Just as we wrote in the first week this year, the Hang Seng China Enterprises futures contract retested last year’s high at 12,095 and topped it off with a weekly close above that. This caused bullish momentum to increase dramatically, and for observed volatility to pick up from extremely low levels to its long-term mean at 20 per cent. Combined, these technical features have conspired to cause a potential sixth consecutive bullish weekly candle. One of the strongest monthly moves in a decade, January’s rally could extend to important chart resistance between 14,500 and 15,000. At this point we would be very cautious indeed as the market is currently more overbought since the record high.

Nicole Elliott is a technical analyst