A series of three positive divergences have materialised between the Hang Seng Index and its quarterly momentum. Although the overall chart pattern has not materially strengthened, a rebound is underway by the HSI after testing the 23,971 to 24,000 level twice. The HSI ended the week of Oct 4-8 at 24,837, just short of the psychological 25,000 mark. Resistance appears at the declining 50-day moving average at 25,480.  

The Straits Times Index rebounded by 61 points ot  to 3,112 during the week of Oct 4-8, regaining its 200-day moving average - currently at 3,084 - and its 50-day moving average at 3,103 in the process. Short term indicators turned up; ADX fell, and the DIs turned neutral. However, volume did not expand with the rebound suggesting that the move is likely to be corrective rather than the start of a new upmove or uptrend. Resistance stays near these leves at 3,123 for the time being. Overall, the local market could still be volatile ahead of a year-end rally known as the Capricorn Effect.

Global markets heaved a sigh of relief even before the US Senate voted to lift the debt limit till Dec 3, and to keep the US government funded. Ahead of the vote, industry leaders and CEOs such as Jamie Dimon, CEO of JP Morgan Chase, Jane Fraser, CEO of Citi, and CEO of Nasdaq Adena Friedman discussed the importance of raising the debt limit. The debt is to pay for the US$8 trillion spent by the previous administration. The US market’s relief rally overshadowed fears around China’s debt problems, in particular in its real estate sector, with China Evergrande Group’s bonds still an issue.