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Thursday's big news was the SARS scare, which is now among the main topics in almost every newspaper and on almost every television network.


reporters seemingly asked every guest about the SARS impact, and most of those being interviewed said the disease wouldn't have much of an economic effect.

I'm not an economist, but I know that when the majority of people lean the same way, the market tends to do what it can to prove them wrong.

With SARS dominating the news the way it has been, today I want to take a somewhat different approach in my column. I've received many questions from readers asking if this news presents a buying opportunity in China, so I thought I'd review the chart of Hong Kong's Hang Seng Index to see if we can learn anything.

I don't monitor the Hong Kong stock market the same way I watch the U.S. markets, in that I don't keep any statistics on the markets over here. However, I do watch their action and their charts, and I certainly pay attention to the news.

One thing that has struck me about the SARS situation is the relative lack of panic in the markets -- unlike in the streets, where everyone is panicking. Take a look at the daily chart of the Hang Seng. The index has seen a relentless downward move, but not a panic.

No Worries?
This chart doesn't show an especially notable selloff

By doing some measurements on the chart, I can get a target in the 8000 area. On the above chart, measuring the swing from the October low (8700) to the December high (10,200) produces a difference of 1,500 points. Then, subtracting that from the breakdown level (connect the low in October with the spike low in early January for the uptrend line that gets broken) of approximately 9500, leaves the index at 8000.

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Target Level
Hang Seng 8000 is the one to watch

The same exercise can be performed on the longer-term chart using the September 2001 low of 9000 and the May 2002 high of 12,000 to get a difference of 3,000.

Next, draw in the uptrend line connecting the September low with the two lows in the spring of 2002. The uptrend line appears to have been broken around 11,000. Subtracting the 3,000 difference from that level, we once again arrive at a target of 8000.

For now, Hong Kong's market simply continues to dribble lower. Each day it seems to open higher and close lower, and the decline looks orderly after drawing in the channel lines.

A move out of the channel, on the downside, should lead to a short-term capitulation in this market and would suggest that SARS is priced in.

Confirming Pattern
The orderly, not panicked, decline in Hong Kong

Overbought/Oversold Oscillators

For more explanation of these indicators, check out The Chartist's


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Helene Meisler, based in Shanghai, writes a technical analysis column on the U.S. equity markets and updates her charts daily. Meisler trained at several Wall Street firms, including Goldman Sachs and SG Cowen, and has worked with the equity trading department at Cargill. At time of publication, she held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. She appreciates your feedback and invites you to send it to

Helene Meisler.