Boxing Reality丨Three Bull and Bear Lines, Two Have Been Broken

On the 21st, local time, U.S. President Trump issued an ultimatum to Iran, ordering the country to reopen the global oil transport route through the Strait of Hormuz within 48 hours, or face attacks on its power plants; the Tehran government responded strongly to the threats, claiming that if its power plants were attacked, it would strike the infrastructure of surrounding countries in the Persian Gulf. The resulting escalation of tensions caused the Hang Seng Index to plummet 1,074 points to a new low of 24,203, the lowest in over eight months, before ultimately closing down 895 points, marking the largest single-day drop in 11 months.

However, before the deadline of his ultimatum (last Monday, U.S. time), Trump announced that due to significant progress in negotiations with Iran, he ordered a five-day delay in military action against Iranian energy facilities (which was subsequently postponed several times), stimulating the Hang Seng Index to rebound for two consecutive days, ultimately rising by 953 points at the close. However, as Iran denied negotiations with the White House, the Hang Seng Index reversed course and closed at 24,951 on the 27th, down 326 points or 1.28% for the week.

It is evident that the performance of Hong Kong stocks continues to be dominated by the Middle Eastern situation. The latest development is that both the U.S. and Iran have proposed several negotiation conditions that the other side will inevitably reject. The U.S. Central Command recently stated on social media that approximately 3,500 sailors and Marines have arrived in the command responsibility area, including the Middle East. The Washington Post reported, citing U.S. officials, that the Department of Defense is preparing for several weeks of ground military operations in Iran, and if President Trump chooses to escalate the actions, the war will enter a dangerous new phase.

Whether Trump decides to launch a ground offensive in Iran is yet to be seen, but the ongoing conflict between the U.S. (along with Israel) and Iran, which has lasted for four weeks, has already caused significant damage to the Hang Seng Index. Mainly, if we use the 200-day moving average as the bull-bear dividing line for U.S. stocks, the Hang Seng Index lost that level back on March 4 (it briefly recovered, but significantly fell again on the 19th). Even according to the commonly used 250-day moving average in Hong Kong, the Hang Seng Index also broke below that level last Monday. However, from another perspective, since the Hang Seng Index peaked at 28,056 points on January 29 and dropped to an intraday low of 24,203 points last Monday, the decline is “only” 13.7%, meaning that the Hang Seng Index has not yet entered a technical bear market (a drop of over 20% from the peak), with at most two of the three bull-bear lines already breached.

It is worth noting that, thanks to Trump, the Hang Seng Index last fell below the 200-day and 250-day moving averages on April 9 of last year, but recovered that same day and subsequently confirmed a bottoming rebound, due to the sudden announcement of Trump’s “reciprocal tariffs” plan being scaled back (TACO).

Whether Trump decides to engage in ground warfare in Iran or revert to TACO remains uncertain. The issue is that even if U.S. military actions escalate, should the Hang Seng Index fall below the 200-day and 250-day moving averages due to political, economic, or geopolitical events, it may indicate that the negative factors related to the news have almost been fully reflected, thus not ruling out a potential oversold rebound for the Hang Seng Index. Of course, if the recent low of 24,203 points is breached, it would indicate that the Hang Seng Index needs to continue probing for a bottom.

Trading operations: Seeing the Hang Seng Index open sharply lower last Monday and significantly break below the 250-day moving average (around 25,108 points), Lao Xu’s long position in the futures at 26,590 points (as noted in the March 2 “Trading Record”) along with the 24,600-point short put have all been stopped out, resulting in a total loss of over 2,500 points, erasing all the profits made in the first two months of this year. He is now closely monitoring developments in the Middle East, and will only consider holding April futures or short puts if it is confirmed that the Hang Seng Index can maintain the large gap down from the 23rd (25,121 and 24,789 points).

Lao Xu