MARKET RAP Critical junctures abound
By R M Cutler
MONTREAL - The MSCI Asia Pacific Index is finishing the week almost exactly
where it closed last Friday, just over 89.5, but still below the 92-94 level
that marks the upper bound of its trading range since last November. This lack
of movement obfuscates regional variations of non-trivial significance.
While it was a tough week for Asian equity exchanges on the whole, three major
national indices were able to eek out gains. The median change of the nine
markets reviewed here was down 1.7% and the arithmetic average was down 0.9%.
Taiwan, South Korea and India were able to close up significantly in comparison
with the others - Mumbai's BSE Sensex 30 is a special case and
is discussed in greater detail below.
The Taiwan Stock Exchange Composite (TSEC) was one of the three best performers
on three days of the week and led all others with a weekly gain of 2.2%.
Closing at 5,881, it has now risen 43.8% from its medium-term low last November
20 at 4,090. So doing, it has closed the gap in the high 5,800s that had rested
unresolved from the second half of September (two occurrences). But since it
closed the week at the top of the range of that gap, it still needs to open and
remain above its current level next week to confirm that breakthrough.
The TSEC chart shows strong long-term resistance in the 5,800-6,200 range
generally from early 2001, early 2002, late 2003 and mid-2004 through mid-2005.
The chart also indicates a medium-term resistance at about 6,132, confirmed
late last September on the way down to its November 20 medium-term low. A 50%
recovery from that medium-term low would place the index at 6,135. The
confluence of these conditions suggests some possible rough going next week.
The Hang Seng Index in Hong Kong was unable this week to maintain its
breakthrough of Thursday-Friday last week, which continued through Monday this
week, when it challenged and temporarily surmounted the 15,613 level that is
the upper bound of the trading range it has inhabited now for the past six
months. At mid-late afternoon local time, the index was just about 15,100, down
2.9% and the worst regional performer of the week. It closed at 15,215, little
changed on the day.
The Shanghai Stock Exchange Composite (SSEC) is fading in the second half of
the week, slowly returning from the Wednesday intraday high of 2,564 to test
the 2,400 support that was the upper bound of its medium-term trading range.
Late in the day local time Friday, it declined from the high 2,400s to close at
2,448.
We may expect further weakness next week as the index descends further to make
the actual test against that support. Fighting this lassitude will be the
short-term channel beginning with the March 3 short-term low at 2,071, the
level from which the index rose to break through the 2,400 resistance at the
top of the aforesaid trading range.
In India, as of midday local time, the BSE Sensex 30 is in the high 11,100s,
just below its weekly intraday high so far, having fallen back from its close
last Wednesday at 11,285 after being unable to maintain the forward momentum
that had propelled it to that level, which is 39.5% above its March 9
short-term low of 8,160. Moreover, its short-term intraday high, registered on
Thursday last week, is 11,362, in the middle of a still unfilled gap last
October 14-15 between 11,310 and 11,483.
At the same time, the Sensex's medium-term descending-tops trend line from the
August 11 close of 15,504 passes Friday through the 11,352 level and will
continue descending next week, providing a critical test of the current
medium-term propulsive move.
Yet the Sensex's long-term descending-tops trend line from the January 8, 2008,
close of 20,873 passes through the 10,561 level, that is, a value already
significantly surmounted. The index could still descend further to touch that
trend line from the other side and rebound positively from it. At present, it
is between the two; a 50% recovery from its medium-term low would see it rise
to 12,135, while there are both long-term and medium-term resistances in the
range between 12,300 and 12,500.
On a combined measure of volatility and strength, the Sensex and Singapore's
Straits Times Index (STI) were two of the three strongest this week. The STI in
late-afternoon on Friday was heading to a close at around 1,849, having found
short-term and medium-term support intraday on Tuesday in the low 1,800s. It
seems unlikely to penetrate its trading range to the upside, where the
resistance is in the low 1,900s.
The Australian and New Zealand markets being unremarkable this week, it remains
only to conclude with some observations on Japan and South Korea. Seoul's KOSPI
finished the week at 1,354, declining from Thursday's close of 1,368. So doing,
it has, like Taiwan's TSEC, barely closed the gap-down from last October 14-15.
(For the KOSPI, the gap was between 1,288 and 1,367.) Also like the TSEC, it
needs to follow through early next week in order to confirm that the gap really
is closed. This move is really quite remarkable.
The KOSPI is now 33% above the March 3 level from which it started; there is
medium-term resistance from last September scattered like flypaper all
throughout the 1,400-1,500 interval, in addition to a long-term resistance from
mid-July 2008 in the very low 1,500s.
Finally, Japan's Nikkei 225 is still stuck below 9,000, with significant
technical resistances of several kinds to the upside. It was down 1.3% on the
week to 8,708 and perhaps remains in doldrums as great as those of any other
major index in the region.
Dr R M Cutler (http://www.robertcutler.org), educated at the
Massachusetts Institute of Technology and The University of Michigan, has
researched and taught at universities in the United States, Canada, France,
Switzerland and Russia. Now senior research fellow in the Institute of
European, Russian and Eurasian Studies, Carleton University, Canada, he also
consults privately in a variety of fields.
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