MONTREAL - The MSCI Asia Pacific Index closed last week up 3.4% to 116.82 (up
3.3% on the fortnight), its largest weekly advance in nearly seven months. The
intraday high on Thursday was less than 1% below the top of the index's lowest
post-crisis trading range, which represents a resistance at 118.7 while by the
Friday close it was threatening to become short-term overbought.
Other short-term resistances are found at 120.2, 122, and notably 125.4.
Whereas the MSCI index seems to have gained some traction, however, the
euro-denominated FTSE Asia Pacific Index still has a medium-term
descending-tops downtrend (based January 2011) to surmount.
The correlation between volatility and percentage move was a high +0.85, but
there was no homogenous behavior either within or
among sub-regions. This means that last week global financial dynamics swamped
any specific Asian or national dynamics.
That the Australian All Ordinaries Index rose 1% last week, yet was the weakest
market reviewed here, suggests how strong the week was. (However, it is up 4.9%
in a fortnight.) Closing at 4,269, it now has breathing space above its
long-term (based November 2007) ascending-lows uptrend, thanks also to its very
long-term uptrend (based January 1991), which provided crucial support below
4,000.
Its next significant hurdle will be the 4,500 level, the lower bound of its
former medium-term (based October 2010) trading range. Volatility decreased
throughout the week as momentum also slackened off but still remained positive.
Other short-term technical indicators are broadly favorable. There is a bit of
a danger of the index becoming short-term overbought, but it is not yet there;
indeed, the danger was greater during the previous week.
The two Northeast Asian exchanges reviewed here were in aggregate below median
on the week, but South Korea outperformed Japan. In Seoul, the KOSPI closed up
4.3% to 1,835 (up 8.1% in a fortnight). The index is now back above its
long-term ascending-lows uptrend (based October 2008), having apparently
confirmed support at the triple-top of its August 2009 - July 2010 (ie lower
post-crisis) trading range. Volatility is low and all significant short-term
technical indicators are favorable.
There is an increasing chance of the KOSPI becoming short-term overbought, but
again it has not reached that threshold. It is approaching the lower bound, in
the low 1,900s, of its higher post-crisis trading range (October 2010 - August
2011). Even if it overcomes that resistance, however, there is an early August
gap-down from 2,019 to 1,967 that it would still have to surmount.
In Tokyo, the Nikkei 225 was the week's second-worst performer, rising 1.7% to
8,748 (and barely more than one-half of 0.1% in a fortnight). It will soon be
encountering a long-term descending-tops downtrend line (based June 2008),
which passed through 9,012 at the close of the week just ended.
The Japanese index is stalling, however, at a very short-term resistance in the
mid-8,820s; the week's intraday high was just below at 8,809 on Thursday. Also
there is another very short-term resistance above the 9,012 long-term
resistance, in the neighborhood around 9,080.
The Greater China complex was highly heterogeneous. The range went from
second-most volatile and third-best performer (Hong Kong) to second-least
volatile and third-worst performer (Taiwan). The Hang Seng Index rose 4.5% on
the week (5.2% in the fortnight. It is up 13.9% in the week and a half since
the October 5 close, perhaps bouncing off the top of its October 2008 - June
2009 trading range in the mid-15,900s.
Short-term technical indicators confirmed the reversal early last week. The
index is on the verge of overcoming a short-term descending-tops downtrend
(based August 2011) and has still some way to go before challenging its
medium-term descending-tops downtrend (based April 2011).
On the other end of the Greater Chinese complex, the TSEC/Taiex in Taiwan rose
2% to 7,358 (up 1.8% on the fortnight), finally appearing to confirm a static
support at the lower bound of its lower post-crisis trading range. Even with
its relatively anemic performance, the index in Taipei followed many other
Asian markets by reversing a number of significant leading short-term
indicators during the first couple days of the week just ended.
Remarkably low volatility coincided also with coming off the threat of
short-term overbuying. There is, however, a descending-tops downtrend (based
January-August 2010) that remains a potential resistance: even though it was
violated to the upside in late 2010, it provided a support in two months ago as
the index was on its way back down, so it now also represents a resistance to
the upside at the present level.
Finally in the Greater China complex, Shanghai's SSEC rose 3.1% on the week to
2,431 (and, since it was closed during the first week of the month, also the
same amount on the fortnight). In the very short term, leading indicators have
reversed to the upside, volatility is a bit higher than elsewhere in Asia, and
the index has backed off from a threat of being overbought.
Despite this advance, which was seen throughout Asia as an encouraging sign,
the index remains still constrained by two short-term descending-tops
downtrends (one based July 2011, at the upper margin of which it now lies; and
one based April 2011, which currently passes above 2,600, and which is
reinforced by a long-term descending-tops downtrend based July 2009) as well as
a medium-term descending-tops downtrend based November 2010).
The high volatility/change correlation throughout Asia meant that in Southeast
Asia, as in Greater China, the constituent exchanges were equally stratified
between its two components. Indonesia was the most volatile and biggest mover
in all of Asia, Singapore the fifth-most on both accounts, and Malaysia the
fourth-least on both accounts.
The JCI in Jakarta rose 7% last week to 3,665 (but only 3.3% on the fortnight).
Short-term technical indicators turned positive en masse towards the end of the
previous week, and the index has slightly backed off from the threat of being
overbought. It is now approaching the upper limit of its short-term
declining-tops downtrend constraint (based July 2011) but faces strong
resistance in the 3,757-3,784 range from its November 2010 to January 2011
triple-top, which subsequent chart behavior has confirmed as a significant
level. On the other hand it has now provisionally confirmed the ascending-lows
uptrend based November 2008 as a significant long-term support.
The Malaysia market index, KLCI, rose 3% to 1,442 last week (4% on the
fortnight) and has just entered short-term overbought territory. Its short-term
technical indicators reversed to the upside at the very beginning of the month,
and these have remained quite favorable, although on wildly fluctuating volume.
The index has overcome its short-term descending-tops downtrend will encounter
significant resistance medium- and long-term resistance to the upside initially
around the 1,484 level and ranging up to 1,517.
Finally in Southeast Asia, the Straits Times Index in Singapore closed the week
up 2.9% to 2,744 (but only 2.6% on the fortnight). The Singapore index has
tracked the Taiwan index exceptionally closely for the last three months,
reasonably closely for six months, and arguing fairly closely since almost the
beginning of the year. Consequently all remarks on Taiwan for the short- and
medium-term apply here. As for the long-term, the Singapore index appears to
have caught itself at the very limit of the lower bound of its lower
post-crisis trading range. The next significant resistances will appear close
to the 2,900 level.
Dr Robert 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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