MONTREAL - Asian stocks put in a strong performance over the past five days,
posting their best week since early May 2009 and driving the bellwether MSCI
Asia Pacific Index up 7.4% to 124.54 as of early afternoon Tokyo local time on
Friday, with high volatility across the region.
Volatility and change were highly correlated (+0.79). Both volatility and
percentage change were thus extremely high this week, with only two exchanges
failing to gain at least 4%. Being swamped by waves of sentiment spilling over
from other parts of the world, Asia showed little relative autonomy, meaning
patterns were absent on both the sub-regional and intra-regional levels.
In Australia, the All Ordinaries Index was at 4,400 just before the Friday
close, up 4.7% on the week. The volatility of this index has risen steady for
the past two weeks but momentum has been up definitively only for the last few
days and is finally solidly, if not impressively, positive. The index is
nearing an overbought situation but has not gone over the line. Aside from
this, short-term technical indicators are uniformly favorable. The index's next
big hurdle is a long-term resistance at 4,500, before it encounters its
third-fan descending-tops downtrend line, which passes through 4,761 at the end
of this week.
In Northeast Asia, both exchanges marked moderate gains for the week. In Seoul,
the KOSPI was at 1,925 as of early mid-afternoon Friday local time, up 4.7% on
the week, barreling through the long-term resistance (based May 2008) just
above 1,885. The KOSPI's volatility actually declined throughout the week even
as short-term technical indicators generally strengthened and the index teased
the overbought level without crossing over.
By contrast in Tokyo, the Nikkei 225 was up 3.8% to 9,011, also in early
afternoon trading local time. The Nikkei's momentum is strong and short-term
technical indicators remain robust. It has penetrated to the upside through a
descending-tops downtrend line (based June 2008) that passed through 8,932 on
Friday. This is the former top leg of the symmetrical triangle that it failed
to resolve positively not long ago. Other short-term technical indicators are
generally good but not as impressive as elsewhere in Asia. The index is not
really close to being overbought.
Performance among the Greater China exchanges was varied. By far the biggest
winner of the week was the Hong Kong exchange, where the Hang Seng Index, was
up 11.3% on the week to 20,061 as of the midday break. After blasting through
the static long-term resistance in the 18,900s, the Hang Seng Index crossed
into overbought territory on Thursday. Other short-term technical indicators,
however, remain favorable, although volatility has spiked since midweek, when
momentum also found positive footing.
In Shanghai, the SSEC is at 2,464 as of early afternoon local time, up 6.3% on
the week. Momentum and other short-term technical indexes reversed to
strong-positive, even as volatility remained relatively steady. The index is
not threatening the overbought line. However, it is not yet near challenging
the medium-term descending-tops downtrend (based April 2011) that has
constrained its movement for the last half-year. Even if the index succeeds
there, a major long-term static resistance lies to the upside at 2,700.
The TSEC/Taiex in Taiwan was up 5% on the week to 7,614 as of late
mid-afternoon Friday local time, but this was down from a Friday high of 7,743
just after the open, following which the index weakened steadily throughout the
day. Volatility is erratic but momentum and other short-term technical
indicators are strong. The index is flirting with the overbought level.
The Southeast Asian group was also heterogeneous in performance. As of early
afternoon Friday local time, Singapore's Straits Times Index was up 6.4% on the
week to 2,885. Volatility spiked this week and momentum turned from neutral to
positive and the index flirted with being overbought. The index is still well
below a series of crucial long-term levels in the 3,100s. There is a short-term
resistance at 2,867 and a two-tiered medium-term resistance in the mid-2,900s
(high 2,930s and low 2,970s).
The two emerging markets had somewhat divergent performances. In Malaysia, the
KLCI rose only 3% on the week as of early afternoon Friday local time, to
1,482, whereas the JCI in Jakarta was up 5.9% to 3,834. The JCI's short term
technical indicators are generally favorable but not as favorable for the rest
of Asia as a whole. Volatility rose strongly in the second half of the week and
one leading short-term term indicator actually declined despite remaining in
Finally on the subcontinent, India's BSE Sensex 30 was up 5.8% on the week to
17,760 as of mid-morning local time Friday. Short-term technical indicators
moved into moderately favorable territory this week despite highly erratic
volatility. The index is nowhere near overbought. It has succeeded in
surmounting a important very short-term resistance around 16,920, but there
remains a medium-term resistance in the 17,900s that blocked its advance Friday
morning. Still higher, there is a descending-tops downtrend resistance (based
With this week's gain, the MSCI Asia Pacific Index is now in the upper half of
its middle post-crisis trading range, which extends up to 128. Its short-term
technical indicators strengthened throughout the week.
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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