MONTREAL - Asian equity markets were in the main down last week even though
internal technical indicators bode well for the short-term for a number of
national markets. All but one of the national markets declined, but the
correlation between volatility and percentage chart move was a moderate 0.39.
Almost all major short-term technical indicators for the Australian All
Ordinaries Index turned negative at the start of the week. The index dropped
1.6% by Friday to 4,343 after failing to make headway against the long-term
resistance at 4,500. There is a long-term ascending-lows uptrend (based early
March 2009) that will potentially provide support and contribute to the
formation of an ascending triangle; at present that trend-line rises to under
4,000, leaving a lot of play in the chart's short- and even medium-term future.
The two members of the Northeast Asia group had similarly near-median
volatilities, but their performance was otherwise radically different. Tokyo
was the worst performer in Asia while Seoul was the second-best. For the South
Korean KOSPI, this meant a loss of 0.1% to 1,928. Some short-term technical
indicators are still unfavorable, but momentum is positive and only getting
stronger while internal volatility fell steadily over the course of the week.
The index remains stymied by the early August gap-down from 2,018 to 1,944
(intraday figures, 2,015 to 1,937).
In Japan, the Nikkei 225 lost 2.8% to 8,801 as short-term technical indicators
were erratic but turning slightly negative late in the week but still finely
balanced. A symmetrical triangle has formed with the lower leg based March
2009, but the upper leg could still be based April 2010 or as far back as
May-June 2008, with differing interpretations depending on which this turns out
to be. If it is the latter, then the descending-tops downtrend passed through
8,938 on Friday and the index fell back under it after making an earlier
attempt to throw a leg over.
The members of the Greater China complex were all over the chart (no pun
intended) last week but mainly turned in favorable, or less unfavorable than
most, performances. The worst performer was Hong Kong where the Hang Seng Index
had only a near-median loss of 0.9% to 19,843. Short-term technical indicators
nevertheless improved during the week, with momentum rising monotonically and
internal volatility down. There is a very clear medium-term descending-tops
downtrend (based April 2011) that may well limit the short-term ascending-lows
uptrend (based early October 2011) to early August gap-down levels, which the
chart has already once failed to surmount.
The SSEC in Shanghai was actually the week's only gainer, up 2.2% to 2,528 with
already favorable short-term technical indicators strengthening still further
throughout the week and barely shying away from the threat of being overbought.
Momentum is strongly up and internal volatility is strongly down. The 2,370s
continue to represent a medium-term static support against the long-term
descending-tops downtrend based in July 2009. The chart is currently trying to
break out of a different, medium-term (based April 2011) descending-tops
downtrend and is now at the upper bound of that dynamic constraint.
Most short-term technical indicators for the TSEC/Taiex strengthened over the
week even though the index lost 0.2% to 7,603 and others turned unfavorable.
Still, it remains in the doldrums since its gap-down below 8,000 in early
August and there is the ominous threat of a short-term descending-tops
downtrend forming itself that would even be traceable back to the mid-March
local minimum.
In Southeast Asia, the Straits Times Index in Singapore was the region's
second-worst performer, losing 2% to 2,848 as short-term technical indicators
were split, contemporaneous ones remaining negative while forward-looking ones
gained strength. The short-term structure of the Straits Times Index is very
similar to the TSEC's, although its resistance is static rather than dynamic,
fixed at between 2,900 and 2,910.
The JSX in Indonesia was the most volatile index in Asia but turned in a
near-median performance, losing 1.2% to 3,784. Short-term technical indicators
were schizophrenic and, like Singapore's, also resembled Taiwan's, although
without an early-August gap-down to create problems. There is, however, a
short-term descending-tops downtrend based from there, which constrains the
present chart move. It forms a descending triangle with the triple-top
resistance from late 2010/early 2011. The index failed in its first attempt to
break out to the upside and is now returning for its second attempt.
In Mumbai, the BSE Sensex 30 had slightly above-median volatility and slightly
below-median performance but the short-term technical indicators mainly
strengthened, especially momentum. The index closed down 1.4% on the week to
17,563. It is still constrained by the medium-term descending-tops downtrend
(based November 2010), now in danger of turning into a long-term structure.
However, the index has finally filled the early-August gap-down and is now at
the level of seeking to confirm a medium-term support from February-March
earlier this year.
The MSCI Asia Pacific Index closed the week down 3.5% to 120.22, recovering
2.4% on Friday after testing on Thursday a support just above the 118 level
that represents the lower bound of the trading range that it entered two weeks
ago. The top of this range is just above 127, and it is surmounted by a
superior contiguous trading range that extends up almost 138, which is the
post-2008 high.
Indications are that this index is gathering strength for an attempt at a
further move upward, but whether the MSCI index for example will reach 127 in a
steady progression is doubtful. There an intermediary resistance at 124.69 and
a stronger one just below 125.50. This structure typifies a handful of
important national indexes as well.
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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