MONTREAL - Five of Asia's most important exchanges - China, India, Australia,
Taiwan and South Korea - are at crucial points as the week draws to a close,
with Shanghai and Mumbai two of the region's most volatile markets as both made
runs at important resistance levels.
It is too early to tell how well the BSE Sensex 30 will fare in its attempt to
surmount 14,000. This it has to do decisively. It has been fluctuating above
13,800 for the past few days but has not even broken 14,005. Even if it
succeeds, there are still important resistances blocking its advance between
there and 14,600.
It opened this Friday at 14,050 but fell back to 13,850 in just
seven
minutes. By afternoon trading, local time, the benchmark slipped further to around
13,400, well below the level of its close the previous day in the low
13,900s.
The
Shanghai Stock Exchange index appears to have failed in yet another run at the
3,000 level, reaching 2,950 on Thursday afternoon but making little headway since.
The good news is that a series of small supports from January 2007 between
2,675 and 2,950 collectively represent a bulwark against a precipitate drop.
The bad news is that they also represent a web in which it seems at present
ensnared ever since dropping below 3,000 a month ago. Given recent volatility,
it will be very tricky if this index works towards the lower end of the
2,675-2,950. It has not closed below 2,650 but on July 3 it did open at 2,610
and touch an intraday low of 2,566.
The Australian All Ordinaries index is down 17.0% in eight weeks, plunging
through supports at 5,410 and 5,175 as if they did not exist. It has found a
ledge at 5,000 to rest on. The index fluctuated within 2% of the 5,000 level
from June through September 2006, but it never returned to test that level
after moving up from there to rise 32% in the course of just over a year ending
October 2007. Other untested, rather minor supports intervene at 4,700 and
4,600 before the 4,240 level provides a measure of solidity, after which the
chart shows only 3,430 to break a fall.
The 5,000 level saved the All Ordinaries index after a nearly 2% drop at the
Thursday open, and it has been clawing back the rest of Thursday and into
Friday with what looks superficially like determination but actually on rather
low volume, which is not a good sign. The Standard & Poor's ASX 300 index
traces exactly the same pattern over time, even back to the beginning of the
decade, and likewise is on a knife's edge as the week is ending, with supports
of the same weakness as the All Ordinaries located at proportional levels down.
Taiwan appears this week to have found good
support, dating from March-April 2004, at the 7,000 level, which it tested on Tuesday
and again on Thursday. This comes following a precipitous decline of 24.7% in
the seven weeks since May 20. It finished the week strongly, just below 7,250 on Friday, but
the volume is not outstanding.
It still has its next resistance at 7,500 and further obstacles throughout
7,800-8,600 range, as well as an important trendline down formed by tops at the
end of October 2007 and in May of this year. However, the bounce off 7,000 is
solidified by its confirmation of a long-term trendline up formed by bottoms
from October 2001, October 2002, and April 2003.
If this holds through the 7,000s and the 8,000s, then theoretically it will be
a good bet against the late 2007 highs, now resistances, in the high 9,000s.
However, it is not clear whether it could conquer the low 10,000s where
resistances from August 1997 and February 2000 look well entrenched. On the
other hand, it seems unlikely that any of that comes into play for at least two
years. But you read it here (maybe) first.
Finally, Seoul broke through its support at 1,600 last week but this week found
support Thursday morning at 1,500. It is not clear from where the support came,
since the chart shows the next support at 1,400. And this is a very strong
support, first established in January 2006 and then confirmed in May that year,
and through much of the end of 2007. The low 1,300s then follow, but the index
should not need to test that level in the absence of catastrophic events.
To sum up this selection of markets: China and India still lack momentum to
penetrate important resistances established relatively recently, while
Australia is still walking a tightrope. Taiwan has a good and justifiable
bounce at least for a short while, and if South Korea is walking on water this
week, the two of them at least appear to have good near-term prospects. I will
address the other major Asian equities markets next week, as warranted.
R M Cutler (rmc@alum.mit.edu) is a Canadian international affairs
specialist.
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