MONTREAL - Overall, Asia looks like having some rough going, at least for a
while, although it seems to have established a support in the MSCI Asia Pacific
Index chart a little underneath the 115 level.
The MSCI Asia Pacific Index was up only 1% on the week to 119.02 in early
afternoon Friday Tokyo time. The 119.10 level represents a short-term
resistance from six weeks ago, and the range from there up to a little over 121
is a medium-term
resistance from mid-May as well as from several local maxima in the fourth
quarter of 2010.
The rank-order correlation between volatility and absolute percentage move was
0.59, signifying that higher volatility was associated with more strongly
advancing indexes.
Shanghai again
led the pack as the most volatile and also the strongest mover. The Shanghai
Stock Exchange Composite (SSEC) rose close to 1.9% to 2,637 in mid-late
afternoon Friday local time, perhaps a bit overbought in the short term but
with otherwise favorable short-term technical indicators, and ready to confront
its first of numerous resistances to the upside at 2,683.
By contrast, the Taiwan Stock Exchange Composite (TSEC) was the least volatile
in all of Asia and also the second-worst performer, closing almost unchanged on
the week at 7,761. It has a short-term resistance just ahead of over 7,770 that
introduces an unfilled gap-down from 7,931 from early May.
The Hang Seng Index in Hong
Kong split the difference between the other two Greater China indexes, as it has
been wont to do lately, being the third-most volatile and fourth-best gainer on the week.
The Hang Seng was up 1% on the week at 21,029 with very favorable
and still consistently improving short-term indicators although perhaps
slightly overbought for the moment. It is fighting at present to maintain its
conquest of the short-term resistance at 20,912, after which the next
resistances are at 21,240 and 21,385.
The Northeast Asian group reversed its customary behavior, making Japan the big
mover while South Korea stagnated. The Nikkei 225 was indeed the second-most
volatile and third-largest gainer on the week, up 1.1% to 9,537 although
weakening in late mid-afternoon Friday local time. The Nikkei’s short-term
technical indicators have turned strongly positive in the last few days, as it
has also from the broken a resistance to the upside at 9,500 which it may be
looking, however, to revisit in order now to confirm as a technical support.
Still, the chart has nothing but resistances in its path, with major ones
variously at 9,800, then 10,300, and then 10,600 and any number of less major
ones in between.
The KOSPI in Seoul was the fourth-least volatile and third-worst performer on
the week. It closed at 1,759, essentially unchanged with favorable but slightly
deteriorating shot-term technical indicators anticipating resistance at 1,995.
The KOSPI is now at its highest level in over two years (more precisely, since
June 11, 2008). Its chart shows a classic ascending-triangle breakout, with the
up-trend having commenced in March 2009, but unimpressive volume is a point for
concern. This formation still needs confirmation that the present rise is not
just a "throw-over" to be followed by a fallback.
The Australasian indexes were fairly docile this week. New Zealand and
Australia were the second- and third-least volatile markets in the region,
although they turned in the third- and fifth-best performances. The New Zealand
50 Index Gross, in particular, gained 1.3% to 3.034, crossing its 50-day moving
average to the upside, with favorable short-term indicators prepared to assault
the next resistance, in the low 3,060s.
The Australian All Ordinaries Index gained 0.8% to 4,511. While this chart has
some work to do in the short-term, a key test will come in the medium-term
against a descending-tops trend line passing through the early April local
maximum as drawn from the late 2007 all-time high. That will play out somewhere
between the current level and 4,750, with the latter figure decreasing at time
passes.
The Straits Times Index in Singapore was by about
0.4% on the week to 2,984, with positive but increasingly weak
short-term technical indicators. This index wishes to challenge its short-term
high at 3,020 from mid-April. If successful, it would reach its highest level
since July 2008 (slightly analogous to South Korea’s KOSPI) but again the
volume on the recent run-up has not been impressive enough to give full
confidence of success in the challenge.
In Mumbai, the BSE Sensex 30 is down 1.2% and weakening, as of early afternoon
local time Friday, to 17,920. Here we have another pattern resembling Seoul's,
and partially Singapore's; however, the short-term technical indicators for the
Sensex turned negative on Thursday, There is potential short-term support at
17,876, and it will be important to see whether this support is confirmed or
not, but there are several other short-term and medium-term supports terraced
down to the 17,000 level.
To summarize, Asian markets have reached an important juncture and have been
able to re-establish some mild autonomy relative to broader international
trends. However, they are now a bit out of breath. Some observers are waiting,
perhaps over-optimistically, for the Western markets to recognize that there
will be no double-dip in their economies.
Asian markets have yet to absorb the fact that the second half of this year
will see the region's economy cool off a bit, irrespective of what happens in
the rest of the world. The equity markets in the region will see a battle
between shorter-term pessimism and longer-term optimism.
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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