MARKET RAP Mumbai shows its strength
By R M Cutler
MONTREAL - As India proved itself the region's best-performing market over the
past five days (although closed on Friday, when markets that were open stayed
mostly in the green), the MSCI Asia Pacific Index was up 1.4% on the week to
121.67 very early in the afternoon on Friday, Tokyo time.
The index did not get close to challenging its medium-term resistance at 123
this week, and not even its short-term resistance at 122.24. In the absence of
external disruptions, it looks like preparing to do so, however, with further
resistances beyond at 127 and 129. Short-term technical indicators are
ambiguous at best.
For the 10 national markets surveyed here, including the three that were partly
closed, the rank-order correlation between
volatility and percentage move was a moderate 0.62 with a scatterplot
interval-data correlation of 0.53.
An experimental rank-order correlation between volatility and performance among
five sub-regions (India, non-China Northeast Asia, Southeast Asia, Greater
China and Australia) was a very high 0.90.
This last statistic requires further refinement before interpretation is
attempted, although it suggests that sub-regional factors were importantly at
work. The other statistic suggests that pan-Asian elements moderately strongly
influenced outcome even if there were global trends to which markets responded
as well. All figures given here are for mid-afternoon Tokyo time Friday, unless
otherwise noted.
The standout of the week was India, where the BSE Sensex 30 rose 3.2% to 18,800
by the close of its shortened week on Thursday, as short-term technical
indicators turned positive on Monday and increased in magnitude throughout the
week. It was the second-best performer in Asia for three of the four days that
it was open this week, and third best on the other. Volume was encouraging, and
there is good momentum.
The second-best performing region was non-China Northeast Asia. Tokyo's Nikkei
225 was up 1.4% to 9,242, the third-best performance on the second-greatest
volatility. It is still trying to gain traction from a bounce at its 9,081
medium-term resistance level against a strong downdraft of short- to
medium-term descending tops. Short-term technical indicators have turned
favorable since the beginning of the past week.
Seoul's KOSPI lagged a bit, up only 0.6% to 1,803. Still, its short-term
technical indicators, which turned positive last week, remained so. Its
short-term ascending-bottoms trend-line remains intact.
The Greater China complex was the next best performing sub-region, somewhat
behind non-China Northeast Asia and slightly ahead of Southeast Asia. The
exchanges in that region continued to perform without a great deal of
homogeneity.
One occasional sub-regional pattern did, however manifest: the rank-order of
performance was the inverse of the rank-order of volatility. Thus Shanghai was
the most volatile Chinese exchange (and fourth in Asia overall) but the worst
performer, in fact the only exchange in Asia to lose ground on the week, as the
SSEC fell 0.4% to 2,646 although with short-term technical indicators turning
slightly positive on Wednesday.
It is now, since the end of July, in an extremely narrow trading range between
2,575 and 2,690, which means among other things that it has not come close to
challenging its next major resistance at 2,750.
The Hong Kong and Taiwan exchanges fared a bit better, being the fourth- and
fifth-least volatile in all Asia this week and turning in the fourth- and
fifth-best performances, still enough to be respectable during this overall
positive week. The Hang Seng Index rose 0.9% to 21,159, confirming last week's
tentative penetration of the 20,912 resistance level. It has now risen back
above both its 50-day and its 200-day moving average, and short-term technical
indicators continued to show the positive signs that they began to do last
week.
The TSEC/Taiex gained 0.8% on the week to 7,890. It may soon have an auspicious
confrontation with its long-term descending-tops trend line but must first win
a challenge in the nearer term to its medium-term descending-tops trend line,
coming very shortly. Short-term technical indicators are so far favorable.
Holiday market closures make performance in Southeast Asia hard to gauge this
week, but its performance was the most diverse of any sub-region. Jakarta was
open only on Monday and Tuesday but the JCI was able to notch a 2.1% gain on
those two days alone to close at 3,231, the second best in all of Asia on the
third highest volatility.
The breather that some indicators suggested last week might occur has not yet
eventuated, but after three days of closure at the end of this week it is hard
to predict what will be the open on Monday. The fact that even Tuesday was an
abbreviated trading day, and also Monday's low volume this week because of the
impending holiday, make short-term prediction difficult.
Singapore and Kuala Lumpur were the two least volatile all-Asia exchanges this
week (among those reviewed here), but both managed modest gains as the Straits
Times Index rose 0.7% to 3,022. The move in Singapore is potentially auspicious
as it represents a penetration of its short-term resistance at 3,010 and
possible confirmation of the long-term ascending-bottoms trend from March 2009
(or, in an interesting variation of the analysis, from October 2008).
With short-term technical indicators continuing to be favorable, that would
mean that the chart may be preparing an assault upon the early-May 2008
resistance just under 3,250 through a classic ascending-triangle formation.
Bear in mind that there is a never-filled gap-down inherited from early January
2008 between 3,336 and 3,235.
Given the extremely abbreviated trading week in Kuala Lumpur, I omit detailed
commentary on the KLCI, noting only that it was up 0.15% to 1,438 and is not so
far from its mid-January 2008 all-time high of 1,516.
The Australian All Ordinaries Index was the third-least volatile and
third-worst performer in Asia this week, but that was still enough to gain 0.5%
to 4,601. It was twice unable to sustain advances through two short-term
resistances at 4,615 and 4,632. Short-term indicators nevertheless remain
moderately favorable although more mixed than last week.
The closure of markets in Mumbai and Kuala Lumpur on Friday, and in Jakarta for
the last three days of the week, may have deformed the statistics slightly this
week. Singapore, which led the recent recovery from post-crash bottoms, bears
especial watching for auguries of the future.
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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