Asian tigers and the PBOC

Asian stock markets are lifting on the prospect of increased trade with mainland China. Hong Kong’s Hang Seng Index broke long-term resistance at 24000, signaling a primary advance. But first expect retracement to test the new support level. Respect of 24000 would confirm the target of 27000*. A 13-week Twiggs Money Flow trough at zero indicates long-term buying pressure. Reversal below 24000 is unlikely, but would warn of a correction to the rising trendline.

Hang Seng Index

* Long-term target calculation: 24000 + ( 24000 – 21000 ) = 27000

Singapore’s Straits Times Index is also retracing after breaking resistance at 3300. Follow-through above 3400 would confirm the target of 3600*. Recovery of 13-week Twiggs Momentum above zero suggests a primary up-trend. Reversal below 3200 is unlikely, but would warn of another test of primary support at 3000.

Straits Times Index

* Target calculation: 3300 + ( 3300 – 3000 ) = 3600

China’s Shanghai Composite Index signals a primary up-trend after breaking resistance at 2150/2180, but I would wait for confirmation from a follow-through above resistance at 2250. The PBOC is aggressively injecting liquidity to revive a flagging economy. It may succeed in lifting the economy in the medium-term, but is not sustainable in the long-term and could well aggravate the situation. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Breakout above 2250 would confirm a primary up-trend. Reversal below 2150 is unlikely at present, but would warn of another test of primary support at 1990/2000.

Shanghai Composite Index

* Target calculation: 2000 – ( 2150 – 2000 ) = 1850

India’s Sensex retraced to support at 25500, but is again testing resistance at 26000. Breakout would signal an advance to 27000*. Bearish divergence on 13-week Twiggs Money Flow indicates long-term selling pressure, but respect of the zero line (recovery above 10%) would suggest that buyers have taken control. Breach of 25000 is unlikely, but would warn of a correction to the primary trendline.

Sensex

* Target calculation: 21000 + ( 21000 – 15000 ) = 27000

Japan’s Nikkei 225 is retreating after a false break of resistance at 15500. Expect a test of support at 15000. Narrow consolidation normally ends in continuation of the trend; upward breakout would indicate a rally to 16000*. Declining 13-week Twiggs Money Flow, however, indicates medium-term selling pressure. Reversal below 15000 would warn of a test of primary support at 14000.

Nikkei 225

* Target calculation: 15000 + ( 15000 – 14000 ) = 16000