Category: Japan & Korea

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Dangerous Waters | Foreign Policy

BY STEPHANIE KLEINE-AHLBRANDT

The wave of anti-Japanese protests that swept across dozens of cities in China this weekend, prompted by Tokyo’s purchase of three disputed islands, has obscured a potentially more worrying development that risks drawing the two countries into a larger conflict: China’s adoption of a legal framework empowering it to expel foreign vessels in disputed waters in the East China Sea.

……More frequent Chinese patrols in the area, along with the Japanese Coast Guard continuing to patrol near the islands, raises the risk of maritime clashes higher than it has ever been. Although the two countries have dealt with past run-ins — such as when the Japanese Coast Guard arrested a Chinese skipper in 2010 after his boat collided with a Japanese vessel — and succeeded in cooling tensions, the current situation is of a different order. That act could be attributed to an overzealous Chinese fisherman. But now, a skirmish between official law enforcement vessels in the current context could prove irresolvable.

via Dangerous Waters – By Stephanie Kleine-Ahlbrandt | Foreign Policy.

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Asia: Markets bouyed by stimulus measures

 

Markets jumped Friday on announcement by the ECB of government bond purchases and China unveiling further stimulus measures. The Shanghai Composite is testing  the first line of resistance at 2150. Respect of 2250 would warn of another down-swing, while penetration of the (secondary) descending trendline would indicate the primary down-trend is weakening. 63-Day Twiggs Momentum, a long way below zero, continues to reflect a primary down-trend.

Shanghai Composite Index

* Target calculation: 2150 – ( 2500 – 2150 ) = 1800

Hong Kong’s Hang Seng is again testing resistance at 20000. Upward breakout plus 63-day Twiggs Momentum recovery above zero would indicate an advance to 22000. Respect of resistance is unlikely, but would test primary support at 18000.

Hang Seng Index

India’s Sensex recovered above 17500, indicating an advance to 18500. A trough above zero on 13-week Twiggs Money Flow would indicate buying pressure.

Sensex Index

* Target calculation: 17.5 + ( 17.5 – 16.5 ) = 18.5

Singapore’s Straits Times Index found support at 3000. Respect would indicate a test of the upper trend channel, but the lower peak on 63-day Twiggs Momentum suggests a ranging market. Breach of support at 3000 would re-test the lower trend channel.Singapore Straits Times Index

The long tail on last week’s Nikkei 225 candle indicates short-term buying pressure and recovery above 9200 would signal an advance to 10200. 13-Week Twiggs Money Flow below zero, however, continues to indicate long-term selling pressure. Recovery above zero would reverse the signal, while failure of primary support at 8200 would confirm another down-swing.

Nikkei 225 Index

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Asia: China & Japan bearish, India hesitant

China’s official manufacturing PMI fell to a nine-month low in August, below 50 at 49.2; steel prices are at their lowest level since 2009 and rail cargo volumes have experienced their sharpest fall since 2008. In the circumstances, stocks have held up surprisingly well, with a gradual rather than vertical descent. The Shenzhen Composite index is headed for a test of support at 800 and declining 63-day Twiggs Momentum below zero indicates a primary down-trend, but the index is still a long way above its 2008 low of 450.

Shanghai Composite Index

* Target calculation: 800 – ( 1000 – 800 ) = 600

The Shanghai Composite is a lot closer to its 2008 low of 1660. 13-Week Twiggs Money Flow below zero indicates selling pressure and follow-through below 2100 offers a target of 1800*.

Shanghai Composite Index

* Target calculation: 2150 – ( 2500 – 2150 ) = 1800

Hong Kong’s Hang Seng is drifting sideways, approaching the apex of its large triangle, but failure of 63-day Twiggs Momentum to cross above zero warns of downside risk. Breach of primary support at 18000 would signal a decline to 16000*.

Hang Seng Index

* Target calculation: 18 – ( 20 – 18 ) = 16

India’s Sensex retreated below its new support level at 17500, warning of a false break. Penetration of the rising trendline would suggest a bull trap, while respect would test 18500*. Reversal of 13-week Twiggs Money Flow below zero would indicate selling pressure.

Sensex Index

* Target calculation: 17.5 + ( 17.5 – 16.5 ) = 18.5

The NSE Nifty Index also retreated below its new support level and 63-day Twiggs Momentum is above zero. Respect of the rising trendline would indicate a test of 5600, while penetration would warn of a bull trap.

Sensex Index

Singapore’s Straits Times Index is retracing to test support at 3000. The up-trend appears weak and failure of support would signal a test of the lower trend channel. It is unclear whether 63-day Twiggs Momentum will oscillate around zero, indicating a ranging market, or above zero, indicating a healthy up-trend. The next trough should clarify this: respect of zero indicating a primary up-trend.

Singapore Straits Times Index

Japan’s Nikkei 225 index retreated below 9000, indicating a false breakout. Matching peaks below zero on 63-day Twiggs Momentum and 13-Week Twiggs Money Flow warn of a strong down-trend. Failure of primary support at 8200 would confirm.

Nikkei 225 Index

South Korea’s Seoul Composite index retraced to test support after breakout above 1900. Declining peaks on 13-Week Twiggs Money Flow depict rising selling pressure. Failure of support at 1900 would suggest another test of primary support at 1750.

Seoul Composite Index

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Asia: India rises but China, Japan bearish

India’s Sensex is retracing to test its new support level at 17500. Respect of support would confirm the primary up-trend and signal an advance to 18500*. Rising 63-day Twiggs Momentum also suggests a primary up-trend.

Sensex Index

* Target calculation: 17.5 + ( 17.5 – 16.5 ) = 18.5

Singapore’s Straits Times Index is consolidating above support at 3000. Reversal below 3000 would signal a test of the lower trend channel, while follow-through above 3100 would indicate a fresh advance. It is unclear whether 63-day Twiggs Momentum will oscillate around zero, indicating a ranging market, or above zero, indicating a healthy up-trend. The next trough should clarify this; respect of zero indicating a primary up-trend.

Singapore Straits Times Index

Japan’s Nikkei 225 index is retracing to test support at 9000 after completing a double-bottom. Respect would confirm a primary advance to 10000. 13-Week Twiggs Money Flow peaking below zero, however, warns of selling pressure.

Nikkei 225 Index

* Target calculation: 9100 + ( 9100 – 8200 ) = 10000

China’s Shanghai Composite followed-through below 2100, confirming the primary decline with a target of 1800*. Reversal of 13-week Twiggs Money Flow below zero indicates selling pressure.

Shanghai Composite Index

* Target calculation: 2150 – ( 2500 – 2150 ) = 1800

The Hang Seng drifts fairly aimlessly. Declining 13-week Twiggs Money Flow suggests selling pressure. Breach of 18000 would signal a primary down-trend but we still appear some way from that.

Hang Seng Index

* Target calculation: 20 + ( 20 – 18 ) = 22

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Asia: India and Japan rise but China remains bearish

India’s Sensex followed through after breaking resistance at 17500, confirming a primary advance to 18500*. A 13-week Twiggs Money Flow trough above zero would indicate strong buying pressure.

Sensex Index

* Target calculation: 17.5 + ( 17.5 – 16.5 ) = 18.5

Singapore’s Straits Times Index, also in a primary up-trend, is consolidating above former resistance at 3040. Reversal below 3000 would signal a test of the lower trend channel. It is still unclear whether 63-day Twiggs Momentum will oscillate around zero, indicating a ranging market, or above zero, indicating a healthy up-trend. A trough above zero would resolve this.

Singapore Straits Times Index

Japan’s Nikkei 225 index broke through resistance at 9100, signaling a primary advance to 10000. 13-Week Twiggs Money Flow below zero continues to warn of selling pressure; recovery would confirm the advance.

Nikkei 225 Index

* Target calculation: 9100 + ( 9100 – 8200 ) = 10000

The daily chart shows China’s Shanghai Composite Index testing support at 2100. Failure would indicate a test of the lower trend channel, while respect would test medium-term resistance at 2180. Breakout above the trend channel  would warn of another bear rally. Follow-through above 2180 would confirm. Bullish divergence on 21-day Twiggs Money Flow indicates medium-term buying pressure.

Shanghai Composite Index

* Target calculation: 2100 – ( 2180 – 2100 ) = 2020

The Hang Seng continues to consolidate above resistance at 20000. Follow-through would indicate an advance to 22000*.  Rising 13-week Twiggs Money Flow suggests buying pressure.

Hang Seng Index

* Target calculation: 20 + ( 20 – 18 ) = 22

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Friedman’s Japanese lessons for the ECB « The Market Monetarist

Milton Friedman, December 1997:

Defenders of the Bank of Japan will say, “How? The bank has already cut its discount rate to 0.5 percent. What more can it do to increase the quantity of money?”

The answer is straightforward: The Bank of Japan can buy government bonds on the open market, paying for them with either currency or deposits at the Bank of Japan, what economists call high-powered money. Most of the proceeds will end up in commercial banks, adding to their reserves and enabling them to expand their liabilities by loans and open market purchases. But whether they do so or not, the money supply will increase.

There is no limit to the extent to which the Bank of Japan can increase the money supply if it wishes to do so. Higher monetary growth will have the same effect as always. After a year or so, the economy will expand more rapidly; output will grow, and after another delay, inflation will increase moderately. A return to the conditions of the late 1980s would rejuvenate Japan and help shore up the rest of Asia.

via Friedman’s Japanese lessons for the ECB « The Market Monetarist.

Friedman was suggesting that the BOJ implement QE to boost the money supply and create inflation. Inflation would rescue the banks and real-estate-owners with underwater mortgages.

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Asia: India recovers but China & Japan bearish

India’s Sensex broke resistance at 17500, signaling a primary up-trend. Expect an advance to 18500*. Rising 13-week Twiggs Money Flow — above zero — indicates strong buying pressure.

Sensex Index

* Target calculation: 17.5 + ( 17.5 – 16.5 ) = 18.5

NSE Nifty is testing resistance at 5350. Breakout would confirm the Sensex primary up-trend. Rising 63-Day Twiggs Momentum is promising but we need a trough above zero to signal a strong up-trend. Target for the breakout would be 5650*.

NSE Nifty Index

* Target calculation: 5350 + ( 5350 – 5050 ) = 5650

Understanding Momentum

Momentum is an oscillator, so you would expect equal peaks if the trend is constant. If oscillating above zero, it would be a constant up-trend; below zero, a constant down-trend; with zero at the mid-point, a ranging market. Divergence should ideally show a clear transition from one to the other or at least a sharp difference in the height of peaks or troughs. A trendline drawn under rising momentum will indicate that momentum is accelerating; a trendline break would indicate slowing acceleration — not necessarily a reversal.

Japan’s Nikkei 225 index is testing resistance at 9000 but 13-week Twiggs Money Flow continues to warn of strong selling pressure, with a peak below zero. Breakout above 9000 is unlikely, but would signal an advance to 10000. Failure of support at 8200 would indicate another test of the 2008/2009 lows at 7000*.

Nikkei 225 Index

* Target calculation: 8000 – ( 9000 – 8000 ) = 7000

China’s Shanghai Composite Index retreated below support at 2150; follow-through below 2100 would indicate a decline to 2000*. Declining 63-day Twiggs Momentum continues to signal a primary down-trend.

Shanghai Composite Index

* Target calculation: 2250 – ( 2500 – 2250 ) = 2000

Hong Kong’s Hang Seng Index is more bullish, consolidating above resistance at 20000. Follow-through would indicate an advance to 22000*.  Recovery of 63-Day Twiggs Momentum above zero would suggest a primary up-trend.

Hang Seng Index

* Target calculation: 20 + ( 20 – 18 ) = 22

Singapore’s Straits Times Index is similarly consolidating above former resistance at 3040. Rising 63-day Twiggs Momentum — above zero — indicates the primary up-trend is intact. Calculated target is 3300* but the trend channel suggests resistance at 3200.

Singapore Straits Times Index

* Target calculation: 3000 + ( 3000 – 2700 ) = 3300

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Slower Growth in Asia Brings Down Stocks – NYTimes.com

By THE ASSOCIATED PRESS

Published: August 13, 2012

Stocks fell Monday as evidence piled up that the global economic slowdown was hurting Asia.

Japan’s economy grew in the second quarter at a 1.4 percent annual rate, slower than many analysts had expected. Last week, China released dismal figures on retail sales and exports in July. Traders were disappointed that Beijing failed to introduce stimulus measures over the weekend……

via Slower Growth in Asia Brings Down Stocks – NYTimes.com.

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Asia: India recovering but China & Japan bearish

China’s Shanghai Composite Index is testing its upper trend channel at 2160. Follow-through would indicate a rally to 2250, while reversal would indicate a decline to 2040*. 63-Day Twiggs Momentum continues to signal a strong primary down-trend.

Shanghai Composite Index

* Target calculation: 2100 – ( 2160 – 2100 ) = 2040

Hong Kong’s Hang Seng Index, however, broke through resistance at 20000 (weekly chart), indicating an advance to 22000*.  Recovery of 63-Day Twiggs Momentum above zero would confirm — further strengthened if the descending trendline is penetrated.

Hang Seng Index

* Target calculation: 20 + ( 20 – 18 ) = 22

Japan’s Nikkei 225 index continues to warn of strong selling pressure — with a peak below zero on 13-week Twiggs Money Flow. Failure of support at 8200 would signal another test of the 2008/2009 lows at 7000*. Breakout above 9000 is unlikely, but would signal an advance to 10000.

Nikkei 225 Index

* Target calculation: 8000 – ( 9000 – 8000 ) = 7000

India’s Sensex is testing resistance at 17500. Breakout is likely and would signal an advance to 18500. Completion of a 13-week Twiggs Money Flow trough above zero would indicate strong buying pressure.

Sensex Index

* Target calculation: 17.5 + ( 17.5 – 16.5 ) = 18.5

NSE Nifty shows a similar picture. 63-Day Twiggs Momentum rising to a new 2012 high would indicate a primary up-trend. Target for the breakout would be 5650*.

NSE Nifty Index

* Target calculation: 5350 + ( 5350 – 5050 ) = 5650

Singapore’s Straits Times Index broke through resistance at 3040. Recovery of 63-day Twiggs Momentum above zero suggests that the primary up-trend is intact. The calculated target is 3300* but the trend channel suggests resistance around 3200.

Singapore Straits Times Index

* Target calculation: 3000 + ( 3000 – 2700 ) = 3300

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Asia: China, Japan bearish

There are conflicting reports about whether China is head for a hard or soft landing. China has the reserves and the capacity to implement further infrastructure programs if the economy cools too rapidly. And while its long-term goal is to deflate the speculative real estate bubble, the PBOC has shown itself prepared to kick that can down the road until export markets recover from the euro-zone crisis. The downside to manufacturing a soft landing, as we have already discovered post-GFC, is that the recovery takes longer. So a sharp recovery of Chinese markets is also unlikely.

China’s Shanghai Composite Index broke its 2011 low at 2150 on the weekly chart, indicating a decline to 1800*. Reversal of 13-week Twiggs Money Flow below zero warns of rising selling pressure. Recovery above 2250 remains unlikely, but would suggest another attempt at 2500.

Shanghai Composite Index

* Target calculation: 2150 – ( 2500 – 2150 ) = 1800

The Shenzhen Composite Index broke support at 880 to confirm the Shanghai signal. The peak below zero on 63-Day Twiggs Momentum also indicates a primary down-trend.

Shenzhen Composite Index

Hong Kong’s Hang Seng Index is more resilient, testing resistance at 20000 on the weekly chart. Breakout would indicate an advance to 22000* — strengthened if 63-Day Twiggs Momentum recovers above zero. Reversal below 19000 is less likely but would warn of a decline to 16000 — confirmed if support at 18000 is broken.

Hang Seng Index

* Target calculation: 20 + ( 20 – 18 ) = 22

Japan’s Nikkei 225 index is headed for another test of resistance at 9000 on the weekly chart, but a peak below zero on 13-week Twiggs Money Flow warns of strong selling pressure. Failure of support would signal another test of the 2008/2009 lows at 7000, while breakout above 9000 would signal an advance to 10000.

Nikkei 225 Index

India’s Sensex found support around 17000 on the weekly chart and is headed for another attempt at 17500. Breakout is likely and would indicate an advance to 18500. A 13-week Twiggs Money Flow trough above zero would strengthen the recovery signal.

Sensex Index

Singapore’s Straits Times Index continues to test resistance at 3040. Recovery of 63-day Twiggs Momentum above zero suggests that the primary up-trend is intact, and breakout would signal an advance to 3300*. Narrow oscillation around zero, however would warn of a ranging market.

Singapore Straits Times Index

* Target calculation: 3000 + ( 3000 – 2700 ) = 3300

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