Category: Japan & Korea

The Dow Jones Japan Index ($JPDOW) formed a small pennant consolidation, favoring continuation of the down-trend. Follow-through below 50.50 would confirm, whereas recovery above 52.00 would indicate retracement to test 53.30. 21-Day Twiggs Money Flow deep below zero warns of strong selling pressure.

* Target calculation: 54 – ( 58 – 54 ) = 50

DJ South Korea encountered resistance below 400, indicated by a red candle and up-tick in volume. Reversal below 360 would warn of another down-swing.

* Target calculation: 370 – ( 430 – 370 ) = 310

The Dow Jones Taiwan Index fared slightly better, advancing to 186 on light volume. Follow-through on Tuesday would confirm a rally to test resistance at 200.

* Target calculation: 196 – ( 216 – 196 ) = 176

I have used the Dow Jones Index Series as data is 15-minute delayed. I will update the better-known Nikkei and KOSPI indices when these are updated at 7:00 p.m. ET.

The greenback is testing weak support at ¥76.50. The BOJ is unlikely to succeed in preventing further appreciation of the yen, to a medium-term target of ¥73.00.

* Target calculation: 76.50 – ( 80.00 – 76.50 ) = 73.00

What appears to be strong institutional buying caused a strong bounce across a slew of Asia-Pacific markets. Long tails and a sharp spike in volume indicate buying support and a rally to test resistance (at 410 on $KRDOW).

The Dow Jones Taiwan Index shows an even stronger open-close reversal signal accompanied by big volume.

This is stronger than shorts taking profits or a few hooray Henrys snapping up bargains. The large volumes are indicative of institutions with deep pockets. Expect a decent rally, but it is likely to eventually fail. Not even Asian tigers are immune from a dead cat bounce — and bear markets take months to resolve, not just a few days.

The Nikkei 225 followed through below 9400 Monday, closing at 9100. Target for the breakout is 8600*.

* Target calculation: 9400 – ( 10200 – 9400 ) = 8600

The South Korean market is one of the few to show some resilience, with the KOSPI falling more than 7 percent to 1806 before recovering about half of its losses to close at 1876.