Category: Japan & Korea

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China in a cleft stick

The CCP is in a cleft stick over the protests in Hong Kong. Either they escalate and clear protestors with a massive show of force — which risks further escalation — or they wait patiently and let the protest run its course. Their problem is that there are more than 800 million Chinese citizens watching, who will take this as a precedent for future demonstrations in China. The shadow of Tiananmen Square will be replaced by the outcome of the current protests, whatever that is.

Hong Kong’s Hang Seng Index broke support at 24000, signaling a correction to 21000/22000. Reversal of 13-week Twiggs Money Flow below zero would warn of a bear market. Breach of support at 21000 would indicate a primary down-trend.

Hang Seng Index

China’s Shanghai Composite Index, however, broke resistance at 2340/2350, indicating an advance to 2440/2450. Rising 13-week Twiggs Money Flow continues to indicate medium-term buying pressure. I would advocate caution, given the situation in Hong Kong and a negative outlook for the economy.

Shanghai Composite Index

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

India’s Sensex is testing support at 26000. Bearish divergence on 13-week Twiggs Money Flow continues to warn of long-term selling pressure, but another trough above zero would suggest that buyers are regaining control. Failure of support would signal a correction to the primary trendline — around 25000 — while respect would indicate an advance to 28000*.

Sensex

* Target calculation: 27000 + ( 27000 – 26000 ) = 28000

Japan’s Nikkei 225 index retraced to test support at 16000, but respect of this level would be a bullish sign, suggesting a breakout above its 2013 high of 16300 with a long-term target of 18000*. Reversal below 16000 is unlikely, but would warn of a correction. Another 13-week Twiggs Money Flow would signal long-term buying pressure.

Nikkei 225

* Target calculation: 16000 + ( 16000 – 14000 ) = 18000

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India, Japan bullish but China hesitates

Hong Kong’s Hang Seng Index is testing support at 24000. Breach of the rising trendline warns of a correction. 13-Week Twiggs Money Flow holding above zero continues to indicate long-term buying pressure. Respect of support at 24000 would suggest another advance; confirmed if there is follow-through above 25000. Breach of support, however, would also warn of a correction — to the primary trendline around 22000.

Hang Seng Index

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

China’s Shanghai Composite Index is consolidating below resistance at its 2013 high. Rising 13-week Twiggs Money Flow continues to indicate medium-term buying pressure. Breakout above 2350 would signal a fresh advance, while reversal below 2250 would warn of a correction.

Shanghai Composite Index

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

India’s Sensex recovered above 27000, suggesting an advance to 28000*. Rising 13-week Twiggs Money Flow suggests medium-term buying pressure. Breach of the secondary rising trendline is unlikely, but would warn of a correction.

Sensex

* Target calculation: 27000 + ( 27000 – 26000 ) = 28000

Japan’s Nikkei 225 index is testing resistance at its 2013 high of 16300. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Breakout above 16300 would offer a long-term target of 18000*. Reversal below 16000 is unlikely, but would warn of a correction.

Nikkei 225

* Target calculation: 16000 + ( 16000 – 14000 ) = 18000

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S&P bullish but Asia, Europe weak

Weekly highlights:

  • Scotland votes “No” and the Pound rallies
  • Treasury yields (long-term) are rising and the Dollar strengthens
  • Gold and crude oil fall
  • European stocks remain bearish
  • Asian stocks also remain bearish despite Hong Kong/Shanghai breakout
  • US stocks still reflect a bull market

Stock markets

Dow Jones Europe Index is retracing after a weak rally that reached 335. Failure of support at 320 would signal a primary down-trend. Follow-through below 315 would confirm. A 13-week Twiggs Momentum peak below zero strengthens the bear signal.

* Target calculation: 320 – ( 340 – 320 ) = 300

Dow Jones Asia Index is testing primary support at 3200 despite bullishness on the Hang Seng and Shanghai Composite. Bearish divergence on 13-week Twiggs Momentum warns of a test of 3100. Breach of 3200 would signal a primary down-trend, while follow-through below 3100 would confirm.

* Target calculation: 3100 + ( 3100 – 2800 ) = 3400

The S&P 500 recovered above 2000 to signal a fresh advance. Follow-through above 2010 confirms a target of 2100*. Reversal below 1980 is unlikely. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure.

S&P 500

* Target calculation: 2000 + ( 2000 – 1900 ) = 2100

CBOE Volatility Index (VIX) remains low, typical of a bull market.

S&P 500 VIX

The ASX 200 correction found support at 5300/5350. But 13-week Twiggs Money Flow below zero, after a long-term bearish divergence, warns of further weakness. Breach of 5300 would indicate a test of 5000. Recovery above 5550 is unlikely, but would suggest a fresh advance.

ASX 200

* Target calculation: 5650 + ( 5650 – 5350 ) = 5950

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Asian stocks cautious

Hong Kong’s Hang Seng Index is retracing to test support at 24000. Rising 13-week Twiggs Money Flow indicates sustained buying pressure. Respect of 24000 would suggest another primary advance, while failure would warn of a correction. Breakout above 25000 would offer a target of 27000*.

Hang Seng Index

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

China’s Shanghai Composite Index is consolidating at its 2013 high. Rising 13-week Twiggs Money Flow reflects medium-term buying pressure. Breakout above 2340 would strengthen the primary up-trend, but retracement to test the new support level at 2250 remains as likely.

Shanghai Composite Index

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

India’s Sensex retreated below short-term support at 27000. Bearish divergence on 13-week Twiggs Money Flow continues to warn of long-term selling pressure, but another trough above zero would negate this. Breach of the secondary rising trendline would warn of a correction, while respect would suggest further gains.

Sensex

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

Japan’s Nikkei 225 index is testing resistance at 16000. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Breakout above 16300 would signal another advance. Reversal below 15500 is unlikely, but would warn of a correction.

Nikkei 225

* Target calculation: 16000 + ( 16000 – 14000 ) = 18000

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Asian stocks pause

Hong Kong’s Hang Seng Index continues to encounter resistance at 25000, but respect of support at 24000 and rising 13-week Twiggs Money Flow indicate sustained buying pressure. Breakout would offer a target of 27000*.

Hang Seng Index

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

China’s Shanghai Composite Index is consolidating after breaking resistance at 2250. Rising 13-week Twiggs Money Flow reflects medium-term buying pressure. The primary trend is up, but expect retracement to test the new support level at 2250.

Shanghai Composite Index

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

India’s Sensex has reached its long-term target of 27000*, shown here on a quarterly chart. Bearish divergence on 13-week Twiggs Money Flow continues to warn of long-term selling pressure. Respect of the zero line appears likely and would suggest a further advance, but a fall below zero would warn of a decline to test the rising trendline.

Sensex

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

Japan’s Nikkei 225 index continues its advance towards 16300. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Reversal below 15500 is unlikely, but would warn of a test of 14800.

Nikkei 225

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Aussie Dollar & Yen break support

Dollar strength is affecting not only gold and commodities, but even the strongest of the currency crosses.

The Aussie Dollar broke support at $0.92 against the greenback, warning of a correction. Expect support at $0.89. Reversal of 13-week Twiggs Momentum below zero, however, suggests a primary down-trend — confirmed if primary support at $0.87 is penetrated. Recovery above $0.925 is unlikely, but would indicate a false break.

Aussie Dollar

The greenback similarly broke through resistance at ¥105.50 against the Japanese Yen. Rising 13-week Twiggs Momentum above zero signals a primary up-trend. Reversal below ¥105 is unlikely, but would warn of another test of ¥104.

USD/JPY

* Target calculation: 105.5 + ( 105.5 – 101 ) = 110

The Euro is already in a primary down-trend against the Dollar. Declining 13-week Twiggs Momentum, below zero, confirms a strong down-trend. Expect support at $1.2750/$1.2800, but a rally is unlikely to break the descending trendline and resistance at $1.31.

Euro/USD

* Target calculation: 1.35 – ( 1.40 – 1.35 ) = 1.30

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Asian tiger leap

Hong Kong’s Hang Seng Index is retracing to test support at 24000. Respect is likely and recovery above 25000 would confirm a primary advance to 27000*. Rising 13-week Twiggs Money Flow signals buying pressure. Failure of support at 24000 is unlikely, but would warn of a correction.

Hang Seng Index

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

China’s Shanghai Composite Index broke resistance at 2250, confirming a primary up-trend. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Expect retracement to test the new support level.

Shanghai Composite Index

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

India’s Sensex is testing resistance at the target of 27000*. Completion of a 13-week Twiggs Money Flow trough above zero indicates that buyers have taken control. Expect retracement to test the new support level at 26000. Penetration of the secondary trendline is unlikely, but would warn of a correction to the primary trendline.

Sensex

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

Japan’s Nikkei 225 index followed through above 15500, suggesting a test of resistance at 16000/16300. Declining 13-week Twiggs Money Flow continues to warn of medium-term selling pressure, but respect of the zero line would signal that buyers have taken control. Reversal below 15500 is unlikely, but would warn of a test of 14800.

Nikkei 225

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Hang Seng leads Asian recovery

Hong Kong’s Hang Seng Index broke its 2010 high at 25000, confirming a primary advance and offering a target of 27000*. Rising 13-week Twiggs Money Flow signals continued 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

China’s Shanghai Composite Index continues to test resistance at 2250. Breakout would confirm a primary up-trend. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Reversal below 2150 is unlikely, but would warn of another test of primary support at 1990/2000.

Shanghai Composite Index

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

India’s Sensex is retracing to test support at 26000. Respect would confirm the target of 27000*. Declining 13-week Twiggs Money Flow continues to warn of selling pressure. Respect of the zero line would indicate that buyers have taken control, while a fall below zero would warn of a correction. Penetration of the secondary trendline is unlikely, but would indicate a correction to the primary trendline.

Sensex

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

Japan’s Nikkei 225 index recovered above 15500, suggesting continuation of the advance. Expect resistance between 16000 and 16300. Declining 13-week Twiggs Money Flow warns of medium-term selling pressure, but respect of the zero line would indicate that buyers have taken control. Reversal below 14800 is unlikely, but would warn of a test of primary support at 14000.

Nikkei 225

* Target calculation: 16000 + ( 16000 – 14000 ) = 18000

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Euro, Yen plunge against Dollar

The Euro broke support at $1.33, signaling a further decline against the Dollar with a target of $1.30*. Falling 13-week Twiggs Momentum, below zero, warns of a strong down-trend. Recovery above $1.35 is most unlikely, but would suggest that the down-trend is slowing.

Euro/USD

* Target calculation: 1.35 – ( 1.40 – 1.35 ) = 1.30

The recent rally of the Euro against the Russian ruble has faltered. An economic contraction and rising tensions over Eastern Ukraine both contributed. The Euro remains in an up-trend and recovery above RUB 49 would suggest another attempt at the previous high of RUB 51. But failure of support at RUB 46 would signal a primary down-trend. 13-Week Twiggs Momentum oscillating close to zero reflects current uncertainty.

Euro/Rouble

Vladimir Putin is attempting to exploit fault lines in the US/European alliance, targeting the powerful European farming and motor industry lobbies. Unauthorized incursions into Ukrainian territory by his white-painted “aid convoy” are another example, where the infringement is so apparently inoffensive that Angela Merkel will find it difficult to convince her European allies to escalate sanctions further. Failure to react will merely embolden Putin to conduct further minor infringements in defiance of the EU, confident in their response, until the Ukraine suffers “death by a thousand cuts”.

Putin

Only if the US/EU adopt an aggressive escalation, as suggested here on Defence & Freedom, are they likely to contain Russian aggression.

“…a defensive and reactionary game plan makes one predictable. The very existence of a crisis should be understood as a hint that someone used this predictability to predict the outcome of a produced crisis — and arrived at the conclusion that it’s a good idea. Aka failure of deterrence.”

Japan

As with the Euro, the Japanese Yen is also weakening against the Dollar. The Greenback broke resistance at ¥103.50, signaling a rally to test the 2013 high. Follow-through above ¥104 would confirm. Rising 13-week Twiggs Momentum above zero strengthens the signal. Reversal below ¥103 is unlikely, but would warn of another test of primary support at ¥101.

USD/JPY

Australia

The Aussie Dollar, however, is holding its own — ranging between $0.92 and $0.95 against the US Dollar. The narrow band and 13-week Twiggs Momentum holding above zero both suggest continuation of the up-trend. Breakout above $0.95 would suggest a target of $0.97. Reversal below $0.92 is unlikely at present, but would warn of a decline to the band of support between $0.87 and $0.89.

Aussie Dollar

The ASX 200, retracing slightly from resistance at 5650, is also influenced by strong foreign investment flows. Indications are predominantly bullish, including 21-day Twiggs Money Flow forming troughs above zero. Follow-through above 5660 would signal another advance, with a medium-term target of 5850. Reversal above 5550 is unlikely, but would warn of another test of primary support.

ASX 200

* Target calculation: 5650 + ( 5650 – 5450 ) = 5850

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China leads Asian recovery

Hong Kong’s Hang Seng Index is testing its 2010 high at 25000. Breakout would confirm a primary advance, with a 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

China’s Shanghai Composite Index is testing resistance at 2250. Breakout would confirm a primary up-trend. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Reversal below 2150 is unlikely, but would warn of another test of primary support at 1990/2000.

Shanghai Composite Index

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

India’s Sensex recovered above 26000, offering a target of 27000*. Declining 13-week Twiggs Money Flow continues to warn of selling pressure, but respect of the zero line and recovery above 10% would indicate that buyers have taken control. Reversal below the secondary trendline is unlikely, but would indicate a correction to the primary trendline.

Sensex

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

Dow Jones Japan Index is testing resistance at 86/87 on the weekly chart. Breakout would suggest a primary advance. Reversal below 82 is unlikely, but would warn of a test of primary support at 74.

Dow Jones Japan Index

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