Asia rallies

Asia rallied Monday on encouraging signs from Europe, with the Nikkei 225 testing 8300, the Seoul Composite (KOSPI) jumping to 1815, and Hang Seng above 18000. But a look at the quarterly chart of the Nikkei shows a long-term, bearish divergence on 63-day Twiggs Momentum, while the index is headed for a test of key support at 7000/7500. Unless we see a break above the descending trendline, the trend remains downward.

Nikkei 225 Index

South Korea’s Seoul Composite index is headed for another test of 1650 according to the weekly chart. 63-Day Twiggs Momentum oscillating well below zero indicates a strong primary down-trend. Failure of support would offer a target of 1350*.


* Target calculation: 1650 – ( 1950 – 1650 ) = 1350

Hong Kong’s Hang Seng index recovered above 18000 Monday but the long-term trend remains downward. Steeply descending 63-day Twiggs Momentum warns of a strong primary down-trend.

Hang Seng Index

* Target calculation: 16 – ( 20 – 16 ) = 12

The Shanghai Composite index did not share the enthusiasm of other Asian markets, testing support at 2375.  Reversal of 13-week Twiggs Money Flow below zero warns of rising selling pressure. Failure of support at 2300 would offer a target of 2050*.

Shanghai Composite Index

* Target calculation: 2300 – ( 2550 – 2300 ) = 2050

S&P 500 monthly chart

A monthly chart of the S&P 500 index gives a clearer picture. Although the Nasdaq is advancing strongly, the S&P 500 is stuck below its long-term trendline. Note the similarity to March-May 2008 rally. Breakout above 1250 would be a bullish sign, similar to the May 2008 breakout above 1400, but retreat below the former resistance level (1250) would give a strong bear warning. Likewise, a 63-day Twiggs Momentum peak below the zero line would signal a strong primary down-trend.

S&P 500 Index Monthly

* Target calculation: 1100 – ( 1250 – 1100 ) = 950