The Asia-Pacific region reacted to Friday’s sell-off in US markets, with the Nikkei and Hang Seng currently down 1.5% and 1.2% respectively. The Shanghai exchange is closed for a public holiday, while India’s DJ15 is down 0.67%. The ASX 200, however, rallied towards the close, losing only 0.17%.
The monthly chart of Japan’s Nikkei 225 continues to display a large bearish divergence on 13-week Twiggs Money Flow, warning of long-term selling pressure. Reversal below 14000 would signal a primary down-trend. Recovery above 15000 is as likely, however, and would indicate another advance.
* Target calculation: 15000 + ( 15000 – 14000 ) = 16000
A monthly chart shows the Shanghai Composite Index on the flight path for a soft landing. Successive falls over the past 5 years have all exceeded the previous trough by roughly 200 points and this seems unlikely to change for the foreseeable future. The problem with a managed descent is that it is likely to endure for a lot longer than a short sharp crash. Breach of primary support at 1950 would therefore offer a target of 1800.
Hong Kong’s Hang Seng Index on the other hand displays a large bullish ascending triangle. A 13-week Twiggs Money Flow trough at zero indicates buying pressure Breakout above 24000 would signal a primary advance. Reversal below the rising trendline is unlikely, but would warn of reversal to a primary down-trend.
* Long-term target calculation: 24000 + ( 24000 – 17000 ) = 31000
India’s Sensex encountered resistance at 22500 and is likely to retrace to test 22000. Respect would signal an advance to 23000*. Bearish divergence on 13-week Twiggs Money Flow, however, warns of short/medium-term selling pressure. Reversal below 21500 is unlikely, but would indicate another correction.
* Target calculation: 21500 + ( 21500 – 20000 ) = 23000
The ASX 200 proved surprisingly resilient, rallying toward the close. Rising 21-day Twiggs Money Flow indicates medium-term buying pressure, but expect strong resistance at 5450/5460. Breakout above 5450/5460 would signal an advance to 5600*. Respect of resistance or a false break, however, would warn of another test of support at 5300 and possibly a stronger correction. Primary support at 5050 does not at this stage appear threatened and the index remains in an up-trend.
* Target calculation: 5450 + ( 5450 – 5300 ) = 5600
ASX 200 VIX below 12 continues to indicate low risk typical of a bull market.
