China Weakens But Rest Of Asia Strengthens

By Colin Twiggs
January 18, 2:00 a.m. ET (6:00 p.m. AET)

These extracts from my trading diary are for educational purposes and should not be interpreted as investment or trading advice. Full terms and conditions can be found at Terms of Use.

The Shanghai and Hong Kong markets are weakening, but Japan, India and South Korea all display strong buying pressure. Australia is more tentative, reflecting resource sector reliance on China, with short-term buying pressure but a longer-term correction warning.

China

The Shanghai Composite Index is edging lower in a broad channel — more a consolidation than a trend. Penetration of the rising trendline and support at 3000 would signal another correction, while upward breakout from the channel would indicate an advance to 3500. The falling (red) trendline on Twiggs Money Flow (13-week) indicates selling pressure, but upward breakout would signal an advance.

* Target calculations: 3500 + ( 3500 - 2700 ) = 4300

The Hang Seng Index is testing support at 21000 after breaking below the rising trend channel. Twiggs Money Flow (13-week) crossing below zero would strengthen the correction warning.

India: Sensex

The Sensex respected support at 17300 and is headed for another test of resistance at 17800. Breakout would confirm the target of 19200*. Breakout above the falling (red) trendline on Twiggs Money Flow (21-day) would confirm buyer interest.

* Target calculation: 17300 + ( 17300 - 15400 ) = 19200

Japan: Nikkei

The Nikkei 225 is testing resistance at 11000. Rising Twiggs Money Flow (13-week) confirms buying pressure. Expect retracement to test support at the former resistance level of 10500.

South Korea

The Seoul Composite is consolidating in a narrow band below 1700. Expect an upward breakout — signaling an advance to 1900*. Rising Twiggs Money Flow (21-day) confirms buying pressure. Reversal below 1650 and the lower trend channel is unlikely, but would indicate trend weakness.

* Target calculation: 1700 + ( 1700 - 1500 ) = 1900

Australia: ASX

The All Ordinaries is consolidating above short-term support at 4900 after a test of the important 5000 resistance level. Respect of support would indicate an upward breakout, signaling an advance to 5300*, while failure would indicate a test of medium-term support at 4800. Twiggs Money Flow (21-day) respect of the zero line confirms short-term buying pressure.

* Target calculation: 4900 + ( 4900 - 4500 ) = 5300

Longer term Twiggs Money Flow (13-week) on the All Ords and ASX 200, however, displays a bearish divergence, warning of a correction. Reversal below 4800 strengthen the signal.

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The greatest accomplishment is not in never falling,
but in rising again after you fall.

~ Vince Lombardi