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Asian Stocks Fall, China Tanks

By Colin Twiggs
May 17, 2010 5:15 a.m. ET (7:15 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.



Asian stocks fell in response to the European turmoil, but the Shanghai Composite broke support Monday at the August 2009 low of 2650 — as well as last week's low of 2600 — adding the final confirmation of China's primary down-trend.

Shanghai Composite Index China

Demand for commodities is so far unaffected, with the Baltic Dry Index breaking medium-term resistance at 3600 to signal a fresh advance. Rising demand for dry bulk shipping — primarily iron ore and coal — is likely to be short-lived considering the Chinese down-turn. Reversal below 2900 would warn of a primary down-trend (if confirmed by the Baltic Panamax Index) — and a bear market for resources stocks.

Baltic Dry Index

USA

Dow Jones Industrial Average

The Dow retreated below short-term support at 10700, warning of another test of primary support at 9900. Twiggs Money Flow (21-day) falling to a 3-month low confirms the correction.

Dow Jones Industrial Average

S&P 500

S&P 500 similarly retreated below 1150 to warn of further weakness. Failure of support at 1100 would test primary support at 1050.

Standard & Poors 500 chart

* Target calculation: 1150 + ( 1150 - 1050 ) = 1250

Transport

Transport indicators are likewise undergoing a correction, but remain in a primary up-trend.

Dow Jones Transportation Average

* Target calculation: 4300 + ( 4300 - 3800 ) = 4800

Technology

The Nasdaq 100 displays more resillience, but reversal below 1900 would test primary support at 1730.

Nasdaq 100

* Target calculation: 1900 + ( 1900 - 1750 ) = 2050

Canada: TSX

The TSX Composite is stronger, but reversal below 11700 would test primary support at 11000.

TSX Daily

* Target calculation: 12000 + ( 12000 - 11000 ) = 13000

United Kingdom: FTSE

The FTSE 100 is headed for a test of primary support at 5000; failure would signal a primary down-trend. Twiggs Money Flow (13-week) below zero confirms strong selling pressure.

FTSE 100 Daily

* Target calculation: 5500 + ( 5500 - 5000 ) = 6000

Germany: DAX

The DAX is testing medium-term support at 6000; failure would warn of a test of primary support at 5400. Twiggs Money Flow (13-week) recovery above zero, however, would indicate buying pressure.

German DAX

* Target calculation: 6000 + ( 6000 - 5400 ) = 6600

India: Sensex

The Sensex dropped to 16600 Monday, signaling another test of primary support at 15800. Bearish divergence on Twiggs Money Flow (13-week) continues to warn of selling pressure. In the long term, reversal below 15800 would signal a primary down-trend; recovery above 18000 is unlikely, but would offer a target of 19800*.

Sensex India

* Target calculation: 17800 + ( 17800 - 15800 ) = 19800

Japan: Nikkei

The Nikkei 225 fell to 10235 Monday, indicating a test of support at 9900; failure would signal a primary down-trend. Triple bearish divergence on Twiggs Money Flow (13-week) confirms strong selling pressure.

nikkei 225 japan

* Target calculation: 11000 + ( 11000 - 10000 ) = 12000

South Korea

The Seoul Composite is Monday testing support at 1650; failure would test primary support at 1550. Twiggs Money Flow (13-week), however, is holding up well, suggesting a relatively mild correction. Recovery above 1750 would signal an advance to 1900*.

Seoul Composite Index

* Target calculation: 1720 + ( 1720 - 1550 ) = 1910

China

The Shanghai Composite Index closed at 2559 Monday, below the August 2009 low, confirming the primary down-trend. Declining Twiggs Money Flow (13-week) indicates continued selling pressure.

Shanghai Composite Index China

* Target calculations: 2900 - ( 3150 - 2900 ) = 2650

The Hang Seng Index gapped below 20000 on Monday, closing at 19723. Expect a test of primary support at 19500; failure would offer a target of the July 2009 low at 17000*. Declining Twiggs Money Flow (13-week) indicates continued selling pressure.

Hang Seng Index Hongkong

* Target calculations: 19500 - ( 22000 - 19500 ) = 17000

Australia: ASX

The All Ordinaries is testing primary support at 4500; failure would signal a primary down-trend. Twiggs Money Flow (21-day) holding below zero warns of continued selling pressure.

ASX All Ordinaries

The ASX 200 is even more bearish, having broken support at 4500. Twiggs Money Flow (13-week) reversal above zero, however, indicates short-term buying support, and we should wait for confirmation from the All Ords.

ASX 200


The oldest, shortest words — "yes" and "no" — are those which require the most thought.

~ Pythagoras (580-520 BC)

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