Asia: China & Japan bearish, India hesitant
By Colin Twiggs
September 4th, 2012 1:30 a.m. ET (3:30 p.m. AET)
China's official manufacturing PMI fell to a nine-month low in August, below 50 at 49.2; steel prices are at their lowest level since 2009 and rail cargo volumes have experienced their sharpest fall since 2008. In the circumstances, stocks have held up surprisingly well, with a gradual rather than vertical descent. The Shenzhen Composite index is headed for a test of support at 800 and declining 63-day Twiggs Momentum below zero indicates a primary down-trend, but the index is still a long way above its 2008 low of 450.
* Target calculation: 800 - ( 1000 - 800 ) = 600
The Shanghai Composite is closer to its 2008 low of 1660. 13-Week Twiggs Money Flow below zero indicates selling pressure and follow-through below 2100 offers a target of 1800*.
* Target calculation: 2150 - ( 2500 - 2150 ) = 1800
Hong Kong's Hang Seng Index is drifting sideways, approaching the apex of its large triangle, but failure of 63-day Twiggs Momentum to cross above zero warns of downside risk. Breach of primary support at 18000 would signal a decline to 16000*.
* Target calculation: 18 - ( 20 - 18 ) = 16
India's Sensex retreated below its new support level at 17500, warning of a false break. Penetration of the rising trendline would suggest a bull trap, while respect would test 18500*. Reversal of 13-week Twiggs Money Flow below zero would indicate selling pressure.
* Target calculation: 17.5 + ( 17.5 - 16.5 ) = 18.5
The NSE Nifty Index also retreated below its new support level and 63-day Twiggs Momentum is above zero. Respect of the rising trendline would indicate a test of 5600, while penetration would warn of a bull trap.
* Target calculation: 5350 + ( 5350 - 5050 ) = 5650
Singapore's Straits Times Index is retracing to test support at 3000. The up-trend appears weak and failure of support would signal a test of the lower trend channel. It is unclear whether 63-day Twiggs Momentum will oscillate around zero, indicating a ranging market, or above zero, indicating a healthy up-trend. The next trough should clarify this: respect of zero indicating a primary up-trend.
Japan's Nikkei 225 index retreated below 9000, indicating a false breakout. Matching peaks below zero on 63-day Twiggs Momentum and 13-Week Twiggs Money Flow warn of a strong down-trend. Failure of primary support at 8200 would confirm.
* Target calculation: 8000 - ( 9000 - 8000 ) = 7000
South Korea's Seoul Composite index retraced to test support after breakout above 1900. Declining peaks on 13-Week Twiggs Money Flow depict rising selling pressure. Failure of support at 1900 would suggest another test of primary support at 1750.
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