Asian Stocks Fall, China Tanks

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

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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


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