MONTREAL - The turbulent evolution of Asia's equity exchanges, their volatility
heightened as investors watch the momentous events in the US, continues apace
with the wild swings of last week running on into this, not least in Hong Kong.
The city's benchmark Hang Seng Index on Tuesday went into a near 4% reverse
after a two-day surge of 11%.
Hong Kong came out last week as the winner among the nine national markets
usually covered in these articles and was one of four not covered in last
Friday's review, the others being Taiwan, Seoul, Tokyo and Mumbai (see
Market Rap, Asia Times Online, September 19, 2008.)
Taiwan finished last week at the opposite end to Hong Kong in the performance
spectrum. The Taiwan Stock Exchange Composite
was the region’s biggest loser on three out of the five days as well as for the
week, which it ended down 5.4%.
Hong Kong, like Tokyo and Seoul closed for a holiday on Monday, was the biggest
winner two days out of the five and turned in the second-best performance for
the week, down barely 0.1%.
While Taiwan had relatively moderate volatility on the week in comparison with
other exchanges, Hong Kong was far and away the most volatile, opening Tuesday
at 18,326 before falling to 16,284 at the end of morning trading on Thursday,
before rebounding to close Friday at 19,328, its high for the week (a high-low
swing of 16.8%, or over one-sixth of its absolute value at the close of the
week previous).
This almost retraces the gap down from September 12 to 15 and comes to rest on
the cusp of a weak-looking support (resistance) from November 2006 and
March-April and August 2007. The chart is still constrained by triple
descending-top downtrends of increasing negative slope, in the manner of the
Australian All Ordinaries index, for example, that I pointed to last Friday.
A congruent but still progressively steeper fan of descending-top downtrends
also constrains the Taiwan market. As of Friday’s close, Taipei too had not yet
broken out of the steepest downtrend, although it was prepared to make a
challenge if momentum carried through to the current week.
The Taiex’s bounce off 5,530 on Thursday morning confirmed a support
established through 18 months of weaving from the middle of 2004 to the end of
2005, but its close at 5,970 at the end of last week left it suspended on a
wire of support and resistance from the same period, leaving the question open
whether it would bounce off higher or fail to find its footing.
Moving to Mumbai, a notably volatile index in recent months, the BSE Sensex 30
turned in the best performance of the week, gaining 0.3%. Starting and ending
the week just below its 14,100 resistance level, it fell to the 13,100 support
Tuesday and Wednesday before closing back above 13,500 both days. It then hit a
dangerous intraday low of 12,555 Thursday before rebounding again above 13,315
and finally closing the week out at 14,042. That meant it had retraced back
upwards the gap down from September 12-15 but was still confronting the same
strong resistance level where it began the week. This level was earlier this
year confirmed also from the upside as a support and has proved enduring for
some time, even since its establishment in the first quarter of 2007.
Rounding out this extended review with Tokyo and Seoul, it is remarkable that
these two were the least volatile Asian equity markets on the week as well as
(no surprise here) the most moderate in movement, down respectively 2.4% and
1.5%, which this week put them in the middle of the pack.
The Nikkei 225's close at 11,921 left it begging for support from its mid-March
2008 plunge yet at a crucial juncture, as this is also a support strongly
established by the chart's action from March 2004 through March 2005.
It does not have so strongly established a triple descending-tops formation as
other indices I have discussed here and last Friday, but there is one if you
look closely enough, although it masquerades as a single such downtrend, all
the more powerful for being so. But the steepest one cuts through the high
12,000s during the current week. It is not at all clear that the index will
even challenge it this time around.
Finally, Seoul’s low intraday volatility and relatively restrained weekly range
did not prevent it from being the second biggest loser last Tuesday and the
biggest winner on Wednesday (as well as the third-worst winner on Friday); but
all its movements were concise and well traced. The current week will also be
critical for its confrontation of the steepest of the three descending-tops
downtrends in its own chart.
To summarize, a broad pattern across many equity exchanges is establishing
itself, a pattern of three descending-tops downtrends. Typically such a fan is
broken only when the earliest established and shallowest downtrend (these are
one and the same) is shattered by a definitive move to the upside from which
the chart never looks back. All the evidence tells us that we are far away from
such an event, recent volatility notwithstanding.
The continuing turbulence across our basket of nine major markets will be
revisited on Friday.
R M Cutler(http://www.robertcutler.org) is a Canadian
international affairs specialist.
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