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Friday, September 2, 2011

Stock Index Chart Patterns – Shanghai Composite, Korea KOSPI, Taiwan TSEC – Sep 02 ‘11

Shanghai Composite Index Chart


The Shanghai Composite index chart pattern is sliding deeper into a bear market, even as the Chinese economy shows considerable growth. Is the index trying to give us a message – that the growth figures may not be that reliable? Or, may be it is providing an advance warning of what is to follow in the US and Eurozone stock indices?

After topping out near the 6000 level way back in Oct ‘07, the Shanghai Composite failed to recover from the subsequent bear market. Periodic efforts to climb above the 3000 level have been resisted strongly by the bears.

The Aug 9 ‘11 low of 2438 may soon be tested and broken. The technical indicators are suggesting as much. The slow stochastic and the RSI have both slipped below their 50% levels. The MACD is negative, and about to cross below its signal line. The ROC is also negative. All three EMAs are falling, with the index trading below them – the sign of a bear market.

Korea KOSPI Index Chart


The Korea KOSPI index touched a new 15 month low of 1704 on Aug 22 ‘11, and then mounted a spirited rally to climb above the 20 day EMA. Note that the ‘death cross’ of the 50 day EMA below the 200 day EMA has confirmed a bear market. Such counter-trend rallies are likely to be used by bears to sell. It won’t be a surprise if the index fails to move above the falling 50 day EMA.

The technical indicators are showing signs of bullishness. The slow stochastic and the RSI have risen above their 50% levels. The MACD is negative, but rising above its signal line. But the ROC is showing a loss of momentum by dropping back towards negative territory.

Taiwan TSEC Index Chart


The Taiwan TSEC index chart has fared marginally better than the KOSPI. It touched a higher bottom before embarking on its rally. Though the index has crossed above the 20 day EMA, the resistance from the 50 day EMA is likely to be more difficult to overcome.

The technical indicators are mildly bullish. The slow stochastic has risen above the 50% level. The RSI is struggling a bit to cross its 50% level. The ROC has not been able to climb into the positive zone. The MACD is negative, but rising above its signal line.

Bottomline? The chart patterns of the Asian indices are trading in bear markets. The Shanghai Composite has already spent the last three months in bear country. The KOSPI and TSEC are more recent entrants, and are trying very hard to return back to a bull market. But resistances from the 50 day EMA and the gap formed on Aug 5 ‘11 may overwhelm their efforts. Remain on the sidelines, and be patient. Lower chart levels are likely.

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