Asian Markets, Technicals

Asian Equity Patterns Scream Reversal

Asian equities may be in a precarious position as suggested by patterns in the Nikkei 225, Hang Seng, and ASX 200.

Nikkei 225

The Nikkei 225 appears most bearish.  Japan’s most important equity index broke from a multi month channel in September on a breakaway gap.  That gap was filled earlier this month when the index was forming what may be a head and shoulders tiop.  The 50 day SMA is above price and sloping down now.  The index is at risk of a downside break.  Under 9629 exposes 9050.

Hang Seng Index

Hong Kong’s Hang Seng is nearing the support line from an ending diagonal (also known as a wedge).  An ending diagonal occurs following a move that’s gone ‘too far, too fast’.  Clearly, the Hang Seng’s Spring and Summer rally fits that description.  The implications are bearish and suggest a return to 17,186 (beginning of diagonal).  The declines that succeed completion of a diagonal are usually sharp. 

S&P ASX 200

After stubbornly riding along its upper channel line, Australia’s ASX 200 turned down in impressive (for bears) fashion.  Still within the 7+ month upward sloping channel, we can’t say for sure that a top is in place, but the RSI divergence leading up to the reversal is typical of important tops.  Structurally, the advance counts well as a complex a-b-c-x-a-b-c (properly labeled w-x-y) correction.  Waves w and y are nearly equal (32.7% and 32.0% rallies respectively).  The next supports are 4261 and 4079.