* Target calculation: 18.5 + ( 18.5 – 16.0 ) = 21.0

Singapore’s Straits Times Index is testing resistance at 3100. Narrow consolidation indicates buying pressure and breakout above 3100 would signal an advance to 3300*. A 63-day Twiggs Momentum trough above zero would signal a strong primary up-trend.

* Target calculation: 3000 + ( 3000 – 2700 ) = 3300

Japan’s Nikkei 225 is headed for a test of support at 8650. Failure would complete a double top reversal, signaling a test of primary support at 8200. Respect of zero (from below) by 13-week Twiggs Money Flow indicates selling pressure. Breach of 8200 would signal a primary down-trend with an initial target of 7200*.

* Target calculation: 8200 – ( 9200 – 8200 ) = 7200

South Korea’s Seoul Composite Index is consolidating below 2000 on the daily chart. Rising 21-day Twiggs Money Flow, high above zero, indicates medium-term buying pressure. Expect a test of this year’s high at 2050. Breakout would signal a primary advance to 2350*.

* Target calculation: 2050 + ( 2050 – 1750 ) = 2350

Chinese exchanges are closed the entire week for Mid-Autumn Festival and National Day. The Shanghai Composite Index is headed for a re-test of 2150. Oscillation of 13-week Twiggs Money Flow around zero indicates hesitancy. Respect of resistance is likely and would signal a decline to 1800*.

* Target calculation: 2150 – ( 2500 – 2150 ) = 1800

Hong Kong’s Hang Seng Index is closed Monday/Tuesday but will re-open Wednesday. Rising 13-week Twiggs Money Flow above zero indicates strong buying pressure. Expect retracement to test 20000 but respect is likely and would signal an advance to 22000.

* Target calculation: 20 + ( 20 – 19 ) = 21

He [Professor Garnaut] said Australia’s terms of trade, or income from exports, would be hit by three “mutually reinforcing negatives” under way in China.

The first was a shift in China’s economy away from a focus on heavy industrial investment and exports, which have driven metals and energy demand. The second was a wave of internal reforms including the move towards lower carbon emissions that would cruel demand for Australian thermal coal. The third was the current “cyclical” downturn that was likely to continue.

“It’s an accident they’re coming all at once, but they are,” Professor Garnaut said

From Leith van Onselen at Garnaut’s bitter pill must be swallowed | | MacroBusiness.

Rail cargo volume growth fell further from -8.2% yoy in July to -9.2% yoy in August, worst since the financial crisis. Cargo volume transported by the railways amounted to 304 million tonnes in August 2012, slightly below 305 million tonnes in July.

via China’s rail cargo volume declined further in August.

After a long period since late last year as Chinese Yuan was expected to depreciate, it appears that the expectation of Chinese Yuan appreciation is back on people’s mind. Chinese Yuan hits the highest level since the revaluation started in 2005, completely reversing the depreciation since earlier this year…..

via Chinese Yuan hits highest level against USD, but PBOC wants it weaker.

Notions of punishing Tokyo economically for buying the islands, whose status was left unclear after World War II, are unrealistic, said Hu Shuli, editor in chief of Caixin Media and one of China’s chief economic journalists. So many Chinese workers are employed at Japanese-owned companies, she said, that any escalation of tensions leading to a boycott of Japanese goods could lead to huge job losses.

This would be disastrous in an already shaky Chinese economy, Ms. Hu wrote in the Chinese magazine Century Weekly……

via China Alters Its Strategy in Dispute With Japan – NYTimes.com.

As a result of the real estate boom, reports in Chinese media indicate that the average property in a top-tier Chinese city now costs between 15 and 20 times the average annual salary, though J.P. Morgan reports indicate something closer to 13. For purposes of comparison, in most of the world’s cities, the housing-cost-to-income ratio hovers between 3-to-1 and 6-to-1, rounding out at about 3-to-1 in the United States. This is especially problematic in China, where thanks to still-prevalent Confucian ideals of the male as the “provider,” home ownership has become an unspoken prerequisite to marriage. It’s a tough, competitive life for men in China these days, in part due to the aftershocks of the one-child policy, which has left the country with a gaping gender imbalance of 120 boys for every 100 girls……

via Bachelor Padding – By Roseann Lake | Foreign Policy.

* Target calculation: 2150 – ( 2500 – 2150 ) = 1800

South Korea’s Seoul Composite Index is headed for a test of 2050. The 13-week Twiggs Money Flow trough above zero suggests a primary up-trend. Breakout above 2050 would confirm.

* Target calculation: 2050 + ( 2050 – 1750 ) = 2350

India’s Sensex broke through 18500, confirming the primary up-trend. The trough above zero on 13-week Twiggs Money Flow indicates buying pressure. Expect retracement to test the new support level.

* Target calculation: 18.5 + ( 18.5 – 16.0 ) = 21.0

Singapore’s Straits Times Index is testing medium-term resistance at 3100. Rising 63-day Twiggs Momentum, above zero, indicates a primary up-trend.  Breakout above 3100 would indicate an advance to 3300*.

* Target calculation: 3000 + ( 3000 – 2700 ) = 3300

Japan’s Nikkei 225 retreated below the new support level at 9200. Reversal of 13-week Twiggs Money Flow below zero warns of a bull trap. Follow-through below 9000 would confirm.

* Target calculation: 9200 + ( 9200 – 8200 ) = 10200

Estimates by the Treasury Department released this week indicated that over the 12 months through July, China reduced its position in Treasury securities by $165 billion, cutting them to $1.15 trillion despite making a small amount of purchases in July. And the Federal Reserve reported that, as of Wednesday, it owned $1.65 trillion in Treasury securities, $17 billion less than it had owned a year earlier.

…..China’s selling of Treasuries over the 12-month period was offset by the actions of Japan, another country whose trade surplus with the United States remains large. The Japanese are estimated to have increased their holdings by $232 billion over the 12 months, to $1.12 trillion. Those figures include both government and private holders of Treasuries.

via As the U.S. Borrows, Who Lends? – NYTimes.com.

The US has an impossible task maintaining “neutrality”, and Beijing knows it.

Washington guarantees Japan’s defence under its US nuclear umbrella. It uses military bases on Japanese soil as an unsinkable aircraft carrier. It works hand in glove with Tokyo in a tight military alliance.

The question is whether Washington is really willing to uphold the Japanese alliance as the going gets tougher. Will it let America to be led by the nose by Japanese nationalists into a clash that is not obviously – or immediately – in US national interest?

President Barack Obama faces the toughest diplomatic choice of any US leader since John Kennedy…….

via China, Japan and the world’s Agadir Crisis (1911) – Telegraph Blogs.

* Target calculation: 250 – ( 300 – 250 ) = 200

Hong Kong’s Hang Seng penetrated the descending trendline at 22000, indicating an advance to 22000. Recovery of 63-day Twiggs Momentum above zero suggests a primary up-trend. Breakout above 22000 would confirm.

India’s Sensex broke through 18500, confirming the primary up-trend. The trough above zero on 13-week Twiggs Money Flow indicates buying pressure. Expect retracement to test the new support level.

* Target calculation: 18.5 + ( 18.5 – 16.0 ) = 21.0

Singapore’s Straits Times Index respected support at 3000. Rising 63-day Twiggs Momentum, above zero, indicates a primary up-trend.  Follow-through above 3100 would indicate an advance to 3300*.

* Target calculation: 3000 + ( 3000 – 2700 ) = 3300

Japan’s Nikkei 225 is testing resistance at 9200. Breakout would signal a primary advance to 10200. Recovery of 13-week Twiggs Money Flow above zero indicates rising buying pressure.

* Target calculation: 9200 + ( 9200 – 8200 ) = 10200

The buying and selling of territory between states is a lot less common than it was in the days when European powers held vast overseas empires and there was significantly more terra nullius to be claimed….

On the other hand, given how many territorial disputes China is involved in at the moment, a study of how these conflicts have been resolved peacably in the past might not be a terrible idea.

via Why is China afraid of the Louisiana Purchase? | FP Passport.

The wave of anti-Japanese protests that swept across dozens of cities in China this weekend, prompted by Tokyo’s purchase of three disputed islands, has obscured a potentially more worrying development that risks drawing the two countries into a larger conflict: China’s adoption of a legal framework empowering it to expel foreign vessels in disputed waters in the East China Sea.

……More frequent Chinese patrols in the area, along with the Japanese Coast Guard continuing to patrol near the islands, raises the risk of maritime clashes higher than it has ever been. Although the two countries have dealt with past run-ins — such as when the Japanese Coast Guard arrested a Chinese skipper in 2010 after his boat collided with a Japanese vessel — and succeeded in cooling tensions, the current situation is of a different order. That act could be attributed to an overzealous Chinese fisherman. But now, a skirmish between official law enforcement vessels in the current context could prove irresolvable.

via Dangerous Waters – By Stephanie Kleine-Ahlbrandt | Foreign Policy.

On Aug. 3, the owner of Chengxing Solar Company leapt from the sixth floor of his office building in Jinhua, China. Li Fei killed himself after his company was unable to repay a $3 million bank loan it had guaranteed for another Chinese solar company that defaulted. One local financial newspaper called Li’s suicide “a sign of the imminent collapse facing the Chinese photovoltaic industry” due to overcapacity and mounting debts.

President Barack Obama has held up China’s investments in green energy and high-speed rail as examples of the kind of state-led industrial policy that America should be emulating. The real lesson is precisely the opposite. State subsidies have spawned dozens of Chinese Solyndras that are now on the verge of collapse.

via WSJ: China’s Solyndra Economy – Business Insider.

Markets jumped Friday on announcement by the ECB of government bond purchases and China unveiling further stimulus measures. The Shanghai Composite is testing  the first line of resistance at 2150. Respect of 2250 would warn of another down-swing, while penetration of the (secondary) descending trendline would indicate the primary down-trend is weakening. 63-Day Twiggs Momentum, a long way below zero, continues to reflect a primary down-trend.

* Target calculation: 2150 – ( 2500 – 2150 ) = 1800

Hong Kong’s Hang Seng is again testing resistance at 20000. Upward breakout plus 63-day Twiggs Momentum recovery above zero would indicate an advance to 22000. Respect of resistance is unlikely, but would test primary support at 18000.

India’s Sensex recovered above 17500, indicating an advance to 18500. A trough above zero on 13-week Twiggs Money Flow would indicate buying pressure.

* Target calculation: 17.5 + ( 17.5 – 16.5 ) = 18.5

Singapore’s Straits Times Index found support at 3000. Respect would indicate a test of the upper trend channel, but the lower peak on 63-day Twiggs Momentum suggests a ranging market. Breach of support at 3000 would re-test the lower trend channel.

The long tail on last week’s Nikkei 225 candle indicates short-term buying pressure and recovery above 9200 would signal an advance to 10200. 13-Week Twiggs Money Flow below zero, however, continues to indicate long-term selling pressure. Recovery above zero would reverse the signal, while failure of primary support at 8200 would confirm another down-swing.

How is it that an economy grows at 7.6% yoy is squeezing corporate profitability so hard? How is it that an economy growing at 7.6% yoy feel like there is not enough demand for all the goods and services being produced?…..The answer, to our mind, is quite simply that China has been investing in too much productive capacity…… The return on investments might be good before the financial crisis, yet the collapse of external demand after the financial crisis and more recently in the persistent Euro Crisis have cut external demand significantly. Meanwhile, domestic demand is not growing quite enough to pick up the slack created by collapse of external demand. Worse still, it is rather clear that domestic demand has been sustained by none other than investment itself. Thus, it should come as very little surprise that IMF’s estimate put China’s capacity utilisation at just about 60%.

via China’s overinvestment: the problem of having too much.

Hat tip to Macrobusiness.com.au

via China’s steel mills braced for slowdown – FT.com.

* Target calculation: 800 – ( 1000 – 800 ) = 600

The Shanghai Composite is a lot 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 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.

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.

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.

* Target calculation: 17.5 + ( 17.5 – 16.5 ) = 18.5

Singapore’s Straits Times Index is consolidating above support at 3000. Reversal below 3000 would signal a test of the lower trend channel, while follow-through above 3100 would indicate a fresh advance. 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 is retracing to test support at 9000 after completing a double-bottom. Respect would confirm a primary advance to 10000. 13-Week Twiggs Money Flow peaking below zero, however, warns of selling pressure.

* Target calculation: 9100 + ( 9100 – 8200 ) = 10000

China’s Shanghai Composite followed-through below 2100, confirming the primary decline with a target of 1800*. Reversal of 13-week Twiggs Money Flow below zero indicates selling pressure.

* Target calculation: 2150 – ( 2500 – 2150 ) = 1800

The Hang Seng drifts fairly aimlessly. Declining 13-week Twiggs Money Flow suggests selling pressure. Breach of 18000 would signal a primary down-trend but we still appear some way from that.

* Target calculation: 20 + ( 20 – 18 ) = 22

* Target calculation: 17.5 + ( 17.5 – 16.5 ) = 18.5

Singapore’s Straits Times Index, also in a primary up-trend, is consolidating above former resistance at 3040. Reversal below 3000 would signal a test of the lower trend channel. It is still unclear whether 63-day Twiggs Momentum will oscillate around zero, indicating a ranging market, or above zero, indicating a healthy up-trend. A trough above zero would resolve this.

Japan’s Nikkei 225 index broke through resistance at 9100, signaling a primary advance to 10000. 13-Week Twiggs Money Flow below zero continues to warn of selling pressure; recovery would confirm the advance.

* Target calculation: 9100 + ( 9100 – 8200 ) = 10000

The daily chart shows China’s Shanghai Composite Index testing support at 2100. Failure would indicate a test of the lower trend channel, while respect would test medium-term resistance at 2180. Breakout above the trend channel  would warn of another bear rally. Follow-through above 2180 would confirm. Bullish divergence on 21-day Twiggs Money Flow indicates medium-term buying pressure.

* Target calculation: 2100 – ( 2180 – 2100 ) = 2020

The Hang Seng continues to consolidate above resistance at 20000. Follow-through would indicate an advance to 22000*.  Rising 13-week Twiggs Money Flow suggests buying pressure.

* Target calculation: 20 + ( 20 – 18 ) = 22

* Target calculation: 17.5 + ( 17.5 – 16.5 ) = 18.5

NSE Nifty is testing resistance at 5350. Breakout would confirm the Sensex primary up-trend. Rising 63-Day Twiggs Momentum is promising but we need a trough above zero to signal a strong up-trend. Target for the breakout would be 5650*.

* Target calculation: 5350 + ( 5350 – 5050 ) = 5650

Understanding Momentum

Momentum is an oscillator, so you would expect equal peaks if the trend is constant. If oscillating above zero, it would be a constant up-trend; below zero, a constant down-trend; with zero at the mid-point, a ranging market. Divergence should ideally show a clear transition from one to the other or at least a sharp difference in the height of peaks or troughs. A trendline drawn under rising momentum will indicate that momentum is accelerating; a trendline break would indicate slowing acceleration — not necessarily a reversal.

Japan’s Nikkei 225 index is testing resistance at 9000 but 13-week Twiggs Money Flow continues to warn of strong selling pressure, with a peak below zero. Breakout above 9000 is unlikely, but would signal an advance to 10000. Failure of support at 8200 would indicate another test of the 2008/2009 lows at 7000*.

* Target calculation: 8000 – ( 9000 – 8000 ) = 7000

China’s Shanghai Composite Index retreated below support at 2150; follow-through below 2100 would indicate a decline to 2000*. Declining 63-day Twiggs Momentum continues to signal a primary down-trend.

* Target calculation: 2250 – ( 2500 – 2250 ) = 2000

Hong Kong’s Hang Seng Index is more bullish, consolidating above resistance at 20000. Follow-through would indicate an advance to 22000*.  Recovery of 63-Day Twiggs Momentum above zero would suggest a primary up-trend.

* Target calculation: 20 + ( 20 – 18 ) = 22

Singapore’s Straits Times Index is similarly consolidating above former resistance at 3040. Rising 63-day Twiggs Momentum — above zero — indicates the primary up-trend is intact. Calculated target is 3300* but the trend channel suggests resistance at 3200.

* Target calculation: 3000 + ( 3000 – 2700 ) = 3300

Published: August 13, 2012

Stocks fell Monday as evidence piled up that the global economic slowdown was hurting Asia.

Japan’s economy grew in the second quarter at a 1.4 percent annual rate, slower than many analysts had expected. Last week, China released dismal figures on retail sales and exports in July. Traders were disappointed that Beijing failed to introduce stimulus measures over the weekend……

via Slower Growth in Asia Brings Down Stocks – NYTimes.com.