We reported some bottom extensions in Asia at the end of the first equity market drop just before Chinese New Year. Malaysia, Singapore and Hong Kong all made daily-scale signals but we did not advise buying at that time. Yesterday Japan joined in and two others made repeat extension signals. China is still closed for the holiday although Taiwan opened today and dropped sharply without making an extension. We do not recommend buying Hong Kong yet – it is more likely to suffer from close association with Taiwan than the non-Chinese Asian markets – but the others are now worth buying.
These are daily-scale signals of course, so this carries the usual health warning about the short time-frame involved. Daily-scale signals have an average shelf-life of three weeks or so and there is quite a bit of variation around this number. They can run out of steam quite quickly so you should only take daily-scale signals if this suits your time frame. When they complement longer-term signals at a weekly or monthly scale, they can add excellent timing to longer-term trades, as happened with our short recommendations in US and European equities recently but we don’t have longer-term reasons to buy these Asian equity markets yet, so these must be seen as ‘trades’ only.
In fact we have an outstanding ‘short China’ recommendation based on weekly-scale signals published in the February 3rd edition – during the New Year break, so that market has been closed since then. The recommendation is still current when China re-opens, provided that similar prices are still available. There is a related reason for selling Korea too – a weekly-scale compression that broke downwards recently:
So the picture in the far-East as a whole is mixed. This is becoming normal and we suspect that an opportunistic approach is appropriate for a while. There is nothing wrong with this and it has done very well for Mr Buffett over in Omaha…
More soon,
RE
