Charting the Fatigue in Asia Stocks Losing Grip on Six-Week Run

UBS Sees Asia Earnings Growth Broadening Out in 2018

A handful of stock charts display the psychological markers that proved the boundary of a six-week streak of gains for Asian equities. The MSCI Asia Pacific Index slipped 0.5 percent from Monday to Friday, halting a rally that had lifted it about 6 percent in a month and a half.

After last week’s retreat, the Asian share gauge is at risk of forming “double-top” technical pattern, falling about 1 percent from its highest point of 171.83 this year. The next 76.4 percent Fibonacci retracement support level from a high in December 2007 to a low in March 2009 will be at 148.3, a 13 percent downside.

The MSCI Asia Pacific Index’s trip toward an all-time high that dates to November 2007 caused a market indicator to flash caution. The 14-day relative-strength index, a momentum measure, hit its highest level in two decades. The gauge lost 2.4 percent in the four days through Wednesday, its biggest decline for any comparable stretch this year. 

Japan’s Topix index failed to sustain its rally, retreating below a 50 percent-retracement point from a high in December 1989 to a low in June 2012. It’s the second time the gauge failed to sustain a rally to its next key Fibonacci-retratement level at 2048.27. The Topix declined 2 percent last week for its biggest drop in seven months as investors locked in profits after the gauge and the Nikkei 225 reached their highest in a quarter century this month. The next key support would be at 1,530.41.

Since December, a broad gauge of mainland Chinese shares traded in Hong Kong has traveled a tight path higher. This puts the Hang Seng China Enterprises Index on a course to meet with its July 2015 high of 12,003.83 points for the gauge loaded with Chinese state-owned giants that dominate industries such as banking, insurance and energy.

— With assistance by Mark Cranfield

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