Both the Nikkei 225 and the Hang Seng Index did pretty interesting things today. The Nikkei 225 closed just a hair below 17 400, while crossing that level in the futures trading and breaking further towards a futures-implied top at 17 480, which would be a new high after 2007. The HSI by comparison closed at a hair above the 24 000 level and has kept going in the futures trade above that level. As is now tradition, you can find this on my charts page that has now been a bit more updated for readability and format.
Perhaps most interesting is that the currency market trade is not going in the correlation-implied way, with the yen “linking off” the Nikkei, and moments of volatility in either one isn’t matched in the other. This has gone both ways so far today and the euro has been strengthening, even though indices are generally up. Is the dollar strength trade weakening? Probably not on a longer term, but at the moment it seems like other data/news or technical factors might be at play than the currency-implied trading directions.
Looking in more detail on the charts provides a few more interesting points. Hit the jump for more!
What are we looking at here then?
For Japan, both the Nikkei and TOPIX are up, (the Nikkei much more so) as is volatility. It seems as if the traders are a little bit uncertain a to what just might happen from here on out. More importantly, the top of the upwards trend channel previously highlighted as support got tested twice in the last 24 hours (at 17 025 and 17 090), before we got a close above the 17 400 level on the 4h candle chart. This level is also rejected on the last candle, so things are looking good. Back to the 2k-width stripes it seems! Now, if the yen starts falling again, what should happen to the Nikkei 225?
A better test is probably the TOPIX futures, which peaked in American trading at 1406.50 on October 31st (November 1st Japanese time), and leaving 9.5 points to run from here (0.7%) before that resistance is tested, or 1450 which was the “hook” during the summer liquidation of 2008. From there the TOPIX is a bit testier, and has significant resistance levels to offer so it might be a much better guide than the Nikkei.
Trading on the Hang Seng Index today was pretty calm and collected, staying within previously established trading ranges, but providing plenty of really interesting signals. Again, look at the charts page, and right-click the HSI chart (1-year) to get a better view.
- The close was at 24 020, versus a 63 SMA at 24 038.
- Volume was pretty huge, at HK$83.9 billion.
- NBFI’s keep drawing down their balances of HKMA liquidity, although the monetary base is down slightly.
- The opening was the low price, and post-open trade was mostly pushing the HSI north.
The spike to nearly 24 100 however was very short-lived, and it seems like price not only will have to contend with the 63 SMA, but with this and last week’s Monday opening highs before being declared “clear to run”.
Looking at the Hang Seng China Enterprises Index is a bit more interesting. Currently, it plays a bit of the Nikkei to the HSI as a close proxy for the TOPIX, leading the market and being more aggressive upwards due to its lower total index capitalization consideration. Here, we have similar mechanics, but with the daily close parked at the 10 800 level after testing and rejecting the possibility of crossing at 10 870, which is significant resistance since mid-July. Instead, we have pretty good indication on the dynamic studies, and a clear rejection of the 63 SMA. I have added this chart to the “Watched Charts” page for your convenience, after the HSI charts.
Tomorrow will be oh-so-interesting!