Are the Eyes on the Right Ball/ Is Europe the Only Ball?

Currently the world news outlets are pretty much fixed on the latest bytes coming from Europe. As a technician, I’ve observed that price will typically give info that the news doesn’t, and many times ahead of time. Put another way, often “smart” money players, or those with privileged information put up behind their opinions, and in games like poker, we call this a tell. Another benefit of technical analysis is that you can implement it cover a lot of ground – not to mention vetting your ideas against the charts. Well, let’s let euro land go for a bit and look to the East and Far East: India and Shanghai in particular.

Here are weekly and daily charts of the Shanghai Se Composite Stock Index. Shown are quantitative technical analysis techniques that are volatility and volume based. Let’s dig in, shall we?

• From volatility and volume based support and resistance(SR):
  • There is a well defined range (shaded in red and green)
  • Price is falling to buying pressure
  • From trend-compensated and volatility sensitive momentum:
    • The SSEC is not near an extreme oversold reading yet,
    • But it is moving in that direction
    • From objective multiple time framed analysis (MTF):
    • There is significant overlap of the SR levels
    • This adds weight to the already statistically significance of these levels  (here are the statistical studies http://bit.ly/t1ZBXx )

I was recently interviewed by Sushil Kedia, CMT, CAIA, FRM who heads up the ATMA India organization. I did my homework ahead of time to have something to talk about regarding their market. Here are weekly and daily charts of the India NIFTY Index. Shown are quantitative technical analysis techniques that are volatility and volume based. Let’s see what there is to see objectively?

• From volatility and volume based support and resistance(SR):
  • There is a well defined range (shaded in red near 5500 and green near 4700)
  • Price bounced off of projected buying pressure
  • From trend-compensated and volatility sensitive momentum:
    • The NIFTY is near an extreme oversold reading on the daily
      • You can see this by a comparison between circled peaks of momentum
      • From objective multiple time framed analysis:
        • There is significant overlap of the daily and weekly SR levels (5500 and 4700 mentioned above)
          • This adds weight to the already statistically significance of these levels
• From predictive trend
  • It is down on a MTF basis
  • This is not to say there won’t be long opportunities…
  • It just means that going long is counter-trend and to be mindful of that
  • Practically, it also increases the odds/performance of short signals (the trend is after all, your friend)

So what does this mean? From looking outside of euro land, it is looking like parts of the East and Far East are near technical levels of support with room overhead. The clearly defined range gives us actionable info that can be readily implemented, and that could lend to strategies revolving around these markets. But additionally, this exercise demonstrates that objective technical analysis can open up other possibilities for where to be in the market other than your go-to sectors/regions/markets.