Markets Observations — Stand Ready
Asia regional markets, as represented by our poster-child APEX50 has also bounced off its critical support as shown, negating an immediately bearish scenario.
This is a good sign, in that despite the seemingly lacklustre earnings season so far, the ‘bad news’ did nothing to depress prices further.
Even though we do still frustratingly lack further evidence/trigger to suggest the resumption of a recovery trend, there are certain setups now which are increasingly supportive. We layout three below.
KOSPI
Wall Street strategists have often termed Korea’s index as ‘Doctor KOSPI’ as it often precedes, or holds implications for Asia EM future performance’s. The recent outperformance of DRAM names, against all concerns as mentioned before, is, therefore, a strong signal that some investors are now more willing to ‘look through the trough’.
Whilst KOSPI’s recovery isn’t exactly broad-based yet, it is nevertheless a good starting point. A bit more momentum should confirm it.
ADXY
Secondly, the ADXY through this entire corrective episode has failed to break out of its corrective trend. Yet, with the Dollar (DXY) strengthening in recent days, especially after FOMC, NEITHER has it turned weaker.
ATEC likes the fact that the swings in the ADXY in recent days have actually gotten more muted. Again we take this to mean selling exhaustion. A decisive move above its 200 Day Moving Average (red line) should serve as a good trigger.
COPPER
Last though not least, Doctor Copper. Whilst it is well accepted that the Electrification theme will ultimately support Copper demand, the near term path is being dampened by China’s economic slowdown. Sure, it’s well documented by now.
But from a different perspective, one can also question — that if such a massive real estate slowdown in China failed to break Copper’s price back into the bearish corrective channel, what happens when Beijing starts to tap on the accelerator? What happens when China also accelerates their Electrification build-out?
We suspect this is an area where we can see surprises, hence are watching closely.
All in all, ATEC is feeling somewhat more bullish on Asia EM here. It has been a long drawn and extremely complex nine (?) months correction which had definitely worn many (including ourselves) out. Such is the nature of markets and life perhaps.
Good Luck Out There.
