Nikkei – The Nikkei is in trouble across the board. The 9000 level did not hold and the short and long-term charts are all showing bearish signals.

The market is looking for the government to do something regarding the appreciation of the Yen to help exporters.

If something does not happen soon we may see a test of the 2003 lows around 7800 and if that level does not hold 7000. Should economic numbers come in weaker than expected do we see another round of quantitative easing by the government and the Bank of Japan?

South Korea (KOSPI) – The KOSPI has had a very volatile year with prices whipsawing between 1800 and 1525.

In early August the KOSPI broke through an ascending wedge and pulled back to the 1720 area where it appears as though a triple bottom is being formed. The question this week is will the 1720 level hold and if so is this a springboard to new highs on the year or does it become a trading range?

The weekly charts show strong support at the 50 and 200 week moving averages with an uptrending pattern.

If support holds and we see a strong rally then 1900 and 2100 are distinct possibilities.

Bombay Sensex (BSE) – The BSE just broke through an ascending wedge to the downside on Friday. The short-term charts indicate a pullback to the 17500 area which will make the Sensex flat for the year.

The longer-term charts are overbought but have a bullish slant to them. This coming pullback may just be a pause that refreshes the market.

On the weekly chart there is a clear W formation and this pullback may just be the springboard to set the stage for a rally back to the old high in the 21000 area.

India has been one of the better markets this year with strong economic growth and a proactive central bank already into a rate tightening cycle in an attempt to cool off the economy before inflation gets out of control.

US Comment: Friday’s rally was well overdue in this pullback. Since the sell off following the Federal Reserve meeting rallies have been weak and met with selling. This week we need to a follow through with respect to Friday’s move up and get in position to take out resistance at the 50 day moving average and 1100 on the S&P 500.

AAII sentiment numbers are extremely bearish which points to a possible contrarian rally, one that may just catch people off guard.

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