David Fuller's view How can you make sense of all the confusion, uncertainty, volatility, and extreme views which are aired daily on financial networks and in business page headlines? At Fullermoney, we monitor the discussions, not least for behavioural insights and contrarian signals, but our preferred approach is to observe what the markets are actually doing. We look at price charts on a factual basis, in terms of relative performance, trends, consistency, and potential for regression to the trend mean by various financial instruments. After all, price charts show us where the money is flowing, and also when trends look overstretched, up or down.

Almost two months ago we emphasised the importance of the early-June lows for many stock market indices, against the background of a bearish consensus. As the recovery progressed our attention focussed on the sequence of higher reaction lows within these rallies. What about now?

Singapore's FSSTI (weekly & daily) (current yield 3.0%) bullish re-rating since the low at 2700 on 4th June has continued following a consolidation near the year's earlier highs. A close beneath 2975 would now be required to question scope for a further test of the upper boundary since the November 2010 high near 3320.

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Indonesia (weekly & daily) 2.2%, rallied sharply from its early-June low but has been ranging in a more choppy fashion over the last month as the small top in April and May was approached. Nevertheless, the highs are still rising, and more importantly, there have been higher or equal reaction lows over the last two months. A close beneath 3960 would be required to reaffirm overhead resistance.

Malaysia (weekly & daily) 3.5% has paused in a consolidation of recent gains, having extended its break above lateral and psychological resistance near 1600. A close beneath this level for several days would now be required to question the resumption of the overall upward trend following a lengthy pause, during which this Index has shown relative strength since its spike low in September 2011.

The Philippines (weekly & daily) 2.6% and Thailand (weekly & daily) 3.6% remain steady within ranges near their all-time highs and closes beneath 4880 and 1100, respectively, would be required to question their overall upward bias.

China's Shanghai A-Shares (weekly & daily) 2.64% have steadied following a mostly orderly, step sequence downtrend since their early-May high and this is the biggest rally since the 2-day bounce in June. A close beneath 2200 is now required to negate further recovery scope. (See also Eoin's item on China Cuts Transaction Fees, posted on 2nd August.)


Hong Kong (weekly & daily) 3.6%, has gone nowhere for three years, but is outperforming A-Shares above. HSI's performance should improve if it can now push above the psychological 20,000 level and the MA.

Australia (weekly & daily) 5.0% has also gone nowhere for three years but the ranging recovery from the lower side of its range since early June continues and it is back above the MA. A break in the progression of higher reaction lows will be required to question continuing recovery prospects and this market should do considerably better as China recovers. Australian Financials (weekly & daily) 6.1% have provided a bullish lead over the last three months and here also a break in the progression of higher reaction lows will be required to check current upside momentum.

Ireland (weekly & daily) 1.6% has held up better this year than most so-called Eurozone peripheral stock markets. A close beneath 2960 would be required to delay further medium to longer-term recovery prospects.

Germany (weekly & daily) 3.8% has extended its recovery towards the psychological 7000 region, above which resistance has been encountered over the last 20 months. Watch for an eventual break in the rising to equal lows, with the latest near 6600, as an indication that demand is losing the upper hand.

The UK (weekly & daily) 4.0% has resumed its rally but some resistance can be anticipated as it approaches the psychological 6000 level where prior resistance is also evident.

Euro STOXX Banks (weekly & daily) 2.7% has extended its recovery following the failed downside break in late July. While short covering is undoubtedly a factor in this move, a close above the last high near 92.80 would increase the possibility that a sustainable low was reached last month.

South Africa (weekly & daily) 3.3% has been a relative outperformer since its August 2011 low and continues to extend its latest upward break. A clear downward dynamic would be required to check this move beyond a brief pause and a close back under 34,000 to suggest a possible failed upside break.

The USA's leading Nasdaq 100 (weekly & daily) 1.0%, in a trend reaffirming characteristic, found support in early June, just above its large 2011 platform. Subsequently, it has ranged with an upward bias above its 200-day MA and a break in the progression of higher reaction lows would be required to delay a further test of the year's earlier highs.

Conclusion - The old adage: "Don't fight the tape" springs to mind. Most stock markets are still ranging higher at a time when many people feared a "threepeat" of the August dive seen in 2010 and 2011. There is no evidence of that at present, although the next correction beyond a brief pause should not be too difficult to spot. With the exception of possible upside accelerations, it will probably commence with breaks in the progressions of higher reaction lows within the rallies which commenced in early June.