Business

MARKET RADAR: TOPIX to Lead Asian Stocks, Middle East Events Didn’t Rally Oil

Thursday, February 17, 2011

By Bill Sarubbi

New York - (PanOrient News) The TOPIX is likely to be one of the leading stock markets in Asia, an $83-95 trading range for oil barrel is likely to remain in force through March and April, and if gold rises much above $1385, the correction is likely over, and new highs will follow.

STOCKS

The US market has held up better than expected. There are short-term cycles that bottom on the 23rd, so the S&P is more than likely to rally into the first week of March. As we have seen, the month of March has been a turning point since the March 2000 high. If we are to see any short pullback, it will likely be after the first week in the next month.

The TOPIX is likely to be one of the leading stock markets. First, this market did not participate in the 2010 rally. Second, the monthly momentum indicator shows higher lows, a constructive development. This market is not overbought, one of the few markets in Asia that it is this favorable condition. It appears likely that funds will flow out of extended emerging markets and into Japan. The TOPIX is likely to break through the April 2010 high at 987 high. The next objective is 1125.

One other Far Eastern market that is also in bullish longer-term condition is China. The 3127 level will likely restrict the Shanghai index, but this level will likely be exceeded. The longer-term target is the old 3423 level, the August 2009 high, 12 percent above current quotes.

Markets that are vulnerable are India and Brazil. Both of these markets failed to exceed their prior highs. In addition relative strength versus the world index and momentum also stopped well short of prior highs. This is a bearish condition. Because both markets were so overbought, it will likely take some months before a low is in place. Malaysia also appears vulnerable. This index did hit a new high, but this was not confirmed by momentum on a monthly level. This creates a bearish non-confirmation. The index could fall another 15 to 20 percent.

OIL

In the last column, I stated that oil was likely to trade sideways into May after which a sustained rally would commence. As short-term proof, note that oil did not rally despite the changes in the Middle East over the last 2 weeks. An 83-95 trading range is likely to remain in force through March and April. Energy stocks, however, have been much stronger than the commodity. This will likely continue. It appears that the stocks are anticipating higher energy prices.

GOLD

Most gold lows are in February and in March, but gold has been rising since January 27th. It is possible that the underlying bull market is so strong that the first quarter correction will be very limited and has ended early. If gold rises much above $1385, the correction is likely over, and new highs will follow.

Bill Sarubbi, a strategist and portfolio manager currently operates his own business from Europe. He spends most of his time in Vienna, London, Tokyo, and Abu Dhabi.

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