Expect more volatility in coming days

Has the bull run in Asian stock markets ended?

Stocks in Asia markets suffered one of the worst sell-off for the year last week.

Straits Times Index (STI) last week fell from a weekly high of 3665 to 3492, down about 173 points or about 4.7%.  Hang Seng Index fell from 23472 to 22570, down about 902 points or about 3.8%.  Kuala Lumpur Composite Index fared better, dropping from weekly high of 1392 to 1355, down about 37 points or about 2.7%.  

But analysts and investors may still have different opinion as to whether the recent bull run has actually ended…… Some investors may feel that a weakening US economy would continue to depress Asia markets since there are many manufacturers from Asia who are still dependent on the US consumer market.

However, there are some who think otherwise, that Asia economy is no longer as dependent on the US economy as 10 or 20 years ago and that the present housing and credit problem that the US economy is facing is purely a domestic problem.  Additionally, corporate earnings from Asian companies remained strong with low gearing and stronger balance sheets compared to the period before the Asian financial crisis.

Which ever side they are on, most people may agree that more volatility is expected in Asian markets in the near term before things stabilize and hopefully after that……improve again.

For short term traders, there could still be opportunities to trade in the near term.  Personally, I would be combining stochastics and price patterns to trade the market in the near term.  

I would like to see stochastics of hot stocks (those hitting new highs recently) hitting oversold levels (below 25) and then cutting back up above oversold levels.  Buy signal would only be triggered if the stock price breakout of recent high.  Recent high is subjective and depends on the price chart.  Very often, it could be the prior day high when the stochastics cuts back up.