Asian Markets May be Confirming Recovery

I have been of the opinion that looking to the Far East for early signs of recovery will reveal green shoots emerging before most other regions. The evidence continues to accumulate that selected pockets of economic activity are witnessing pick-ups. Granted, Japan is still falling hard but there is momentum building on the Mainland and a few associated Tigers.

Technically, the region's move off bottom in the percentage of stocks on bullish signals has been broad-based, and all nine broad sectors I follow in the region are now in Bull Confirmed mode. The regional bullish percent is gaining strength. At the March low merely 28% of Asian stocks were on buy signals, currently that reading is at 54%, matching the high of May 2008.

The best looking market here? Shanghai. Look at its textbook triangle pattern with the upside break out in late March. What is unusual here is that Shanghai A Index is trading below its Bearish resistance line and under these conditions, normally you would expect a triangle break to the downside. But this one broke topside and with that expect it now to make to run to the Bearish trend line at 2700, with a likely pause as it will typically need a few attempts to punch though:

Traders can look to play this with FXI, which could get to $40,  it's September 2008, pre-collapse high.

(charts courtesy of Dorsey Wright & Associates)

Another strong market in the region is Malaysia, which traders can look to play via the related exchange-traded fund, (NYSE: EWM).

**Disclosure: the author owns share in FXI, either personally or on behalf of clients.

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