Japanese Stocks Are Furthest Along in the Correction

We've argued on a number of occasions recently that stock markets around the world are generally not as oversold as they were in periods that preceded the largest subsequent gains (April 2010, August-October 2011, June 2012). However, the MSCI Pacific Index, which is mostly composed of Japanese stocks, is getting there quickly. Below we show some charts of market breadth that indicate the MSCI Pacific Index is approaching washed out territory (at least temporarily). We caution that this state of affairs can persist for some time and further price declines can be sharp. Our only point is that market breadth is the weakest in the Pacific region and so it might be further along in its corrective phase.