The Financial Forecast Asian-Pacific Short Term Update

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[Posted:] Sunday, May 13, 2012.

[Bottom Line:] Increasing downside momentum in the region argues for a reconsideration of those markets apparently within fourth waves. The climate of weakening secondary currencies continues, and that climate argues for bearish trends in regional equities.

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Financial Forecast Asian-Pacific Short Term Update May 13, 2012

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Financial Forecast Asian-Pacific Short Term Update May 13, 2012

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[The Won and Indian Rupee] The dollar had a strong week against the South Korean won. The weekly chart above shows the dollar rally now underway following the completion of a six-month, Intermediate wave (X) triangle. A rising dollar against the won is negative for South Korean equities. The dollar rally versus the Indian rupee remains on track. The daily chart shows the precise channel that defines this uptrend. We will watch for potential dollar resistance at the 54.5 level of the upper weekly Keltner channel.

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Financial Forecast Asian-Pacific Short Term Update May 13, 2012

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Financial Forecast Asian-Pacific Short Term Update May 13, 2012

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[South Korea KOSPI 200] The KOSPI 200 broke below its lower, declining daily Keltner channel on Friday. This event argues that the current decline is the beginning of an impulsive move. Weve revised the wave count on the daily and weekly charts above to reflect this development. Our intermediate-term outlook for South Korea is for a five-wave decline to take prices below the 210 level in Intermediate wave (C).

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Financial Forecast Asian-Pacific Short Term Update May 13, 2012

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Financial Forecast Asian-Pacific Short Term Update May 13, 2012

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[Hong Kong Hang Seng Index] The Hang Seng was also presumed to be in a fourth wave like the KOSPI 200. Though this market remains above its lower daily Keltner channel, we are assigning a similar wave count for Hong Kong as South Korea. The next two sessions will be informative as we see how prices react to that lower channel level, now at 19,774. Our wave count implies prices will not find support early this week.

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Financial Forecast Asian-Pacific Short Term Update May 13, 2012

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[Singapore MSCI Singapore Index] Singapore has also broken its lower daily Keltner channel level. That channel is also beginning to accelerate lower. With the 335 level in the MSCI Singapore index now in the rear-view mirror, look for prices to drop quickly to at least 320 in coming weeks.

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Financial Forecast Asian-Pacific Short Term Update May 13, 2012

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[India S&P Nifty Index] Increasing weakness in the Nifty index argues for a revision of our preferred wave count. The weekly chart above shows Minor wave C of (2) as underway. The 2011 decline, previously considered as all of wave (2) a triple zigzag - is now seen as a leading diagonal wave A of (2). The problem with this wave count is that the initial trading off the wave B high shown on the daily chart does not count cleanly as an impulsive move, unless it is a series of smaller degree ones and twos. But recent downside acceleration, especially taking prices below the lower daily Keltner channel argues that an impulsive decline is the best scenario available. The additional support for the bearish case via the weak rupee adds to our conviction that additional downside should be expected for the short and intermediate-terms (weeks and months).

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[China Shanghai Composite Index] Theres no change in our outlook for the Shanghai Composite index. Prices are in the early stages of a new intermediate-term decline that will retrace all of the April rally and bring prices below 2250 in coming weeks.

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[Australia ASX 200 Index] The trading range of both Thursdays and Fridays bars on the daily chart is within W ednesdays range. Prices are consolidating the recent five-wave decline shown in the intraday chart. The 4229-4235 area marks the previous fourth-wave high, the Fibonacci 38.2% retracement and the upper intraday Keltner channel level. We think this level contains any early-week rally. Once the oversold condition is ameliorated, look for the larger decline in the ASX 200 to resume.

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[Japan Nikkei 225 Index] We are maintaining our bullish outlook on the Nikkei, giving prices one last chance to hold the Fibonacci 61.8% retracement level at 8947. A break of this price will argue for a bearish intermediate-term scenario. A rally above the upper intraday Keltner channel at 9200 would signal a successful short-term reversal.

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[Taiwan MSCI Taiwan Composite Index] Theres no change in our MSCI Taiwan Composite outlook. Minute wave c is expected to take prices lower in coming weeks. [Edited by Chris Carolan], Sunday, May 13, 2012. New Subscriber or just need a refresher? I've written a few "concept" paragraphs on how I approach the markets with details about a few custom indicators that subscribers have found helpful. Find them here: <a href="http://www.elliottwave.com/wave/ASTU-intro" target="_blank">http://www.elliottwave.com/wave/ASTUintro</a>

Your comments and correspondence are appreciated, although I may not be able to respond to each and every note - ChrisC@elliottwave.com

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