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Tidal shifts

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  Technical Analysis
  LONG WAVE Outlook                                                                 Macro
                                                                                March 2012

  Tidal shifts
  James Bond, Golf & the Stock Market:
  An Introduction to Socionomics

  Long-Term Technical Analysis Trades
  Short JPY Basket
  Short GBP Basket
  Short S&P 500, Long Taiwan TAIEX

Disclosures and Disclaimer This report must be read with the disclosures and analyst
 certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it
                                                                                    渐飞研究报告 - http://bg.panlv.net
   Technical analysis                                                                                        abc
   March 2012

2012 should see an acceleration of the generational mood change
that started in 2000.

Twelve years ago the era of credit creation and inflated asset markets in the developed world came to an
end and the forces of deflation took over. This becomes clear when we measure stock markets in real
money terms, gold, rather than fiat money. On that measure, developed markets are down over 80% in
this period (as our chart of the US stock market demonstrates on page 28).

Negative social mood (Socionomics) should continue to drive the developed markets. In the year in which
the James Bond franchise sees its latest release with Skyfall, we introduce this new social science with a
look at how a social mood cycle affects such diverse aspects as movie popularity, golf, attitudes to death
and the stock market. (See page 5).

According to our technical analysis, Asian stock markets should hold up relatively well and vastly
outperform. Some Asian stock markets are in secular bull cycles, particularly Taiwan (page 24), India
(page 22) and Korea (page 18). Asian currencies on the other hand, although in a long-term bull market,
should depreciate versus the US dollar in 2012 (as our chart of the Singapore Dollar shows on page 21).

The US dollar outperformance will also be seen against G10 currencies over the course of the next few
months although the very long term trend is still down. Despite all the negative news, the euro should
survive its next leg lower and come back an even stronger currency (see our chart of the euro trade-
weighted index on page 41).

This year’s deflationary lurch should surprise everybody by hurting gold and a move lower like the one we
saw in 1975 to 1976 seems likely before the real bubble phase gets going (see charts on pages 54 and 55).

Commodities in general should remain under pressure after a classic Socionomic peak mood indicator (a
high profile initial public offering) nailed the top of the asset class rally in 2011 (page 56).

Bond yields have a mixed outlook, but the clearest message comes from Japan where a very long-term
bottom in JGB yields is playing out (see page 17).

Credit markets should remain out of favour with CDS Indices ready for the next wave higher (see page 42).

                                                                            渐飞研究报告 - http://bg.panlv.net
    Technical analysis                                                                            abc
    March 2012

Long-Term Technical Analysis Trades
Short Yen Basket
Short JPY equally weighted versus USD, EUR and SGD. Stop loss of 5% basket move. Target of 15%.

Short GBP Basket
Short GBP equally weighted versus USD and EUR. Stop loss of 5% basket move. Target of 15%.

Short S&P 500, Long Taiwan
Short Dec 12 S&P 500 future at 1350. Long HSBC MSCI Taiwan ETF at HKD 43.8. Equally weighted.
Stop loss of 5% spread move. Target of 20%.

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  Technical analysis                                           abc
  March 2012


James Bond, Golf & Stocks         4   Middle East                         51
An Introduction to Socionomics    4
                                      Africa                              53
China / Hong Kong                12
                                      Metals & Commodities                55
Japan                            14
                                      Our technical analysis
Korea                            16   methodology                         58

Singapore                        18   Disclosure appendix                 63

India                            20   Disclaimer                          64

Emerging Asia                    22

Australia                        24

United States of America         26

Canada                           31

Latin America                    33

Eurozone                         38

United Kingdom                   43

Scandinavia                      47

Russia                           49

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    March 2012

James Bond, Golf & Stocks

An Introduction to Socionomics                           For instance, in the example above a Socionomic
                                                         commentary would instead read: “Better-than-
Question: What have Tiger Woods, zombies,
                                                         expected GDP numbers confirm positive social
James Bond movies and the length of women’s
                                                         mood”. Socionomists (so-shee-onomists) think in
hemlines got in common?
                                                         reverse to the orthodox. An orthodox economist
Answer: They are all Socionomic indicators linked        might say: “The recession is causing business
to the stock market.                                     people to be cautious”. A Socionomist would say:
                                                         “Cautious business people are causing
Socionomics is a new social science, pioneered by
                                                         the recession”.
Robert Prechter Jr, that has sprung out of the field
of technical analysis, in particular the Elliott         It is this different view of causality that makes
Wave Principle.                                          Socionomics different. It alludes to the herding
                                                         nature of society and why social mood therefore
Most people take the orthodox, ‘fundamental’
                                                         moves between positive and negative in a structured,
view and assume that events and news drive
                                                         regular fashion. But most people, being unaware that
sentiment and markets. Society is conditioned to
                                                         they are part of the social crowd, are oblivious to this
accept this way of thinking because of our
                                                         underlying tide and carry on thinking that, for
relentless need to rationalise ‘why’ markets have
                                                         example, people are protesting on the streets because
moved. “Stock markets went up today because of
                                                         the economy/market is down. They are not. The
better than expected GDP numbers” is a standard
                                                         economy/market is down because of the underlying
orthodox commentary on markets. This view
                                                         negative social mood, of which social unrest is
assumes that market sentiment or mood is a
                                                         merely a manifestation.
function of what the news is.
                                                         Once you accept the validity of Prechter’s
But Socionomics takes a different view.
                                                         Socionomic theory you start to view news and
Socionomics takes the opposite view that it is instead   events in a very different way. Rather than ask “what
the mass mood of a society (social mood) that            the news is” you start to ask “why is this news
drives markets, social trends and, therefore, the        happening now?”
news. Furthermore and crucially, social mood is
                                                         Robert Prechter Jr has been the pioneer in
patterned according to the Elliott Wave
                                                         developing Socionomics, and his 1999 book The
Principle. Thus, the stock market is a
                                                         Wave Principle of Human Social Behaviour and
measurement of social mood. This makes social
                                                         the New Science of Socionomics is a seminal work.
mood not only highly predictable but also means that
                                                         It rigorously examines many examples of
manifestations and measures of social mood can act
                                                         socionomic manifestations, but for the sake of our
as sentiment confirmation of where markets are in
the wave cycle.

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   March 2012

brief introduction to the subject we will only                    1989, but social mood had already begun to bottom
highlight a few here.                                             out and the positive social mood of the 1990s was
                                                                  manifest in a revival in Bond’s popularity. The
“No Mr Bond…I expect you to die!”
                                                                  decline in social mood over the last 11 years has
One of the central tenets of Prechter’s Socionomic                meant Bond no longer appeals the way he once did
theory is that bear markets are driven by feelings                as mood turns away from testosterone-fuelled
involving empathy, caring and nurturing in a general              endeavours. The next movie, Skyfall, is scheduled
social mood of unhappiness. Bull markets, on the                  for release later in 2012. Given the continued
other hand are driven by a psychology of selfishness,             downtrend in social mood, we think it is
aggression and competitiveness.                                   appropriately titled.
And so it might fit that James Bond, the icon of male
chauvinism, action-hero and all-round playboy,
should be a Socionomic indicator.

The chart below shows the Dow Jones Industrials
index versus the James Bond movie franchise film
earnings, both in gold terms. The peak in movie
earnings was Thunderball in 1964 which coincided
with the peak in social mood as measured by the
stock market. The low point was Licence To Kill in

 Figure 1: James Bond Film Earnings (RHS) versus Dow Industrials [LHS]

 Source: HSBC, Bloomberg, www.the-numbers.com, shutterstock.com

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      March 2012

The hemline indicator                                    This reflection of liberal versus conservative fashion
Credited to George Taylor in 1926 (and later             is replicated across society in general. Positive social
developed by Ralph Rotnem), this famous                  mood engenders liberal feelings and attitudes
Socionomic indicator notes the relationship between      towards politics and international relations. Politics
the stock market and the length of hemlines. In free     become very centralised and consensus-oriented in
societies, hemlines tend to get shorter and shorter as   bull markets, whereas negative social mood causes
the social mood becomes ever more positive and           fractures in society and drives people to the extreme
they lengthen as social mood becomes negative.           left and right of politics. This fracturing in social
                                                         mood can lead to movements springing up from
In Europe and the US, positive social mood was           grass roots (such as the Tea Party in the US) and also
reflected in the 1920s flappers, the 1960s mini and      general social unrest.
the 1990s micro-mini whereas negative social
mood was reflected in the 1930s cross cuts and
the 1970s caftans.

Given that social mood has been declining
relentlessly since 2000 it should be unsurprising that
the spring/summer 2012 fashion collections of
designers such as Zoe Jordan, Caroline Herrara and
Max Azria feature long hemlines.

    Figure 2: Social Mood & Hemlines

    Source: HSBC, Bloomberg, shutterstock.com

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   March 2012

War & peace                                              Take the recent example in Australia where the 2007
Periods of unity, togetherness and apology for past      top in social mood was crested with an historic
mistakes tend to occur after a time of positive social   apology to the indigenous aboriginal people for past
mood whereas conflict and wars tend to occur after       mistreatment.
social mood has turned down. The Socionomic              Reconciliations such as this generally occur after a
explanation for this is that it is not wars that make    period of prosperity and signal a peak in social mood
people angry; it is angry people that make war.          (ie: the stock market).
Figure 4 on the next page shows that both major
conflicts of last century occurred after a period
negative social mood.

By the same token, peace and reconciliation do not
make people content. Contented people engage in
peace and reconciliation.

There have been many examples of this
manifestation of positive social mood over the
super-cycle degree top in developed markets
during the last 20 years. From the European
Union project to the British apologies over its
empire, the decades long bull cycle in social mood
led to societies feeling confident enough to come
together and atone for the past.

 Figure 3: Australian Social Mood

 Source: HSBC, Bloomberg, Updata

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The Tiger Woods effect                                                         So we should expect the popularity of golf to wax
There is a general relationship between the                                    and wane with the stock market as social mood
popularity of sport and leisure and the stock market.                          cycles through its stages.
Positive social mood makes people want to get out
                                                                               The chart below shows the inflation adjusted UK
and exercise. Watching others doing the same in a
                                                                               stock market and the inflation adjusted winners prize
harsh competitive environment captures the spirit of
                                                                               for the British Open golf championship since 1865.
a bull market. Sporting attendances (and the players’
                                                                               Given the historical lack of sponsorship for the Open
salaries) rise and fall with social mood.
                                                                               (it is run by the Royal and Ancient Golf Club of
But perhaps more than any other sport or pastime, it                           St Andrews) we can think of the prize fund as a
is golf that encapsulates the essence of social mood.                          reflection of the popularity in the grass roots of the
Traditionally snobby and elitist, having the time to                           game of golf. It can be used as a proxy for golf club
engage in such a time consuming pastime is seen,                               membership numbers.
rightly or wrongly, as a badge of prosperity.

    Figure 4: UK Social Mood

    Source: HSBC, finfacts.com, safalra.com, wikipedia.com, shutterstock.com

    Figure 5: Japanese Social Mood

    Source: HSBC, Bloomberg, Updata

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   March 2012

We can see that periods of positive social mood are     how the chronic underperformance of Callaway
reflected in an increased prize (increased popularity   has coincided with the bear market over the last
in golf) and periods of negative social mood are        ten years.
reflected in a stagnation in golf’s popularity.
                                                        In fact the popularity of golf has been on the wane
This relationship between golf and the stock            for many years and we can highlight this by
market can also be seen in the relative                 examining another Socionomic phenomenon: heroes
performance of golf stocks.                             of bull markets become villains of bear markets.
                                                        Tiger Woods has been the iconic image of golf since
Figure 5 shows the Japanese Nikkei Index versus
                                                        the mid to late 1990s and he is generally thought to
Resort Solutions Co, which manages golf resorts and
                                                        have played his best, and some say the best they
leisure parks. Notice how the bubble in the mid to
                                                        have ever seen, in 2000 when he won the US Open
late 1980s coincided with a massive outperformance
                                                        by ten shots. Since then Woods has gone on to win
of golf and leisure. The peak of the bubble was
                                                        many more major championships, but his popularity
marked by the sale of Pebble Beach links, the iconic
                                                        (and some say his form) has never really been the
jewel in the crown of American golf, to the
                                                        same since. The decline in his form has accelerated
Japanese. This is interesting because arrogance and
                                                        in recent years with well-publicised off-course
hubris are major emotions at the end of bull markets
                                                        problems contributing to his declining popularity.
when those involved think that they can do no
                                                        When social mood turns negative the icons of the
wrong. Witness the battle for ABN Amro bank at the
                                                        previous good times get panned, whether they are
top of the credit bubble in 2007.
                                                        Alan Greenspan, the former Fed “maestro”, who
Figure 6 shows the relationship between the US          could do no wrong but who is now vilified by many,
stock market and the stock of a leading golf            the banking sector, which was seen to be central to
company, Callaway. Callaway’s outperformance            the apparent economic “success” during the credit
topped out before the general stock market and          bubble is now about the most despised profession on
thus gave an early warning signal that in the late      the planet, or Tiger Woods.
1990’s underlying social mood was weakening as
the general market made its bubble top. Notice

 Figure 6: United States Social Mood

 Source: HSBC, Bloomberg, Updata

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     March 2012

 Figure 7: UK Social Mood

 Source: HSBC, Bloomberg, Updata, shutterstock.com

The popularity of death                                  When people are so pessimistic that there is an
As social mood cycles through its ups and downs,         increasing interest in planning for one’s own demise,
attitudes to death change. Bull markets are driven       it’s a good Socionomic indication that the sentiment
by a psychology of passion for life and optimism         cycle is very dark.
whereas bear markets are driven by pessimism             In fact, this Socionomic phenomena also shows up
and feelings that life is pointless.                     in movie genres. Periods of positive social mood
Every so often national debates about euthanasia         engender feelings of life and vivaciousness – soft,
come up and they coincide with bear markets.             family oriented Disney-style films tend to be
Witness the increase in debate in the UK over recent     popular in these times. When social mood turns
years over the right to kill yourself, which have        down, horror and dark genre movies become
coincided with an 11-year bear market in real terms.     popular. In the early 1930s as social mood
                                                         plummeted there was a plethora of horror movies
This relationship also shows up in the chart above       produced that proved to be extremely popular,
which shows a listed stock in funeral services against   including Dracula, Frankenstein, Jekyll & Hyde
the British stock market. The red line is the inverted   and The Mummy. Readers of a certain age will
relative performance of Dignity PLC, which provide       remember the popular horror movies of the 1970s
undertaking and funeral planning services, and so as     bear market in social mood (including vampire
the red line is going down the stock is outperforming    movies, The Texas Chain Saw Massacre and
the market.                                              Halloween) and younger readers will no doubt be
We can see clearly that when social mood is              well aware how popular vampires (Twilight, True
negative (declining stock market) funeral services       Blood) and zombies (Zombieland) have become in
outperform and vice versa.                               recent years. World War Z, a zombie film exploring
                                                         themes of survival and uncertainty, and starring

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‘Hollywood royalty’ Brad Pitt is due for release at    For now though, this brief introduction to
the end of 2012. Oh yes, just in time for the end of   Socionomics has hopefully given you a flavour of
the world as predicted by the Mayan calendar.          how thinking differently from the crowd can give us
                                                       insights into where we are in the economic cycle.
The way things are shaping up, social mood in 2012
is turning black.                                      For much more information on Prechter’s
                                                       Socionomic theory, the Socionomic Institute at
Which means that, on a positive note, the bear
                                                       www.socionimics.net is a comprehensive resource.
market will at least be nearer the end than the

There are many more Socionomic manifestations of
the swings between positive and negative social
mood and we allude to some in the remainder of
this document.

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China / Hong Kong
 Sideways should outperform the West
 Positive sentiment growing

China and Hong Kong should outperform                 to an Intermediate degree wave (B) low around
developed markets in the years ahead.                 current levels, it adds evidence to a slightly bullish
                                                      scenario for China in 2012. We must, however, be
Amid the growing concern over a ‘China bubble’
                                                      cognisant of the bearish alternative count which
we see little evidence for this in stock market
                                                      gains probability on a break below the December
data. From an Elliott Wave perspective the bubble
                                                      2011 lows (see Chart 1).
phase was the final fifth wave of the Cycle degree
wave III between 2005 and 2007. The correction        The Hang Seng index has a similar structure that
lower from that high is not over yet and will         points to an upward phase over the next few
probably last a few more years as a sideways          months followed by another downturn to
Cycle wave IV plays out.                              complete the correction from 2007. And one
                                                      Socionomic indicator that pointed to the October
The bubble sentiment manifested in the rising
                                                      low in the Hang Seng was the measurement of
premium of onshore A shares over offshore H
                                                      extreme negative social mood using the relative
shares, with the premium then collapsing into 2010.
                                                      performance of Macau casinos (see Chart 3).
The premium did have a spurt higher in late 2011,
but is now back to levels of more balanced
sentiment. Given that the current wave cycle points

 Chart 1: Shanghai A Share Index

 Source: HSBC, Bloomberg, Updata

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Chart 2: Hang Seng Index

Source: HSBC, Bloomberg, Updata

Chart 3: Socionomics

Source: HSBC, Bloomberg, Updata

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     March 2012

 Entering the end game for the 22-year old bear market
 JPY and JGB offer trades of the decade

If you have started to read this section you are     new long-term bull market to start. Very long-
probably in the minority. After a 22-year long       term investors would be wise to start thinking
bear market, global investors don’t seem to care     about Japan over the next couple of years.
that much about Japanese markets. But this is
                                                     In fact, the currency and bond markets are both
precisely the sentiment conditions required for a
                                                     pointing to significant reversals in the months
lasting low to be put in. Complete apathy about
                                                     ahead. USD-JPY has scope for a marginal new low
the stock market is a Socionomic sign that social
                                                     below 70 but the long-term cycle is higher towards
mood is near a cycle low (watch for financial
                                                     130 and beyond. There is an interesting reductive
news television channels in the West going off air
                                                     cycle pointing to 2013 as a potential low point.
in coming years).
                                                     And the JGB market also offers one of the trades
Unfortunately though, the Nikkei has an Elliott
                                                     of the decade with a very long-term reverse head
Wave structure that suggests one more phase
                                                     and shoulders pattern visible on the 10-year yield.
down towards 5,000 to complete the bear. This
                                                     A rise through 1.74% will be a key event.
will no doubt convince absolutely everyone that
Japan cannot be saved – ideal conditions for a

 Chart 1: Nikkei 225

 Source: HSBC, Bloomberg, Updata

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Chart 2: USD-JPY

Source: HSBC, Bloomberg, Updata

Chart 3: JGB 10-Year Yield

Source: HSBC, Bloomberg, Updata

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     March 2012

 Positive polarity shift in social mood
 Bull market to last many years

Social mood in Korea, as measured by the stock         progress in Korea for 22 years. Future potential
market, shows evidence that a generational             remains very high.
positive change has taken place.
                                                       The Korean won should weaken versus the US
The KOSPI index collapsed along with most other        Dollar in 2012. The 1,277 level is very attainable
markets in 2008, but what is really interesting from   and given that the alternative wave count has
a technical analysis point of view is that the         Primary degree wave B (circled) ending at the
support level it found corresponded to the previous    2011 low, a continued rise towards 1,600 cannot
peaks in the market throughout the 1980s and           be ruled out.
1990s. When old resistance becomes support it is a
sure sign that the polarity of the market has          A fall in the 10-year Onshore Swap Rate towards
changed. In this case it signals that the long-term    the old 3.26% low seems probable from a technical
outlook for Korea is very positive indeed.             perspective before a significant low is put in.

In gold terms, the top in the KOSPI was way back
in 1989! So, in real terms, there has been no net

 Chart 1: KOSPI

 Source: HSBC, Bloomberg, Updata

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Chart 2: USD-KRW

Source: HSBC, Bloomberg, Updata

Chart 3: Korea 10-Year Onshore Swap Rate

Source: HSBC, Bloomberg, Updata

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     March 2012

 A cause for concern
 Singapore dollar to decline

Perhaps the biggest worry for the ‘bullish Asia’     And one alternative count in Singapore presents a
scenario is Singapore.                               strong case for a bigger bear in 2012. If the index
                                                     rallied above 3,227 it would be the first sign of this
The Straits Times Index displays a preferred long-
                                                     bearish alternative being eliminated. Until that
term wave structure that is bullish. However,
                                                     happens though, we must be wary of the downside
because Elliott Wave analysis recognises that all
                                                     and a consolidation below 2,600 would be bearish.
analysis is an exercise in probabilistic
interpretation, there is always at least one         As chart 2 shows, the Singapore dollar has
alternative wave count that could be validated       reversed from an area of long-term Phi /
depending on how the market evolves. Rather          Fibonacci based support after a clear five down
than being a disadvantage to the analysis, this is   structure from 2001. There is resistance around
actually an advantage because it allows the          the 2008 low of 1.3451 and at the 1.4300 trendline
analyst to eliminate the possible and concentrate    but the market does have potential to reverse as
on the probable as prices evolve.                    high as 1.5580.

 Chart 1: Straits Times Index

 Source: HSBC, Bloomberg, Updata

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Chart 2: USD-SGD

Source: HSBC, Bloomberg, Updata

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     March 2012

 Secular bull market

The long-term Elliott Wave cycle for India points       Cycle wave II was a sideways affair into 2001 and
to a market and social mood that is in a secular        so India is now in a cycle degree wave III bull
bull market that will last a generation.                market in social mood. Expect this to last a
                                                        generation and for the SENSEX to be many
Chart 1 shows that Cycle degree wave I in the
                                                        hundreds of percent higher in the years to come.
SENSEX ended in the early 1990s with the fifth
wave of that cycle degree categorised by the            Notice how the market found support in 2008 at
Harshad Mehta bubble. Mehta was an Indian               an old resistance line – a bullish shift in polarity.
stockbroker who was alleged to have been involved       From a current Socionomic point of view,
with engineering a fraudulent rise in the stock         although issues remain, the recent thawing in
market, and scandals such as this are typical of        relations between India and Pakistan are also
ending fifth waves. Enron and Bernie Madoff are         consistent with a developing positive social mood.
just two more recent Socionomic examples of how
the last vestiges of a large bull cycle bring out       As for the currency, the Indian rupee is bottoming
villainous behaviour in sections of the market crowd.   out versus the USD (high in USD-INR). The

 Chart 1: SENSEX

 Source: HSBC, Bloomberg, Updata

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 Chart 2: USD-INR

 Source: HSBC, Bloomberg, Updata

ending diagonal (identified by us in our Wave
Principle Letter in August 2011) has led to a rapid
rise in price that probably completes the up cycle
from 2007. There is an alternative count that
would see USD-INR move sideways to slightly
higher over the next few years in an even bigger
bearish ending diagonal but it is a
lower probability.

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     March 2012

Emerging Asia
 Taiwan social mood set to soar higher
 Frontier markets fail to confirm a broad bull market

One of the most reliable of all the patterns that       Indonesia also has a very bullish long-term
make up Elliott’s Wave Principle is the triangle.       outlook, but requires another leg down to
Taiwan has been in a Cycle degree wave IV               complete Intermediate degree wave (2) of Primary
triangle formation since the 1989 high and is very      wave 3 (circle).
close to breaking out into a bullish fifth wave bull
                                                        We still have to be selective in Asian markets
market lasting many years.
                                                        though. Chart 3 shows that an index of some
Notice how the monthly Relative Strength Index,         Frontier markets failed to confirm the new highs
which we can use as a measure of sentiment, was         in Asia APEX 50 in the middle of 2011 and until
actually lower in wave E (circled) of the triangle      both indices start to make new highs together
than in wave C, even though the price level of wave     again we cannot talk of a region-wide bull market.
E was above wave C. Sentiment was signalling a
climactic low at that point and since then the market
has rallied in wave (1) of a new bull phase. Wave
(2) is in the process of completing and will usher in
a very strong positive phase in social mood.

 Chart 1: Taiwan TAIEX

 Source: HSBC, Bloomberg, Updata

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Chart 2: Jakarta Composite

Source: HSBC, Bloomberg, Updata

Chart 3: Asian Frontiers versus MSCI APEX 50

Source: HSBC, Bloomberg, Updata

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     March 2012

 Schizophrenic social mood

Australian society has changed a lot in recent          The All Ordinaries index crash between 2007 and
years with the country having more of an Asian-         2009 was the first wave, wave A (circled), of a
centric outlook.                                        multi-year correction and it looks like wave B
                                                        peaked out in 2011. The market is now in wave C
This is important for technical analysts and
                                                        lower towards 3,000 and below. If the market rose
Socionomists because measurements of social
                                                        above 5,069 it would be the first sign that the
mood are important sentiment indicators.
                                                        more bullish alternative wave count (labelled as
“Australia benefits from an Asian bull market so
                                                        alt on the chart) was coming into play.
the stock market / economy should look all right” is
an oft-quoted mantra. Whether that is true or not       The Australian dollar reversed in 2011 at a major Phi
we will leave to the economists. All we know as         / Fibonacci resistance zone and, unless AUD-USD
technical analysts is that the price structure of the   rallies above 1.0754, the probabilities point to a
stock market gives a lead indicator of what path the    long-term decline towards 0.80 in the first instance.
economy goes down. And the Australian stock
                                                        The Australian Government 10-year bond yield is
market has more of a Western market structure to it
                                                        at risk of reversing higher in 2012.
than some of the Asian secular bull markets.

 Chart 1: All Ordinaries Index

 Source: HSBC, Bloomberg, Updata

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  March 2012

Chart 2: AUD-USD

Source: HSBC, Bloomberg, Updata

Chart 3: Australia Government 10-Year Yield

Source: HSBC, Bloomberg, Updata

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     March 2012

United States of America
 Supercycle downturn in social mood

Chart 1 below remains the dominant driving force      Chart 2 shows the Dow in honest money (gold)
behind Western markets. It shows that the very        terms and how the bear market has accelerated
long-term Elliott Wave structure for the Dow Jones    below a trend channel, creating a huge divergence
Industrials index is very bearish. At least a         with the Dow in fiat dollar terms as the QE bubble
Supercycle degree wave (V) ended 12 years ago and     has developed.
probably a Grand Supercycle wave III (circled). The
                                                      Chart 3 shows that volume in the S&P 500 declined
movement since then has been a cycle wave a down
                                                      during the rally from 2009 – a classic bear market
into 2003 with wave b higher into 2007. C waves
                                                      rally sign. It also shows that the American
consist of five waves so the crash in 2008/09 was
                                                      Association of Individual Investors Bull / Bear
just wave 1 (circled) of a five wave movement that
                                                      Ratio is nowhere near the pessimism levels required
takes the index much lower over the next couple of
                                                      for a lasting low to be put in. Hope still lingers and
years. 5,000 is a trend line support from the 1932
                                                      only when the majority of the market crowd have
low and so should provide a stopping point of some
                                                      abandoned all hope and thrown in the towel on the
description. Lower potential remains.
                                                      market will the sentiment conditions be in place
                                                      from where a new bull market can develop.

 Chart 1: Dow Jones Industrials

 Source: HSBC, Bloomberg, Updata

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   March 2012

Chart 3 also shows that our Sector Rotation Index,    not at the levels of extreme pessimism required
although pointing to a trend towards defensive        for major market bottoms.
sector leadership since the spring of 2011, is also

 Chart 2: Dow Jones Industrials / Gold

 Source: HSBC, Bloomberg, Updata

 Chart 3: S&P 500 Index

 Source: HSBC, Bloomberg, Updata

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     March 2012

Chart 4 shows that the Nasdaq Composite has            The new lows on the US Treasury 10-Year bond
reversed at a pivotal old support line and from the    yield in 2011 have not been matched by new lows
2007 high resistance with bearish divergence vis-      in monthly RSI and so the market remains
à-vis the monthly Relative Strength Index (RSI).       vulnerable to a reversal higher. In our view 2.42%
                                                       remains the critical pivot point though. Only a
Apart from the fact that the monthly RSI in 2009
                                                       consolidation above that level would increase
in Chart 1 of the Dow was the lowest it had been
                                                       confidence in the higher-yield scenario. Until that
in the 110 years of this data history, there is very
                                                       happens it is best not to fight the downtrend
little technical evidence to suggest that the bear
                                                       too much.
market which started 12 years ago is over. The
next wave down in 2012 and beyond has the              With regard to credit markets, Chart 7 shows that
potential to be one for the history books.             the pressure is for higher levels in the Markit
                                                       CDX Investment Grade 5-Year index.
With regards to the US dollar, Chart 5 shows that
the divergence between the broad trade-weighted
index’s new lows in 2011 and the narrower DXY
index has led to the anticipated reversal higher.
The USD has potential to move much higher
throughout 2012. Our ‘stop’ on that bullish USD
analysis would be if the DXY moved below the
2011 low of 72.69.

 Chart 4: NASDAQ Composite

 Source: HSBC, Bloomberg, Updata

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  March 2012

Chart 5: USD Broad Trade Weighted Index

Source: HSBC, Bloomberg, Updata

Chart 6: US Treasury 10-Year Yield

Source: HSBC, Bloomberg, Updata

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     March 2012

 Chart 7: Markit CDX Investment Grade 5-Year

 Source: HSBC, Bloomberg, Updata

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   March 2012

 Canadian dollar to weaken versus US

The peak in Canadian social mood was 12 years         now in wave C lower towards 8,000 over the next
ago in 2000 as measured in real (gold) terms.         few months.
That, as chart 1 shows, coincided with Primary
                                                      USD-CAD is in a new longer-term bull cycle that
degree wave 3 (circled) on the S&P/TSX
                                                      should take the market much higher in 2012. A
Composite index. Third waves are usually the
                                                      rise above the 2009 high of 1.3065 cannot be
strongest and most powerful phase of a bull
                                                      ruled out.
market with fifth waves usually characterised by
divergences and a subtle weakening in the             New (post January 2009) lows in the Canadian
underlying market.                                    Government 10-year yield have not yet been
                                                      matched by new lows in the monthly Relative
So the new highs in the index during Primary
                                                      Strength Index and so we must remain wary of a
wave 5 into the June 2008 top were not matched
                                                      reversal higher.
by new highs in the index priced in gold terms – a
classic divergence. The move higher from the
2009 low counts best as a three wave movement
and therefore the probability is that the market is

 Chart 1: S&P / TSX Composite Index

 Source: HSBC, Bloomberg, Updata

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     March 2012

 Chart 2: USD-CAD

 Source: HSBC, Bloomberg, Updata

 Chart 3: Canada Government 10-Year Yield

 Source: HSBC, Bloomberg, Updata

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   March 2012

Latin America
 Sideways to down in 2012 but long-term bullish
 Currencies under pressure

Elliott Wave structures in Latin America suggest       markets priced in both nominal and real terms and
that a negative social mood should dominate in         when both are declining or rising together we will
2012 as corrective waves mature.                       have the best indication of whether the trend is
                                                       being confirmed. A strong underlying market in
With its history of currency instability and
                                                       social mood should see stock markets rising in
devaluation, it is perhaps most instructive to view
                                                       both nominal and real terms. And this has not
Latin American stock markets in real terms – in
                                                       been happening in Latin America.
terms of honest money, gold.
                                                       In Mexico, the peak of the stock market in gold
And if we do that we can see a picture that is
                                                       terms was in July 2007 and at the start of 2011 the
similar to a lot of markets over the last few years.
                                                       new high in the IPC index was not confirmed by a
Even though the markets in nominal fiat currency
                                                       new high in gold terms. However, the IPC index
terms have rallied, when priced in gold we can see
                                                       has found support at the old 2007, 2008 and 2010
that they have fallen and remain under pressure.
                                                       highs with a massive increase in volume over the
When measuring social mood we should look at

 Chart 1: Mexico IPC Index

 Source: HSBC, Bloomberg, Updata

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     March 2012

last few months suggesting a huge battle taking    In Brazil, the Bovespa index high in gold terms
place between the bulls and bears. The wave        was in 2008 and again new highs in the nominal
structure suggests more downside to come over      index at the end of 2010 were not matched by
the next few months, but a rise above 38,900       highs in real terms. More downside is required to
would raise the probability that the longer-term   complete the correction and not until the market
bull market is back on track. As for the Mexican   clears resistance between 72,000 and 74,000 will
peso, a continued rise towards 16 in USD-MXN       the long-term bull market be back on track. The
in 2012 seems most likely.                         Brazilian real should remain under pressure, but a
                                                   drop below 1.6631 in USD-BRL would be a
                                                   positive development for the currency.

 Chart 2: USD-MXN

 Source: HSBC, Bloomberg, Updata

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   March 2012

 Chart 3: Brazil Bovespa Index

 Source: HSBC, Bloomberg, Updata

Similar to Mexico, Argentina and Chile are
finding some support at the old 2007 highs in the
nominal, fiat-currency-denominated indices. But
even though the indices are up 180% and 230%
respectively since 1997, both are down in honest
gold terms. The good news in Argentina is that
the January 2011 high was matched by new highs
in gold terms and so this is a positive sign at least
on a relative performance basis. 2,200 on the
Merval index is an important pivot level, and the
longer that level can hold as support the more
positive the outlook becomes. A drop below it
would target the 1,480 support.

After tracing out a classic ending diagonal in
2011, the medium-term technical cycle for USD-
CLP is higher. A rise to over 553 is probable
in 2012.

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     March 2012

 Chart 4: USD-BRL

 Source: HSBC, Bloomberg, Updata

 Chart 5: Argentina Merval Index

 Source: HSBC, Bloomberg, Updata

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  March 2012

Chart 6: Chile Stock Market Select Index

Source: HSBC, Bloomberg, Updata

Chart 7: USD-CLP

Source: HSBC, Bloomberg, Updata

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     March 2012

 Marriage counselling required
 Euro to survive

Feelings of anger, bitterness and dissatisfaction      EUR terms going sideways to higher but the index
are key drivers of negative social mood and one        in gold terms moving lower. For those paying
Socionomic manifestation of this is that divorce       attention, the bull market since 2009 had a lot of
rates tend to be higher in bear markets than in bull   underlying problems with it and the catch up from
markets. So it is not a surprise to Socionomists       this divergence is now starting.
that the eurozone is going through a period of self
                                                       The long-term Elliott Wave analysis points to a
reflection given that it is now in the twelfth year
                                                       continued bear market that has potential to fall at
of a bear market in real terms.
                                                       least another 50% before a lasting low can be
Chart 1 shows just how severe this bear market         established. And as chart 2 shows, the centre of
has been since 2000 with the red line marking the      gravity in the market has changed with old
DJ Euro Stoxx index in terms of gold (honest           support becoming resistance.
money). And we can clearly see the divergence
                                                       But what is really interesting is that the Greek
that has occurred since 2009 with the index in
                                                       stock market actually looks close to a significant

 Chart 1: Dow Jones Euro Stoxx 50

 Source: HSBC, Bloomberg, Updata

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   March 2012

 Chart 2: Dow Jones Euro Stoxx 50

 Source: HSBC, Bloomberg, Updata

 Chart 3: Greece FTSE / ASE 20 Index

 Source: HSBC, Bloomberg, Updata

low. Spain, on the other hand (Chart 4), has a      technical analysis is pointing to a currency that
bearish head and shoulders structure to it.         remains under pressure in 2012 but that should
The euro currency (Chart 5) has a bearish Elliott   come back strongly.
Wave structure versus the US dollar but retains
                                                    And Socionomic evidence continues to mount to
some bullish potential on some cross rates. The
                                                    an extreme in anti-euro sentiment. Consider this

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     March 2012

report from the UK’s Daily Telegraph on
December 7, 2011 “Heavy metal band Metallica
has brought forward a European tour scheduled
for 2013 to next year over fears the single
currency will collapse, jeopardising the chances of
getting paid for the gigs.”. When the idea of ‘euro
collapse’ has permeated into popular culture, it is a
good sign that fears are becoming way overdone.

The Euro Bund 10-year bond yield is displaying
bullish divergence on the monthly chart meaning
that new lows in yield in 2011 have not been
confirmed by new lows in the Relative Strength
Index. This, combined with a bullish wave count
makes us anticipate higher yield levels in 2012.
However, only a rise in momentum (for example
the five-week moving average crossing above the
40-week moving average) would give us real
confidence in this scenario.

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   March 2012

 Chart 4: Spain IBEX Index

 Source: HSBC, Bloomberg, Updata

 Chart 5: Euro Trade Weighted Index

 Source: HSBC, Bloomberg, Updata

The iTraxx Europe Investment Grade 5-year           formidable resistance and should provide a long-
index has a bullish wave structure the emergence    term pivot point.
of bearish divergence between new highs in the
index and no new highs in Relative Strength (RSI)
on the weekly chart has led to a decline over the
past three months. The 2008 high of 216 is a

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     March 2012

 Chart 6: Euro-Bund 10-Year Yield

 Source: HSBC, Bloomberg, Updata

 Chart 7: Markit iTraxx Europe Investment Grade 5-Year

 Source: HSBC, Bloomberg, Updata

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   March 2012

United Kingdom
 Pound to fall with stock market

Social mood in the United Kingdom (as measured        Further evidence of the decline in UK social
by the stock market priced in real money terms)       mood comes from the decline in popularity of the
has been declining for over 12 years.                 X Factor talent show. When a positive social
                                                      mood dominates, people like vacuous
Manifestations of this decline in social mood have
been varied, but a general divisiveness in society    entertainment, vote for the status quo, become
has been the trend. Political debate has moved        politically correct and buy stocks. As a negative
away from the centre ground with attitudes            social mood dominates, people prefer angry and
hardening on the left and right of the spectrum. A    edgy entertainment, vote for change, become
recent survey carried out by the National Centre      politically incorrect and sell stocks. The X Factor
for Social Research shows that over 50% of those      is a singing talent show which had its UK debut in
questioned thought that unemployment benefits         2004. The show takes auditions from thousands of
are too high, a large increase on a decade ago, and   hopeful singers and eventually ends up in a finale
there was a general trend towards self reliance       of a few contestants singing cover versions of
rather than a governmental ‘common good’. This        well-known songs. The winner is almost always
fits with the Socionomic hypothesis.                  the number one selling single at Christmas. Fans

 Chart 1: UK All-Share Index

 Source: HSBC, Bloomberg, Updata

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     Technical analysis                                                                                                  abc
     March 2012

 Chart 2: Socionomics

                        FTSE All-Share in Gold Terms       X-Factor UK Viewing Figures (Momentum)
       12                                                                                                         30%
                                                                               Aug - Dec
                                                                 Aug - Dec
                                                                               2009 Series                        25%
                                                                 2008 Series

                                                                      Rage Against                                20%
                                                                      The Machine
                                                                                                    Aug - Dec     15%
                                                                                                    2011 series
        6                                                                                                         10%


                                                                         Social Mood                              0%

               "Give it up…"                                                                                      -5%

        0                                                                                                         -10%
                2003               2004   2005   2006   2007      2008         2009          2010       2011
 Source: HSBC, Bloomberg, Updata

 Chart 3: GBP-USD

 Source: HSBC, Bloomberg, Updata

of the X Factor love the hype and ‘bling’ whereas              Viewing figures momentum for the 2011 series is
critics say that the show produces vacuous and                 down for the second straight year, which when
manufactured talent.                                           looked upon through a Socionomic lens would
                                                               have been relatively unsurprising given the
Chart 2 shows the UK stock market priced in real
                                                               downturn in the stock market over the past few
terms (in terms of gold) and the year on year
                                                               months. But this evidence of the public turning
change in average X Factor viewing figures.

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   March 2012

away from what many consider to be vacuous and
manufactured entertainment confirms that social
mood is continuing to deteriorate. And this means
continued pressure on stock markets. The bear
market of the 1970s ended up with punk and hard
rock music becoming very popular. Socionomic
evidence suggests that similarly angry genres are
on their way back.

Chart 1 shows that an Elliott Wave supercycle
degree wave (V) topped out in the UK All-Share
Index 12 years ago and that the market is now
entering wave three of C down. This should see
the UK market decline by well over 50% over the
next couple of years. There is a possible triangular
wave count but this would be negated with a
break of the 2009 low.

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     March 2012

 Chart 4: GBP Trade Weighted Index

 Source: HSBC, Bloomberg, Updata

 Chart 5: UK 10-Year Gilt Yield

 Source: HSBC, Bloomberg, Updata

As for the currency, the British pound sports a     10-year Gilts have very strong support
long-term wave structure that points to a decline   around 2.18%.
against the USD and the EUR over the course of
2012. EUR-GBP in particular has a bullish
structure which should result in an increase in
volatility and a move towards parity.

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   March 2012

 NOK uptrend tired but wary of a final flourish
 Stocks under pressure

Despite being viewed by some as the new ‘safe          sell-off. But because the existence of divergence
haven’, the technical evidence suggests that social    only gives an indication that a market may about
mood (the stock market) in Norway should continue      to reverse its previous trend, we would not be
to decline. A classic head and shoulders top on the    confident of a sustainable reversal higher in EUR-
OBX index in the first half of 2011 should provide a   NOK until a trend measure (such as the 5- and 40-
cap to the market for some time to come. However,      week moving average cross) turned higher. Until
the Elliott Wave structure suggests that Norway’s      that happens, we must be on guard for a spike
longer-term outlook is brighter than most with the     lower in EUR-NOK, as happened in 2001/02.
rise from the 2008 low counting well as a wave
                                                       In Sweden, the OMX All-Share index is turning
(1) of a new longer term bull market. However, that
                                                       over into a new bear market that should take the
still means wave (2) down is in force and second
                                                       index below the 2008 low. As long as 333 holds
waves are often very deep.
                                                       as resistance, the focus should be on a
EUR-NOK is displaying bullish divergence               continued downtrend.
meaning that new lows in price have not been
confirmed by new lows in momentum (Relative
Strength Index) and so the NOK is vulnerable to a

 Chart 1: Sweden OMX Index

 Source: HSBC, Bloomberg, Updata

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     March 2012

 Chart 2: Norway OBX Index

 Source: HSBC, Bloomberg, Updata

 Chart 3: EUR-SEK & EUR-NOK

 Source: HSBC, Bloomberg, Updata

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   March 2012

 Russian bear
 Ruble to decline

Social mood in Russia, as measured by the real       Ralph Elliott discovered that by connecting the
stock market, has been in decline since 2006.        top of first and third waves, and then drawing a
                                                     parallel from the second wave low we can get a
One of the manifestations of a negative social
                                                     good idea of where wave four will end. This
mood is a desire for change, and recent events in
                                                     Elliott channelling technique suggests that support
Russia are turning that way. When mood turns
                                                     for the RTS Standard Index comes in around
negative, it doesn’t matter what or who it is that
                                                     4,500 by the middle of 2012, rising towards 6,000
people want to change; they just want to change
                                                     by the middle of 2013.
the status quo.
                                                     As for the Russian ruble, a classic impulsive move
The wave structure suggests that social mood (the
                                                     higher in USD-RUB in 2008/09 followed by a three
stock market) will become even more negative in
                                                     wave decline into May 2011 firmly points to higher
2012 with Primary degree wave 4 (circled) still in
                                                     levels (a weakening ruble) in 2012.
operation from the 2008 nominal market peak.

 Chart 1: Russia RTS Standard Index

 Source: HSBC, Bloomberg, Updata

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     March 2012

 Chart 2: USD-RUB

 Source: HSBC, Bloomberg, Updata

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   March 2012

Middle East
 Turkish stock market in long-term uptrend
 Middle East should outperform

The Turkish stock market in nominal (Turkish         The ‘Arab Spring’ that has occurred during 2011
Lira) terms has an Elliott Wave structure that       fits the Socionomic hypothesis well because it
points to a continuation of the long-term bull       comes after a multi-year regional
market in the years to come. However, in 2012 it     underperformance versus the rest of the world.
looks likely to be a sideways to down market         The lower graph in Chart 3 on the right shows the
towards long-term support around 35,000 on the       GCC Index versus the rest of the world but the
ISE National 100 Index.                              picture is the same if we included Egypt and
                                                     Jordan in an equally weighted index. Relative
USD-TRY has stalled at long-term resistance but
                                                     performance has started to pick up in 2011 and,
the Elliott Wave structure suggests a surge higher
                                                     given the Elliott Wave counts on individual
in 2012 before falling lower again.
                                                     markets, this should continue in the years to come.
The Middle East in general is actually one of the
most bullish regions on the planet from a long-
term Elliott Wave cycle point of view.

 Chart 1: Turkey ISE National 100 Index

 Source: HSBC, Bloomberg, Updata

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     March 2012

 Chart 2: USD-TRY

 Source: HSBC, Bloomberg, Updata

 Chart 3: Bloomberg GCC 200 Index

 Source: HSBC, Bloomberg, Updata

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   March 2012

 Shifting into a new era

The structure of the technical cycle in South         Chart 2 shows how a pivot line in USD-ZAR
Africa has a lot in common with markets like          turned the underlying market sentiment from
Korea and India in that the 2008 / 09 bear market     bearish to bullish. Throughout the early part of
found support at an old resistance pivot zone.        2011 we were warning of a significant reversal
                                                      higher in USD-ZAR and the subsequent rally
This is very significant because it means there has
                                                      from the May 2011 low of 6.5445 does not yet
been a structural change in psychology from
                                                      look complete from an Elliott Wave perspective.
bearish to bullish. The FTSE/Johannesburg Stock
                                                      A continued rally towards 9 looks probable.
Exchange All-Share Index has significant
resistance around the 33,250 level, but once it       As for the frontier African markets, there is a case
clears that sticking zone the market will be into a   for counting an A-B-C correction from 2008 as
new bull phase. The wave structure suggests that      being complete. But only a rise above 1,018 on
there will be a longer period of sideways to down     the S&P Africa Frontier Index would start to
before that happens.                                  confirm that.

 Chart 1: South Africa FTSE / JSE All-Share Index

 Source: HSBC, Bloomberg, Updata

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     March 2012

 Chart 2: USD-ZAR

 Source: HSBC, Bloomberg, Updata

 Chart 3: S&P Africa Frontier Index

 Source: HSBC, Bloomberg, Updata

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   March 2012

Metals & Commodities
 Gold to repeat bear of mid 1970s
 But long-term mega bullish
 Socionomic aspect to 2011 commodities top

Is gold a bursting bubble or is the real bubble       well as industrial metal theft) has grown strongly
phase still ahead?                                    over the last couple of years. There are clear
                                                      Socionomic signs that gold is near a top.
On the face of it, there has been quite a lot of
Socionomic evidence to suggest that at least an       But is it THE top? Our Elliott Wave count on
interim top in gold has been reached. Nobody was      chart 1 shows that the recent high of USD1,921 is
interested in gold when it was trading at USD300 an   most likely a Primary degree wave 3 (circled)
ounce back in the late 1990s and European central     high. This means that that wave 4 down is upon us
banks were selling their holdings off. But in 2009,   that should last a number of months. But it also
after a huge rise in gold to over USD1,000 an         means that wave 5 is still ahead and that has the
ounce, some central banks started to buy gold and     potential to take gold towards USD3,000.
gold vending machines started to appear. Suddenly,
                                                      In the mid 1970s, Gold declined some 40% before
everyone was interested in gold and that trend has
                                                      rallying into the mania phase over 500% higher.
continued. Now, even the criminal elements of
                                                      We think a similar Elliott Wave structure is
society are gold bugs as precious metal theft (as
                                                      evolving now.

 Chart 1: Gold versus USD

 Source: HSBC, Bloomberg, Updata

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     March 2012

 Chart 2: Gold Index

 Source: HSBC, Bloomberg, Updata

 Chart 3: Silver / Gold Ratio

 Source: HSBC, Bloomberg, Updata

The commodity market in general displayed a               common sense because, given the human
classical Socionomic aspect in 2011.                      condition of herding behaviour, there has to have
                                                          been an uptrend in order to generate enough
Initial Public Offerings (IPOs) normally occur at
                                                          interest to offer the stock as an IPO.
the end of an uptrend in the underlying market or
in an asset class that is being ‘offered’. This is just

                                                                               渐飞研究报告 - http://bg.panlv.net
   Technical analysis                                                                                     abc
   March 2012

 Chart 4: S&P GSCI Commodity Index

 Source: HSBC, Bloomberg, Updata

In May 2011 the world’s biggest commodities         So just as with the Blackstone IPO in 2007
trader, Glencore, made a large and well             marking the top of the private equity/credit bubble
subscribed IPO. This occurred after the general     and AOL buying Time Warner in 2000 marking
commodities index had risen 149% from the           the end of the Nasdaq bubble, another high
February 2009 low to the April 2011 high and at     profile, much-hyped corporate deal has probably
an important Fibonacci retracement zone. Since      marked an historic top.
then the commodities index has continued to fall.

                                                                                     渐飞研究报告 - http://bg.panlv.net
     Technical analysis                                                                                           abc
     March 2012

Our technical analysis methodology

Technical market analysis is, at its essence, a        indicators with where the market is in the wave
study of crowd behaviour and market psychology.        structure results in a forced appreciation of the
                                                       Keynesian paraphrase that the markets can remain
R.N.Elliott’s Wave Principle is based on his           overbought or oversold longer than you or I can
empirically derived discovery in the 1930’s that       remain solvent. Other sentiment indicators such as
market prices move in recognisable, repeating          option pricing, put/call ratios, positioning data and
patterns and that these patterns reflect a basic       surveys are also used in our methodology in order
natural harmony manifested in the inherent             to gather as much evidence as possible in coming
herding behaviour of crowds. Elliott discovered        to our technical analysis conclusions.
that these crowd behaviour cycles appeared at
                                                       With regards to translating these analysis
every time scale and whilst they were repetitive in
                                                       conclusions into actual trading ideas and
structure they were not always repetitive in
                                                       positions, we employ our Trend-Wave Trading
amplitude or the time taken to form. Robert
                                                       methodology. Trend-Wave Trading is an
Prechter Jnr has developed Elliott’s Wave
                                                       investment process that combines the technical
Principle to uncover that a market driven by
                                                       analysis of the Elliott Wave Principle with the
human decision makers is a robust fractal that
                                                       objective discipline of Trend Following. A
may look chaotic but is actually following a
                                                       potential trade set-up is given by the wave
structured formal progression. Essentially a
                                                       structure and supporting technical analysis such as
detailed description of Dow Theory and the             Japanese candlesticks, trend extension and
orthodox pattern recognition of Edwards &              exhaustion measures, momentum oscillators and
Magee, Elliott’s Wave Principle (being based on        sentiment. However, the trade is only executed
price and volume) is the purest form of technical      when there is an objective movement of
analysis and is the foundation of our analysis         momentum in the direction the technical analysis
process. Please see the HSBC Elliott Wave              suggests. Specifically, momentum is measured by
Principle Basic Guide for a fuller explanation.        the crossing of a short moving average (5 period)
                                                       with a long average (40 period). If the market
We enhance this analysis by overlaying a large
                                                       price is also above an up sloping 200 period
suite of indicators (Relative Strength Index (RSI),
                                                       average when a buy signal is given or below a
Moving Average Convergence Divergence
                                                       down sloping 200 period average when a sell
(MACD), trend exhaustion etc), volatility and
                                                       signal is given, more confidence and size is given
volume data to gauge sentiment and trend
                                                       to the trade. Initial trade entry and full trade exit is
strength, looking for divergences and
                                                       governed by the moving averages acting as both a
confirmation. It is vitally important in technical
                                                       trailing stop loss and take profit discipline. By
analysis to view indicators in relation to where the
                                                       overlaying a disciplined, proven investment
market is in its wave cycle. For instance, an
                                                       strategy such as Trend Following on our technical
oscillator showing that a market is overbought
                                                       analysis we seek to run winning trades and cut
could be a confirmation of the start of an extended
                                                       losing trades early.
up trend if it appears in the wave one position of
an impulse wave. Failure to combine a reading of

                                                                                                渐飞研究报告 - http://bg.panlv.net
    Technical analysis                                                                                            abc
    March 2012

2012 Technical Analysis: Wave Cycle Pressure & Major Support / Resistance Levels
        Asset Class                   Market               2012 Wave Cycle Pressure   Support        Resistance
       Stock Markets         China (Shanghai A Share)                               1,749            3,338
                                 HK (Hang Seng)                                     10,676           24,988
                                Japan (Nikkei 225)                                  6,994            11,408
                                  Korea (KOSPI)                                     1,402            2,229
                             Singapore (Straits Times)                              2,165            3,313
                                 India (SENSEX)                                     12,820           21,108
                                  Taiwan (TAIEX)                                     5,961            9,207
                              Australia (All Ordinaries)                             3,090            5,069
                                  USA (S&P 500)                                       1010            1,576
                                Brazil (BOVESPA)                                    46,116           73,103
                             Euroland (Euro Stoxx 50)                                1,765            3,077
                                  UK (FTSE 100)                                      4,790            6,754
                                 Russia (RSSTD)                                     6,953            12,810
                                 Turkey (ISE 100)                                   40,342           71,776
                            GCC (Bloomberg GCC 200)                                 48.20            62.17
                            South Africa (JSE All-Share)                            25,552           36,976

     Currency Markets            USD Index (DXY)                                    72.69            88.70
                                   EUR-USD                                          1.1876           1.4940
                                   GBP-USD                                          1.4229           1.6747
                                    USD-JPY                                         72.06            101.32
                                   AUD-USD                                          0.8067           1.1080
                                   USD-CAD                                          0.9407           1.0932
                                   USD-SGD                                          1.1992           1.4209
                                   USD-KRW                                           1046             1277
                                    USD-INR                                          43.85            54.31
                                   USD-MXN                                          11.48            15.58
                                   USD-BRL                                          1.5288           2.2036
                                   USD-TRY                                          1.6301           1.9230
                                   USD-ZAR                                          6.5445           9.8363
                                   EUR-PLN                                          3.8232           4.9450
                                   EUR-HUF                                          260.52           324.28
                                   EUR-CZK                                           22.91            29.68

   Rate & Credit Markets        UST 10-Year Yield                                   1.57%            2.33%
                             Euro-Bund 10-Year Yield                                1.45%            2.37%
                               UK Gilt 10-Year Yield                                1.70%            2.79%
                                JGB 10-Year Yield                                    0.83%            1.36%
                                  EMBI+ Spread                                       303              442
                              iTraxx EUR 5-Year IG                                    92              217
                               CDX USD 5-Year IG                                      75              151

Metal & Commodity Markets          Gold (Spot)                                       1,155           1,921
                                   Silver (Spot)                                     24.24           49.79
                                    S&P GSCI                                          480             762
                              Crude Oil (Brent Future)                               68.15           128.40

Source: HSBC
 = Up,  = Down,  = Range,  = Down then Up,  = Up then Down

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Technical analysis                  abc
March 2012


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     March 2012


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    Technical analysis                                                                                         abc
    March 2012

Disclosure appendix
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     Technical analysis                                                                                                                     abc
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Principal contributor

            Murray Gunn
            Head of Technical Analysis
            HSBC Bank plc
            +44 20 7991 6797

            Murray is Head of Technical Analysis, covering cross-asset markets of FX, interest rates, equity indices and metals and commodities.
            He joined HSBC in September 2010. He had spent most of his twenty-year career working on the buy side, as a portfolio manger in
            equity, bond and currency markets. A published author on technical analysis, Murray is a Certified Financial Technician (CFTe) and has
            been investing and trading with technical analysis since the early 1990s. He has served on the board of the Society of Technical
            Analysts (UK) and has been an active speaker at conferences on technical analysis.

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