HSBC - Wave Principle Letter by riteshbhansali

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									 09 October 2012                    Macro
                                    Technical Analysis                                                     abc
                                    Medium / Long Term
                                                                                                           Global Research



                                    Wave Principle Letter
                                    Asia-Pacific

                                    Meet VIKTa the bull
                                    The four Asian markets that sport the most bullish Elliott Wave structures are Vietnam,
                                    India, Korea and Taiwan - or VIKTa for short. Near-term risks remain but long-term
                                    investors should accumulate overweight positions in these markets. Asian currencies,
                                    however, are still due another wave down.

                                    The next Wave Principle Letter will be published on 26 October.

                                    Stock Markets…page 2.           Interest Rate Markets…page 10.         FX Markets…page 12.

                                    Cross-Asset Summary
                                                                    ____________________ Elliott Wave Cycle Direction________________
                                                                         Short Term              Medium Term            Long Term
                                                                      (Multi Day/Week)        (Multi Week/Month)     (Multi Month/Year)

                                    US Dollar Index                                                                    
                                    Euro Index                                                                         
                                    Japanese Yen Index                                                                
                                    British Pound Index                                                                
                                    Asian Currency Index (ex Yen)                                                      
                                    USD 3-Month Interest Rate                                                          
                                    USD 10-Year Yield                                                                
                                    EUR 10-Year Yield                                                                
                                    JPY 10-Year Yield                                                                
                                    CDS IG 5-Year (EUR)                                                               
Murray Gunn MSTA CFTe               China / HK (Hang Seng)                                                           
Head of Technical Analysis
HSBC Bank plc                       USA (S&P 500)                                                                      
+44 20 7991 6797
murray.gunn@hsbcib.com
                                    Europe (Stoxx 600)                                                                 
View HSBC Global Research at:       Japan (Topix)                                                                     
http://www.research.hsbc.com
                                    Brazil (Bovespa)                                                                  

Issuer of report:   HSBC Bank plc
                                    Commodity Index (S&P GSCI®)                                                        

Disclaimer &                        Gold                                                                             
Disclosures                         Crude Oil                                                                         
This report must be read            Source: HSBC

with the disclosures and
the analyst certifications in        = Up,  = Down,  = Range,  = Bottoming,  = Topping
the Disclosure appendix,
and with the Disclaimer,
which forms part of it
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      Technical Analysis                                                                                  abc
      09 October 2012




Asia-Pacific Sentiment Overview

“Bull markets are born in pessimism, grow on scepticism, mature on optimism, and die of
euphoria” - Sir John Templeton



Dear Reader,

It’s not all doom and gloom.

There’s always a bull market somewhere and whereas the stock markets in Europe and the US continue to
look very vulnerable, some stock markets in Asia sport extremely bullish wave structures.

Vietnam, India, Korea and Taiwan have the most bullish long-term Elliott Wave structures and
investment allocations to these markets (VIKTa for short) should, under the current Elliott Wave
probability analysis, provide strong returns in the months and years ahead.

    Vietnam




    Source: HSBC, Updata, Bloomberg



Vietnam is directly bullish as long as the January 2012 low of 332 holds as support. The move higher in
2009 is a clear five wave movement and we label it as Intermediate degree wave (1) of a Primary degree
third wave which should be strongly bullish over the next few years.




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   09 October 2012




 India SENSEX




 Source: HSBC, Updata, Bloomberg



The long-term chart of India shows a secular bull market. The old resistance line held as support in 2008
and 2009 which is solid long-term bullish evidence.

 India SENSEX




 Source: HSBC, Updata, Bloomberg



The medium-term chart of India shows new 2012 high which is a bullish sign. Against that there was an
outside day on 5 October which may provide for a pause and a retracement of the move higher. As long
as 17,250 holds as support in the SENSEX the medium-term trend should be considered higher.




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      09 October 2012




    Korea




    Source: HSBC, Updata, Bloomberg



In Korea a move down to a new low below 1,644 is probably required to complete wave (2) of the
longer-term bull market. However, a rise above 2,057 would be the first sign that the bullish cycle is
underway already.

    Taiwan




    Source: HSBC, Updata, Bloomberg



Although marginal lower levels below 6,609 are still possible Taiwan is at the beginning of a long-term
super bullish trend that will last for many years to come.



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   09 October 2012




Other Asia-Pacific Stock Markets
 China




 Source: HSBC, Updata, Bloomberg



The Shanghai A Share Index has bullish technical evidence but only a rise above 2246 would increase
confidence in that case.

 Hong Kong




 Source: HSBC, Updata, Bloomberg



In Hong Kong there are two potential triangle Elliott Wave counts, both of which are longer-term bullish.
Resistance lies at 21,400 and 21,760. If 18,400 does not hold as support the probability increases that the
market is going to test the 13,000 zone.



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    Japan




    Source: HSBC, Updata, Bloomberg



The gap zone around 9,388 held as resistance in the Japanese Nikkei which increases confidence in the
bear case. A drop below the strong support at 8,135 would be particularly bearish. Long-term investors
should note though that this should be the final phase in the entire bear market from 1989.

    Singapore




    Source: HSBC, Updata, Bloomberg



For Singapore, the wave structure counts best as bearish as long as 3,313 holds as resistance. Only a rise
above 3,313 would bring about a more bullish scenario.



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   09 October 2012




 Thailand




 Source: HSBC, Updata, Bloomberg



Thailand is bullish in the long-term but a correction lower is due. Strong resistance lies around 1370.

 Malaysia




 Source: HSBC, Updata, Bloomberg



Like Thailand, Malaysia sports bearish divergence with new highs in the index not being matched by
new highs in the Relative Strength Index (lower chart). A correction lower is due.




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      09 October 2012




    Philippines




    Source: HSBC, Updata, Bloomberg



The Philippine stock market is long-term bullish but, similar to other Asian markets, a correction lower is
due.

    Indonesia




    Source: HSBC, Updata, Bloomberg



Indonesia is completing Minor degree wave B of an irregular flat correction. Wave C lower towards
3,300 lies ahead.




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   09 October 2012




 Australia




 Source: HSBC, Updata, Bloomberg



In Australia the Elliott Wave structure points to Primary degree wave C (circled) being underway. This
should take the market lower in coming months towards 3,000. Interim support exists at 3,829.

 New Zealand




 Source: HSBC, Updata, Bloomberg



The New Zealand stock market has moved above channel resistance but all the price action from the
2009 low is corrective in nature.



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     09 October 2012




Interest Rate & Bond Markets
 Australian Government 10-Year Yield




 Source: HSBC, Updata, Bloomberg



There is a valid Elliott Wave count that shows five cycle degree waves down in the Aussie 10-Year yield
from 1982. Based on that count, a lower yield is probable with 2% not out of the question. So far, there is
no candlestick evidence to suggest a significant reversal higher in yield.

 Korean 10-Year




 Source: HSBC, Updata, Bloomberg



In Korea, 2.86% in the 10-Year Onshore Swap Rate, is a 123.6% retracement of wave (A) and
represents a support area.



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   09 October 2012




 JGB 10-Year




 Source: HSBC, Updata, Bloomberg



The very long-term reverse head and shoulders pattern in the JGB yield should eventually result in much
higher yields once the neckline (currently at 1.69%) is broken.

 JGB Yield Curve




 Source: HSBC, Updata, Bloomberg



The price action of the JGB yield curve, 2’s 10’s, is displaying an underlying psychology that is
ultimately resolved in a large steepening. Either the cycle degree wave b triangle ended in 2008 or there is
one more small leg lower required to complete it. The next big move is a steeper yield curve.



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     09 October 2012




Foreign Exchange Markets
 Asia Dollar Index, ADXY (CNY, HKD, INR,IDR,KRW,MYR,PHP,SGD,TWD,THB)




 Source: HSBC, Updata, Bloomberg



The Asia Dollar Index has strong resistance between 117.91 and 118.04. A wave (C) lower towards 110
is likely.

 USD-JPY




 Source: HSBC, Updata, Bloomberg



The long-term chart of USD-JPY suggests some upside but the possibility of one more all-time low still
exists.


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   09 October 2012




 USD-SGD




 Source: HSBC, Updata, Bloomberg



USD-SGD has Intermediate degree wave (C) higher towards 1.35 to come.

 AUD-USD




 Source: HSBC, Updata, Bloomberg



The Aussie still holds bullish longer-term potential but is bearish in the medium term down towards
0.9600.



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 NZD-USD




 Source: HSBC, Updata, Bloomberg



NZD-USD has strong long-term support between 0.7130 and 0.7460. Resistance lies at 0.8224.

 USD-INR




 Source: HSBC, Updata, Bloomberg



The structure in USD-INR suggests that the June high of 57.33 is significant, coming only slightly above
the key 56.85 level. The drop below 54.17 brings support at 48.61 into focus.



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   09 October 2012




 SGD-JPY




 Source: HSBC, Updata, Bloomberg



In SGD-JPY the structure is bearish in so far as 66.59 holds as resistance. A rise above that level would
switch the probabilities to bullish.




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Our Technical Analysis Methodology

Technical market analysis is, at its essence, a study of crowd behaviour and market psychology.

R.N.Elliott’s Wave Principle is based on his empirically derived discovery in the 1930s that market prices
move in recognisable, repeating patterns and that these patterns reflect a basic natural harmony
manifested in the inherent herding behaviour of crowds. Elliott discovered that these crowd behaviour
cycles appeared at every time scale and whilst they were repetitive in structure they were not always
repetitive in amplitude or the time taken to form. Robert Prechter Jnr has developed Elliott’s Wave
Principle to uncover that a market driven by human decision makers is a robust fractal that may look
chaotic but is actually following a structured formal progression. Essentially a detailed description of
Dow Theory and the orthodox pattern recognition of Edwards & Magee, Elliott’s Wave Principle (being
based on price and volume) is the purest form of technical analysis and is the foundation of our analysis
process.

We enhance this analysis by overlaying a large suite of indicators (Relative Strength Index (RSI), Moving
Average Convergence Divergence (MACD), trend exhaustion etc), volatility and volume data to gauge
sentiment and trend strength, looking for divergences and confirmation. It is vitally important in technical
analysis to view indicators in relation to where the market is in its wave cycle. For instance, an oscillator
showing that a market is overbought could be a confirmation of the start of an extended up trend if it
appears in the wave one position of an impulse wave. Failure to combine a reading of indicators with
where the market is in the wave structure results in a forced appreciation of the Keynesian paraphrase that
the markets can remain overbought or oversold longer than you or I can remain solvent. Other sentiment
indicators such as option pricing, put/call ratios, positioning data and surveys are also used in our
methodology in order to gather as much evidence as possible in coming to our technical analysis
conclusions.

With regards to translating these analysis conclusions into actual trading ideas and positions, we employ
our Trend-Wave Trading methodology. Trend-Wave Trading is a medium term (multi week / month)
investment process that combines the technical analysis of the Elliott Wave Principle with the objective
discipline of Trend Following. A potential trade set-up is given by the wave structure and supporting
technical analysis such as Japanese candlesticks, trend extension and exhaustion measures, momentum
oscillators and sentiment. However, the trade is only executed when there is an objective movement of
momentum in the direction the technical analysis suggests. Specifically, momentum is measured by the
crossing of a short moving average (5 day) with a long average (40 day). If the market price is above the
200 day average when a buy signal is given or below the 200 day when a sell signal is given, more
confidence and size is given to the trade. Initial trade entry and full trade exit is governed by the moving
averages acting as both a trailing stop loss and take profit discipline. By overlaying a disciplined, proven
investment strategy such as Trend Following on our technical analysis we seek to run winning trades and
cut losing trades early.




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    Technical Analysis                                                                                         abc
    09 October 2012




Disclosure appendix
Analyst Certification
The following analyst(s), economist(s), and/or strategist(s) who is(are) primarily responsible for this report, certifies(y) that the
opinion(s) on the subject security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect their
personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific
recommendation(s) or views contained in this research report: Murray Gunn

Important Disclosures
This document has been prepared and is being distributed by the Research Department of HSBC and is intended solely for the
clients of HSBC and is not for publication to other persons, whether through the press or by other means.

This document is for information purposes only and it should not be regarded as an offer to sell or as a solicitation of an offer
to buy the securities or other investment products mentioned in it and/or to participate in any trading strategy. Advice in this
document is general and should not be construed as personal advice, given it has been prepared without taking account of the
objectives, financial situation or needs of any particular investor. Accordingly, investors should, before acting on the advice,
consider the appropriateness of the advice, having regard to their objectives, financial situation and needs. If necessary, seek
professional investment and tax advice.

Certain investment products mentioned in this document may not be eligible for sale in some states or countries, and they may
not be suitable for all types of investors. Investors should consult with their HSBC representative regarding the suitability of
the investment products mentioned in this document and take into account their specific investment objectives, financial
situation or particular needs before making a commitment to purchase investment products.

The value of and the income produced by the investment products mentioned in this document may fluctuate, so that an
investor may get back less than originally invested. Certain high-volatility investments can be subject to sudden and large falls
in value that could equal or exceed the amount invested. Value and income from investment products may be adversely
affected by exchange rates, interest rates, or other factors. Past performance of a particular investment product is not indicative
of future results.

Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment
banking revenues.

For disclosures in respect of any company mentioned in this report, please see the most recently published report on that
company available at www.hsbcnet.com/research.

* HSBC Legal Entities are listed in the Disclaimer below.

Additional disclosures
1    This report is dated as at 09 October 2012.
2    All market data included in this report are dated as at close 08 October 2012, unless otherwise indicated in the report.
3    HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its
     Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research
     operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier
     procedures are in place between the Investment Banking and Research businesses to ensure that any confidential and/or
     price sensitive information is handled in an appropriate manner.




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     09 October 2012




Disclaimer
* Legal entities as at 8 August 2012                                                                                          Issuer of report
‘UAE’ HSBC Bank Middle East Limited, Dubai; ‘HK’ The Hongkong and Shanghai Banking Corporation Limited,
                                                                                                                              HSBC Bank plc
Hong Kong; ‘TW’ HSBC Securities (Taiwan) Corporation Limited; 'CA' HSBC Bank Canada, Toronto; HSBC
Bank, Paris Branch; HSBC France; ‘DE’ HSBC Trinkaus & Burkhardt AG, Düsseldorf; 000 HSBC Bank (RR),                           8 Canada Square, London
Moscow; ‘IN’ HSBC Securities and Capital Markets (India) Private Limited, Mumbai; ‘JP’ HSBC Securities                        E14 5HQ, United Kingdom
(Japan) Limited, Tokyo; ‘EG’ HSBC Securities Egypt SAE, Cairo; ‘CN’ HSBC Investment Bank Asia Limited,                        Telephone: +44 20 7991 8888
Beijing Representative Office; The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch; The                   Telex: 888866
Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch; The Hongkong and Shanghai
Banking Corporation Limited, Seoul Branch; HSBC Securities (South Africa) (Pty) Ltd, Johannesburg; HSBC Bank                  Fax: +44 20 7992 4880
plc, London, Madrid, Milan, Stockholm, Tel Aviv; ‘US’ HSBC Securities (USA) Inc, New York; HSBC Yatirim                       Website: www.research.hsbc.com
Menkul Degerler AS, Istanbul; HSBC México, SA, Institución de Banca Múltiple, Grupo Financiero HSBC; HSBC
Bank Brasil SA – Banco Múltiplo; HSBC Bank Australia Limited; HSBC Bank Argentina SA; HSBC Saudi Arabia
Limited; The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch incorporated in Hong
Kong SAR
This document is issued and approved in the United Kingdom by HSBC Bank plc for the information of its Clients (as defined in the Rules of FSA) and those of its
affiliates only. If this research is received by a customer of an affiliate of HSBC, its provision to the recipient is subject to the terms of business in place between the
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is not an offer to sell, or a solicitation of an offer to sell or subscribe for, any financial product or instrument (including, without limitation, any currencies, securities,
commodities or other financial instruments).
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or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Bank plc. MICA (P) 038/04/2012, MICA
(P) 063/04/2012 and MICA (P) 206/01/2012




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Global Currency Strategy Research Team
                                                    Technical Analysis
                                                    Murray Gunn
Global                                              +44 20 7991 6797   murray,gunn@hsbcib.com

David Bloom                                         Precious Metals
Global Head of FX Research                          James Steel
+44 20 7991 5969    david.bloom@hsbcib.com          +1 212 525 3117    james.steel@us.hsbc.com
Asia                                                Howard Wen
Paul Mackel                                         +1 212 525 3726    howard.x.wen@us.hsbc.com
Head of FX Research, Asia-Pacific
+852 2996 6565     paulmackel@hsbc.com.hk
Perry Kojodjojo
+852 2996 6568     perrykojodjojo@hsbc.com.hk
Dominic Bunning
+852 2822 1672     dominic.bunning@hsbc.com

United Kingdom
Daragh Maher
+44 20 7991 5968   daragh.maher@hsbcib.com
Stacy Williams
+44 20 7991 5967   stacy.williams@hsbcgroup.com
Mark McDonald
+44 20 7991 5966   mark.mcdonald@hsbcib.com
Murat Toprak
+44 20 7991 5415   murat.toprak@hsbcib.com
Mark Austin
Consultant
United States
Robert Lynch
+1 212 525 3159    robert.lynch@us.hsbc.com
Clyde Wardle
+1 212 525 3345    clyde.wardle@us.hsbc.com
Marjorie Hernandez
+1 212 525 4109    marjorie.hernandez@us.hsbc.com

								
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