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The Nikkei's Massive Plunge: Get a More Satisfying Explanation
5/23/2013 6:00:00 PM

When seemingly unforeseen market events occur -- like the Nikkei's 7% one-day drop on May 23 -- we immediately want to know why. In this case, the financial media has suggested a number of causes: weak data from China, Bernanke's plans to slow quantitative easing, the strength of the yen.

But this kind of reasoning is ultimately unsatisfying. Whether the drop was caused by China, Bernanke, the yen -- or the boogeyman -- these explanations don't help you at all, because they come after the fact. They only help you lick your wounds, rather than avoid the punch in the first place.
 
Here at EWI, though, our analysts don't fall back on such after-the-fact explanations. That's because they apply the objective rules and guidelines of the Elliott Wave Principle, which states that markets are patterned and predictable. As a result, our analysts don't need to look at financial news or fundamental data -- but they can peek around the corner by looking at the price charts themselves.
 
Case in point: In fall 2012, the Nikkei was stuck in a three-year rut, and Japan's just-released GDP numbers revealed a 3.5% economic contraction. This was hardly the time for a bullish forecast. But on Nov. 2, 2012, EWI's Asian-Pacific Financial Forecast studied the Nikkei's Elliott wave patterns and told readers about a specific stock market correlation that was "bullish for Japanese stocks as a whole."
 
One month later, with the Nikkei still below 10,000, The Asian-Pacific Financial Forecast reiterated its bold contrarian forecast and proclaimed that "long a sleeping giant, Japan will probably surprise the world in 2013."
 
These forecasts went against the grain of conventional opinion, the market fundamentals, and the financial media -- but they were spot-on. The Nikkei rocketed more than 70% from the initial forecast.
 
And here's an example from the beginning of this month: On May 3, 2013, as the Nikkei rally was still in full force, The Asian-Pacific Financial Forecast boldly informed readers:
 
 
(Editor's note: Wave labels have been removed.)
 
"The [Nikkei] has continued advancing on lower momentum and volume than seen earlier in the rally. In addition, sentiment as measured by the Nikkei 225 Daily Sentiment Index, remains near elevated levels that have coincided with significant tops in the past. Thus, our main indicators are signaling that the rally since late 2012 is near its end."
 
And on May 21, two days before the Nikkei's massive fall, The Asian-Pacific Short Term Update cautioned readers that "this rally is beginning to have that unsustainable vertical look to it."
 
So you didn't have to wait for after-the-fact explanations. The Nikkei's price charts were telling the whole story all along -- and EWI's Asian-Pacific market analysts were one step ahead of the trend the entire way.
 
Is the Nikkei's sudden plunge a small correction in a larger bullish run, or is it the start of a new bearish trend? The Asian-Pacific Financial Forecast equips you to answer that very question in the latest monthly issue, while The Asian-Pacific Short Term Update empowers you to ride the near-term trends in the Nikkei three times per week.
 
You don't have to miss the next major move in the Nikkei. Put yourself ahead of the trend with EWI's comprehensive Asian-Pacific Financial Forecast Service, completely risk-free. Details>>
 
* * * * * * * * * * * * *
 
The same wave analysis that accurately anticipated key moves in Japan's Nikkei can equip you to ride trends in China, India, Australia, Korea, and more.
 
Put three veteran analysts, including Robert Prechter, to work for you and get a critical perspective for any forward-thinking Asian-Pacific investor.
 

 

 
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The Elliott Wave Principle is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific Elliott wave patterns in price movements. Each pattern has implications regarding the position of the market within its overall progression, past, present and future. The purpose of Elliott Wave International’s market-oriented publications is to outline the progress of markets in terms of the Wave Principle and to educate interested parties in the successful application of the Wave Principle. While a course of conduct regarding investments can be formulated from such application of the Wave Principle, at no time will Elliott Wave International make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. Investing carries risk of losses, and trading futures or options is especially risky because these instruments are highly leveraged, and traders can lose more than their initial margin funds. Information provided by Elliott Wave International is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your advisor to explain all risks to you before making any trading and investing decisions.