Asian Stocks May Rise 8% Before Declining: Technical Analysis

June 1 (Bloomberg) -- Asian stocks may gain a further 8 percent before a “correction” that will pave the way for the next leg of a rally in regional markets, Elliott Wave International Inc. said.

The MSCI Asia-Pacific Index has retraced about 38.2 percent of the drop from the record in November 2007 on the logarithmic scale, and may rise to 110, the 50 percent level indicated by a Fibonacci chart, Elliott Wave International said in its June Asian-Pacific Financial Forecast report. The index may then retreat before rebounding in a “multi-month rally,” it added.

The MSCI regional index slipped 0.1 percent to 101.94 as of 8:08 a.m. in Singapore after jumping 12 percent last month. The measure has climbed 14 percent this year, rebounding from last year’s record 43 percent slump.

“Most Asian-Pacific indexes are losing momentum but their rally patterns appear incomplete,” the Gainesville, Georgia- based market researcher said in the report that was dated May 29. “A correction lasting at least a few weeks should begin by late June.”

Elliott Wave Theory, created by U.S. market analyst Ralph Elliott in 1938, attempts to predict future price moves by dividing past trends into sections, or waves, and calculating changes in value.

Elliott Wave International said in a May 1 report that Asian stocks are on the “final leg” of a rally from their March lows and face a “correction” by the middle of the month.

India Call

India is among markets that may give up some gains as momentum and volumes slow, the researcher said last month. That will be a correction amid the market’s longer bull market that can last for 15 years, the forecaster has predicted.

The benchmark Bombay Stock Exchange Sensitive Index soared 28 percent in May, its best month in 17 years, after the ruling Congress party had its biggest election victory in two decades.

“We didn’t pay enough attention to our own admonition that in a bull market, surprises come to the upside,” Elliott Wave International wrote in its June report. “Longer term, the recent price action was positive for our long-term bullish forecast.”