Technical analysis is about weight of evidence. More the indicators pointing in the negative side, the more negative the market and vice versa. Technical analysis is about Intermarket. Everything is connected. This means if we look at the CEE (Central and Eastern European) market, we should get some cues where Europe is headed and also get Q1 2012 cues regarding the global equity bias.

Here we are looking at Hungarian BUX, which seems to have completed a five wave impulse up and a three wave corrective down.

Now an Elliottician might contest or confirm this count. While the Intermarket analysts might say, “Look at the Romanian BETFI, which has a similar count like Hungarian BUX but an unclear five wave up.” And if Intermarket is true one of the counts is write either the Hungarian BUX or the Romanian BETFI. One of them is going to decide whether market attempts a low below 2009 or starts a new leg higher into 2012.

There is another reason, which Elliotticians can give. A cycle degree can bottom with a three wave structure and may not need a five wave structure. This is why Romanian markets could bottom with a three wave rather than a five wave structure. This means that whether it's Mar 2012 or Dec 2011, the Romanian Equity could be ready to move higher in a new impulse up.

Now if we have to confuse the Elliottician we can show him the price chart of Austrian ATX, Polish WIG and the CEE Index, a composite of all CEE indices. Now the aim is not to confuse the Elliottician, but to remind him that there is subjectivity in counting waves even if Intermarket support is assumed.

Orpheus Jiseki on the other hand is a basic indicator which illustrates where the Hungarian BUX and Romanian BETFI or CEE indices are on the larger performance scale, in the top, in the bottom, in the middle. If there are on the top, no Elliott wave positive counting would help and if there are at the bottom, even the most negative counts on Elliott might not take the respective indices lower. The Jiseki is a performance time cycle for an asset and a valuable tool to fine-tune Elliott and Intermarket cases.

The CEE Index Jiseki is already at the worst ruling at sub 20 percentile readings. This suggests that the despite all negativity in Europe at least parts of CEE region is already at its worst and to expect consistent selling pressure to take markets secularly lower in 2012 might be a tough task for bears. The odds are favoring the value pickers and bulls. If we look at things separately, the Austrian ATX (outside CEE) is still at 55 and has no reversal signs. Romanian BETXT (top 25) is sub 30 suggesting relative value. A whole new Intermarket case can be made from Jiseki, to understand Intermarket cases, whether Long German DAX short Sensex is workable or is Sensex Ready to outperform CEE and EU region Indices.

Mukul Pal, CMT, Orpheus Capitals, Global Alternative Research