Elliott wave analysis on the Japanese Nikkei Index

NIKKEI Index

Alastair asked my opinion on the Nikkei index as it produced a Gravestone Doji in May and what the consequences on other markets could be.

The above count is my preferred count and the big question is of cause whether we have begun a new impulsive rally or it's just an X-wave and a new decline should follow.

I do prefer the impulsive count, but in this case we should see a break above important resistance at 15,943.
However, looking at the current rally from the 2008 low at 6,995 wave 1 or a moved up to 11,408 the following decline to 8,136 is wave 2 or b and the current rally is wave 3 or c. As can be seen we have only finished three waves at 15,493 and therefore we need at least one more rally to above 15,943. But will it be a minor break followed by a new decline to below 6,995 or will we see a break that is confirmed as only wave v of 3 and will be followed by wave 4 and 5? As I said I think the odds favors the impulsive count and that means a confirmed break above 15,943.

But what about the Gravestone Doji? As it is with all candle formations they will have to be confirmed, which in this case means a lower close in June, but even if that happens it does not alter my count above and therefore I would be very careful about being to bearish on the Japanese Nikkei Index. I don't think we will see the Nikkei index much lower and is looking for a break above 13,585 as confirmation that wave iv of 3 is over and wave v of 3 higher to above 15,943 is developing. However, until we have seen a break above 13,858 we could see a slightly deeper decline towards 11,806 before wave iv of 3 is done.

About the implications on the other markets? I don't know, what the implications will be. I'm still looking for one more rally in the US indices. I expect the JPY will continue to weaken once the ongoing corrections is over. I'm looking for a weaker AUD and NZD and likely also CAD and ZAR. But if the rally in the Nikkei has anything to do with that I really don't know and does it really matter? If you just follow you analysis and know when and where you are wrong it can't be all that bad.