Caution remains warranted in South Korea in the intermediate term, Lowry Research says, as selling pressure continues to move to new highs. The Kosdaq mid- and small-cap price indices have recovered to test their highs, while the Kospi 200 Index is lagging and has declined to a new low. The 30-day moving averages of declines, points lost and down volume continue to trend higher, while market breadth has been sluggish in the rebound, particularly in the large and small-cap segments. Rallies in the mid- and small-cap segments could prove unsustainable. In the short term, recovery rallies have been based on selective strength, with the percentage of stocks above their 10-day moving averages peaking in mid-May and since trending lower. Segmented momentum indicators have lagged the gains in the price indices, while the short-term index has been extremely sluggish. Lowry Research says the risk of near-term losses is elevated and new buying in response to the recent advances in the mid- and small-cap segments should be avoided.