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And the base keeps running, running and running, running... 
Elliott Wave and the XAO
- Thread starter OzWaveGuy
- Start date
Nice breakout through Aug 2014 top, leaving bear market counts dead. I'll post some analysis on weekend where this wave could end, as well about some other stocks.
As for now, third wave is in progress, and better not to do some stupid action like sell and try to pick up cheaper. Third waves can go beyond anything one can expect. All my stocks are deep in the green (WBC and BOQ the biggest winners), just WES is a bit slow, but ultimately it should catch on too.
As for now, third wave is in progress, and better not to do some stupid action like sell and try to pick up cheaper. Third waves can go beyond anything one can expect. All my stocks are deep in the green (WBC and BOQ the biggest winners), just WES is a bit slow, but ultimately it should catch on too.
I won't be looking at a short term subdivisions today, but rather we must take a look at the weekly chart. But first some news from RBA.
RESERVE BANK CUTS GROWTH AND INFLATION FORECASTS.
This headline appeared just yesterday, for RBA officials to justify why they cut the cash rate to 2.25%.
They say that "There has been little growth in non-mining business investment over recent years and recent data suggest that it will remain subdued for a time." But it is basically the same as saying “ there were raining in the past two weeks, and raining today, so based on this we project a rainy days further ahead.”
But that’s not all. RBA also said, that "Growth overall is now forecast to remain at a below trend pace somewhat longer than had earlier been expected."
And looking at the market from 2012 it(RBA comments) does make sense- market was rising, and then “unexpectedly” we had a year long sideways correction, which shifted optimistic sentiment as good as the swift decline. And at the end of this correction, RBA turned pessimistic, slashing economy’s growth forecasts and predicting rising unemployment to 7% in a year to come.
But all of this won’t happen. With market in early stages of Intermediate Wave (3), sentiment just shifted from negative to positive. It takes time for economy to respond, as fundamentals lag market usually few years, but from here things start to improve. But real good numbers will usually appear only when wave (3) is near the Top, so do not expect that there will be major “good news” as a buy signals. Third waves keeps the majority of people out of the market and runs on empty, not with everyone on board.
Trying to forecast where wave (3) could end, I can apply simple guideline-it should be 1,618 times of Wave (1), this puts a Target of All Ords at 7944. And because third waves have a character of a swift advance, it should last shorter than Wave (1), which lasted 3,5 years. So maybe 2-2,5 years, but this is highly speculative as it is hard to forecast time frames because of the nature of the EW patterns which in reality do not have neither price, nor time axis, just a form.
The 2007 Top is 6870, and this number remarkably marks the length of Wave (1) itself, so expect some sort of resistance here on the way.
On the bottom of a chart you can see the RSI index just generated a Buy Signal on a weekly time frame, adding one more technical evidence into the bigger picture.
TLS is the leader and is rising in Primary Wave ((3)) with momentum at this stage being very strong, indicating that price is somewhere at the middle of the wave. Year long Target for Wave ((3)) is at $9.40, where it will be 1,618 times of Wave ((1))(circled). The y1999 Top was at $9.20, so this wave is definitely targeting to breach it, showing that new trend has been set.
Short term I expect some sideways movement lasting 4-5 weeks in a $6.5-7.0 range and the breakout higher thereafter, leaving those prices behind. This would be a god spot to join the trend or ad to a position for those who missed the strongest part.
At this stage of the trend prices usually remains in a thin channel, so any break out lower from it will rise an alarm for current labelling.
One more stock that is resisting overall market trend is WOW. In the WOW thread you can find my short term forecasts, but the bottom line is that WOW is looking for Primary Wave ((2)) bottom, and it should come soon, most likely in the first quarter, if it is not bottomed already.
Applying a simple trendline technique, we can see that there is a strong resistance at $28-29 area, if the WOW decides to sport a last wave down. But breaching $33,15 will force to reconsider the chances that WOW has made it‘s ultimate bottom at$ 29,12 and Primary Wave ((3)) has started, which should carry prices well above mid 2014 top of $39.
If my forecast turn out to be right, 2015 should be extremely good year for stocks. You can read more about why the market should advance in Wave (3) in my earlier post, when Wave (2) just bottomed, here : https://www.aussiestockforums.com/forums/showthread.php?t=15355&p=847352&viewfull=1#post847352
Cheers
RESERVE BANK CUTS GROWTH AND INFLATION FORECASTS.
This headline appeared just yesterday, for RBA officials to justify why they cut the cash rate to 2.25%.
They say that "There has been little growth in non-mining business investment over recent years and recent data suggest that it will remain subdued for a time." But it is basically the same as saying “ there were raining in the past two weeks, and raining today, so based on this we project a rainy days further ahead.”
But that’s not all. RBA also said, that "Growth overall is now forecast to remain at a below trend pace somewhat longer than had earlier been expected."
And looking at the market from 2012 it(RBA comments) does make sense- market was rising, and then “unexpectedly” we had a year long sideways correction, which shifted optimistic sentiment as good as the swift decline. And at the end of this correction, RBA turned pessimistic, slashing economy’s growth forecasts and predicting rising unemployment to 7% in a year to come.
But all of this won’t happen. With market in early stages of Intermediate Wave (3), sentiment just shifted from negative to positive. It takes time for economy to respond, as fundamentals lag market usually few years, but from here things start to improve. But real good numbers will usually appear only when wave (3) is near the Top, so do not expect that there will be major “good news” as a buy signals. Third waves keeps the majority of people out of the market and runs on empty, not with everyone on board.
Trying to forecast where wave (3) could end, I can apply simple guideline-it should be 1,618 times of Wave (1), this puts a Target of All Ords at 7944. And because third waves have a character of a swift advance, it should last shorter than Wave (1), which lasted 3,5 years. So maybe 2-2,5 years, but this is highly speculative as it is hard to forecast time frames because of the nature of the EW patterns which in reality do not have neither price, nor time axis, just a form.
The 2007 Top is 6870, and this number remarkably marks the length of Wave (1) itself, so expect some sort of resistance here on the way.
On the bottom of a chart you can see the RSI index just generated a Buy Signal on a weekly time frame, adding one more technical evidence into the bigger picture.
TLS is the leader and is rising in Primary Wave ((3)) with momentum at this stage being very strong, indicating that price is somewhere at the middle of the wave. Year long Target for Wave ((3)) is at $9.40, where it will be 1,618 times of Wave ((1))(circled). The y1999 Top was at $9.20, so this wave is definitely targeting to breach it, showing that new trend has been set.
Short term I expect some sideways movement lasting 4-5 weeks in a $6.5-7.0 range and the breakout higher thereafter, leaving those prices behind. This would be a god spot to join the trend or ad to a position for those who missed the strongest part.
At this stage of the trend prices usually remains in a thin channel, so any break out lower from it will rise an alarm for current labelling.
One more stock that is resisting overall market trend is WOW. In the WOW thread you can find my short term forecasts, but the bottom line is that WOW is looking for Primary Wave ((2)) bottom, and it should come soon, most likely in the first quarter, if it is not bottomed already.
Applying a simple trendline technique, we can see that there is a strong resistance at $28-29 area, if the WOW decides to sport a last wave down. But breaching $33,15 will force to reconsider the chances that WOW has made it‘s ultimate bottom at$ 29,12 and Primary Wave ((3)) has started, which should carry prices well above mid 2014 top of $39.
If my forecast turn out to be right, 2015 should be extremely good year for stocks. You can read more about why the market should advance in Wave (3) in my earlier post, when Wave (2) just bottomed, here : https://www.aussiestockforums.com/forums/showthread.php?t=15355&p=847352&viewfull=1#post847352
Cheers
Logique
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Great work again Rimtas.
It's been amazing to see the All Ords outperform the Dow by percentage over the last couple of weeks.
It's been amazing to see the All Ords outperform the Dow by percentage over the last couple of weeks.
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In theory there could be a 200+ point correction somewhere between now and 6100 if this abides by the rules.
(click to expand)
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My thoughts too
Yes, there could be a correction, as wave (iv) of ((iii)). Good spot to add those shares which were missed to pick up near the bottom.
Today I wanted to post some interesting chart of Iron Ore, but in the context of Motley Fool pro Joe Magyer, who claims himself a Chief Investment Advisor. Recently he made a comment : "The Future of Iron Ore (hint: it's not looking promising)". And later he explains fundamental reasons why its' not looking promising, article here : http://us3.campaign-archive1.com/?u=0d1d0582254b8399936e6130e&id=bc10475889&e=7116026ec2
As an elliott minded investor, I put this comment on a chart-in two places-now, and near the Top in 2011, when Iron ore was trading at nearly $200. What do you think which timing would be more appropriate for this comment to come out? Which would have made more money and was more important as a warning?
Answer is obvious, right?
That's what happens, when anyone is trying to predict future market prices using current fundamental/economical situation as a reason.
China is not looking good right now, and why? Because it was in a bear market for five years. After the bottom has been set, economy usually collapses as a consequence of the bear market that is a history already. And for this same reason many people are missing bottoms, because there are simply nothing good around at the time, no good news, no good fundamentals, everything is black-no reason to buy anything.
And most of the people are using fundamental reasoning as a cause for future market direction. That's why majority of them are missing trends, ending buying near the tops and selling near bottoms, and almost never make money.
I have nothing against Motley Fool, I am reading many articles, but just for one reason-to grasp a crowd sentiment at the particular point in the wave structure. And Iron Ore definitely looks more promising now than in 2011.
Today I wanted to post some interesting chart of Iron Ore, but in the context of Motley Fool pro Joe Magyer, who claims himself a Chief Investment Advisor. Recently he made a comment : "The Future of Iron Ore (hint: it's not looking promising)". And later he explains fundamental reasons why its' not looking promising, article here : http://us3.campaign-archive1.com/?u=0d1d0582254b8399936e6130e&id=bc10475889&e=7116026ec2
As an elliott minded investor, I put this comment on a chart-in two places-now, and near the Top in 2011, when Iron ore was trading at nearly $200. What do you think which timing would be more appropriate for this comment to come out? Which would have made more money and was more important as a warning?
Answer is obvious, right?
That's what happens, when anyone is trying to predict future market prices using current fundamental/economical situation as a reason.
China is not looking good right now, and why? Because it was in a bear market for five years. After the bottom has been set, economy usually collapses as a consequence of the bear market that is a history already. And for this same reason many people are missing bottoms, because there are simply nothing good around at the time, no good news, no good fundamentals, everything is black-no reason to buy anything.
And most of the people are using fundamental reasoning as a cause for future market direction. That's why majority of them are missing trends, ending buying near the tops and selling near bottoms, and almost never make money.
I have nothing against Motley Fool, I am reading many articles, but just for one reason-to grasp a crowd sentiment at the particular point in the wave structure. And Iron Ore definitely looks more promising now than in 2011.
Sometimes market tends to sport a textbook patterns, so I draw a few lines how it would look if WBC is about to make one. Usually textbook patterns make about 20% of the market, so forecasting them is tough and one always need to be in a mode of expecting something unexpected. So this is just for fun. A few months later we will see how it will look in reality
Short term WBC is really strong, but if I counted waves correctly, it is at the wave (iv) now and a small wave (v) to new highs is underway.
2,618 level of wave ((i)) is at ~$38,40, so I expect WBC to top here in a ((iii))(circled) wave.
After this happens there would be no any prolonged "gap and go" movements for months, unless down. All Ords should have some sort of similar structure; just waiting for a big correction in Intermediate wave (3) is a bit wrong.
Short term WBC is really strong, but if I counted waves correctly, it is at the wave (iv) now and a small wave (v) to new highs is underway.
2,618 level of wave ((i)) is at ~$38,40, so I expect WBC to top here in a ((iii))(circled) wave.
After this happens there would be no any prolonged "gap and go" movements for months, unless down. All Ords should have some sort of similar structure; just waiting for a big correction in Intermediate wave (3) is a bit wrong.
It is possible to say that All Ords have toped in wave (iii) at 5803, just shy 40 points of my 5840 target. I expect a coming correction will carry prices to at least 38,2% retracement of recent rise, bottoming in a 5590 area.
As wave v of (iii) was an extended wave, correction usually tries to reach a second wave (of v), which remarkably lies directly at fib 38,2 level. Using channelling technique it is possible to anticipate a time factor as well, and this will put the market into another week or so of not rising prices.
The top alternate(in blue) is a more deeper slide to 61,8%(towards 5450) in wave ii, breaking a channel and keeping sentiments very low. In this case the most funny part would be later.
But the bottom line is that market should sport some sort of a stair-step advance towards significantly higher levels in the months to come.
As wave v of (iii) was an extended wave, correction usually tries to reach a second wave (of v), which remarkably lies directly at fib 38,2 level. Using channelling technique it is possible to anticipate a time factor as well, and this will put the market into another week or so of not rising prices.
The top alternate(in blue) is a more deeper slide to 61,8%(towards 5450) in wave ii, breaking a channel and keeping sentiments very low. In this case the most funny part would be later.
But the bottom line is that market should sport some sort of a stair-step advance towards significantly higher levels in the months to come.
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You called this a ramp month or so ago rimtas... Great call, thanks for posting!!!
Hi Penn, I anticipated this wave from the mid of last year... But unfortunately I am not riding it in full, just a bit less than half of the portfolio is still in cash. At this stage I think it is too late to buy anything, need to wait a few months until the full wave cycle plays out and only then step in with remaining cash.
Good entry opportunities are only two-three times(or less) per year so patience is the key here if you want to ride the entire Intermediate (3) which I think will take 2 or more years to complete. And market is just at the initial stage of advance, breaking itself from the ice that kept it below the surface for the entire year. So there will be many opportunities along the way.
In the short term, so much of the correction. It was short both in time and in price(for wave (iv) discussed above), so I am not sure how to interpret it. But one thing is clear-market is in wave (iii), momentum is strong, and better to sit still. Some stocks (like WBC and NAB) have quite good structures, so guidance where the market is located can be drawn from their charts. Before a turn, it will slow down.
It is quite interesting to read analysts and other market observers(and traders) thoughts and opinions about how stocks are already valued in line with their fundamentals. It is a classic sign of "disbelief" and ignorance which accompanies third waves-there are simply no any buy signals using fundamentals.
They say that Market is at it's face value, unemployment s rising so there is no room for more advance, because companies need to grow their profits in order for stocks to rise. But this is not true. People maybe have a logical reason, but they're still in control of their emotions. And emotions are controlled by limbic system, which has a direct link to market action. It does not need any reason to make anyone press a Buy button-it is enough that everybody around is buying.
Disbelief, ignorance, bad fundamentals, tense geopolitical situation, -these are the fuel for market advance. If you are afraid, be long.
Cheers
Good entry opportunities are only two-three times(or less) per year so patience is the key here if you want to ride the entire Intermediate (3) which I think will take 2 or more years to complete. And market is just at the initial stage of advance, breaking itself from the ice that kept it below the surface for the entire year. So there will be many opportunities along the way.
In the short term, so much of the correction. It was short both in time and in price(for wave (iv) discussed above), so I am not sure how to interpret it. But one thing is clear-market is in wave (iii), momentum is strong, and better to sit still. Some stocks (like WBC and NAB) have quite good structures, so guidance where the market is located can be drawn from their charts. Before a turn, it will slow down.
It is quite interesting to read analysts and other market observers(and traders) thoughts and opinions about how stocks are already valued in line with their fundamentals. It is a classic sign of "disbelief" and ignorance which accompanies third waves-there are simply no any buy signals using fundamentals.
They say that Market is at it's face value, unemployment s rising so there is no room for more advance, because companies need to grow their profits in order for stocks to rise. But this is not true. People maybe have a logical reason, but they're still in control of their emotions. And emotions are controlled by limbic system, which has a direct link to market action. It does not need any reason to make anyone press a Buy button-it is enough that everybody around is buying.
Disbelief, ignorance, bad fundamentals, tense geopolitical situation, -these are the fuel for market advance. If you are afraid, be long.
Cheers
Sean K
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rimtas, our previous EW'ers failed dramatically. Only ever correct in select retrospect. Love your work.
Hi Kennas,
EW is simple, but only when you have an artistic mind which can spot something majority can't; and the scientific approach, that can fit those patterns into larger perspective. So Art and Science comes together here.
Technically EW is not much better than any other TA, because at the any given moment all rules and guidelines could be successfully applied to forecast both directions. That's why internet is full of Elliott technicians with plenty of different counts. But very little of them understand how their counts are connected with economy, and social action.
I believe that humans en masse act unconsciously, and their behaviour is patterned. Social sciences explaining and observing this are at the dawn and many years will pass until theory turns into real thing. But some universities in US are already accepting this idea and you can find socionomics and EW in their curriculums.
So practically applying EW to make money one must rely on the little data their have and even less examples of what social action means, what kind of wave it represents. Give me 1000 or 10.000 years of market data and I can tell with great confidence where the current market and economy is located and forecasting next 100 years with great accuracy would be a piece of cake.
But now when we have 100-200 years of data only, this peace of information is highly speculative, it can represent any wave sequence and next wave could always be the last. So even EW at this point can not tell what the future holds, and I personally try not to forecast more than 5-10 years ahead. I put my money only on high confidence patterns that I understand and which fit into given social atmosphere. One more example can be given right away: last Friday there were news with headline:
Economy lacking animal spirits
https://au.news.yahoo.com/a/26287614/economy-lacking-animal-spirits-rba/
RBA was close, but it missed one great thing-animal spirits are already roaring through the whole country month or so(as well as through Asia region), and this is recorded by stock prices. Current social action will result in improved economic figures later, because social mood is improving. So RBA will get it's numbers later in the year, where it can say that "oh, finally animal spirits started to pick up". But truth is that they picked up month ago.
This statement comes to light exactly at the moment when animal spirits bottomed in wave (2) and the strongest part of the sequence started. At the dawn of the rise everybody is crying how bad things are, because not rising market makes social mood go down, and at the end they just explode.
I also liked the RBA phrase that animal spirits "are unforecastable". But if you can forecast economy, why you can't forecast the reasons of economic improvement? In the end, economy is just the lagging factor of social actions, driven by herding behaviour.
I can go on, but hardly it has any use here, people in this kind of forums are looking for information that could help them to back up their opinions about market direction...which for most of them are moving in linear fashion and driven by news or government actions. I believe this is the reason why most of them loose money-because they use information, which already is a result of a previously dominated trend.
Cheers
EW is simple, but only when you have an artistic mind which can spot something majority can't; and the scientific approach, that can fit those patterns into larger perspective. So Art and Science comes together here.
Technically EW is not much better than any other TA, because at the any given moment all rules and guidelines could be successfully applied to forecast both directions. That's why internet is full of Elliott technicians with plenty of different counts. But very little of them understand how their counts are connected with economy, and social action.
I believe that humans en masse act unconsciously, and their behaviour is patterned. Social sciences explaining and observing this are at the dawn and many years will pass until theory turns into real thing. But some universities in US are already accepting this idea and you can find socionomics and EW in their curriculums.
So practically applying EW to make money one must rely on the little data their have and even less examples of what social action means, what kind of wave it represents. Give me 1000 or 10.000 years of market data and I can tell with great confidence where the current market and economy is located and forecasting next 100 years with great accuracy would be a piece of cake.
But now when we have 100-200 years of data only, this peace of information is highly speculative, it can represent any wave sequence and next wave could always be the last. So even EW at this point can not tell what the future holds, and I personally try not to forecast more than 5-10 years ahead. I put my money only on high confidence patterns that I understand and which fit into given social atmosphere. One more example can be given right away: last Friday there were news with headline:
Economy lacking animal spirits
https://au.news.yahoo.com/a/26287614/economy-lacking-animal-spirits-rba/
RBA was close, but it missed one great thing-animal spirits are already roaring through the whole country month or so(as well as through Asia region), and this is recorded by stock prices. Current social action will result in improved economic figures later, because social mood is improving. So RBA will get it's numbers later in the year, where it can say that "oh, finally animal spirits started to pick up". But truth is that they picked up month ago.
This statement comes to light exactly at the moment when animal spirits bottomed in wave (2) and the strongest part of the sequence started. At the dawn of the rise everybody is crying how bad things are, because not rising market makes social mood go down, and at the end they just explode.
I also liked the RBA phrase that animal spirits "are unforecastable". But if you can forecast economy, why you can't forecast the reasons of economic improvement? In the end, economy is just the lagging factor of social actions, driven by herding behaviour.
I can go on, but hardly it has any use here, people in this kind of forums are looking for information that could help them to back up their opinions about market direction...which for most of them are moving in linear fashion and driven by news or government actions. I believe this is the reason why most of them loose money-because they use information, which already is a result of a previously dominated trend.
Cheers
tech/a
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Kennas
You've never been able to get your head around the dynamic nature
Of Elliott Wave,
One of the biggest advantages of the analysis.
Some of us do.
Is there any " work " of yours you'd like to share
Or is this the best you've got!
Waves in oil doesn't look like textbook pattern, but previous Triangle Apex was reached and count can be seen as "five" from the bottom, indicating uptrend. I am looking forward for a pullback and then next phase of advance towards significantly higher levels. So much of the glut and oversupply. In the heads only, as always.
Sean K
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Thanks for the generous feedback rimtas. Always in good spirit.
Logique
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The All Ords seems to be struggling to push through this level ~ 5870 or so.
Vulnerable to a retrace I'd have thought, especially if OS markets pull back.
Vulnerable to a retrace I'd have thought, especially if OS markets pull back.
I try to understand market location but waves on XAO are not textbook, so sometimes it is better to look at it's constituents. Banks have the best structures at the moment with WBC, NAB leading the way.
NAB has a nice Ending Diagonal as a small wave (v) and from this I can expect that the strongest part of the move from mid January is over. Now it should experience some "struggle", as I call it, and finally pushing to new highs in last wave, ending the entire five wave pattern.
XAO may have some similar movement, maybe with different structure, but indications are that market is slowing down. There will be some more waves higher until it reverses into higher degree multiweek correction. Hopefully I will be able to point to a probable top if there is enough evidence for it. As for now, trend is up, there is no reason for exit.
NAB has a nice Ending Diagonal as a small wave (v) and from this I can expect that the strongest part of the move from mid January is over. Now it should experience some "struggle", as I call it, and finally pushing to new highs in last wave, ending the entire five wave pattern.
XAO may have some similar movement, maybe with different structure, but indications are that market is slowing down. There will be some more waves higher until it reverses into higher degree multiweek correction. Hopefully I will be able to point to a probable top if there is enough evidence for it. As for now, trend is up, there is no reason for exit.
BHP is either bottomed or one more wave is still missing. The long term bullish trendline (which I covered in my previous posts about BHP) remains a strong resistance. Even when price did break it down, this didn't last long- market made a violent move to the upside rushing back into channel, this behaviour is bullish.
One more evidence of the bottom is that traders shifted their view from the Iron Ore correlation and this no longer is the reason to sell the stock lower. Iron Ore most likely is also somewhere very close to the bottom, so rally is inevitable.
Because BHP rallied from the bottom in 7 waves, (or just A-B-C) I still consider a one more last possibility for it to make one more lower low just below $26,5, but BHP is the stock where waves in shorter time frames are not perfect, so this move could be an Impulsive advance from the actual bottom.
If it rallies above last week's top of 32,97, consider no more new lows, and instead a multimonth/multiyear advance towards $50 in three waves, completing one more wave of the larger Triangle that I discussed earlier.
One more evidence of the bottom is that traders shifted their view from the Iron Ore correlation and this no longer is the reason to sell the stock lower. Iron Ore most likely is also somewhere very close to the bottom, so rally is inevitable.
Because BHP rallied from the bottom in 7 waves, (or just A-B-C) I still consider a one more last possibility for it to make one more lower low just below $26,5, but BHP is the stock where waves in shorter time frames are not perfect, so this move could be an Impulsive advance from the actual bottom.
If it rallies above last week's top of 32,97, consider no more new lows, and instead a multimonth/multiyear advance towards $50 in three waves, completing one more wave of the larger Triangle that I discussed earlier.
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