Elliott Wave and the XAO

[rimtas]

With bearish views already crystalized, aussie dollar has no where to go but up. This picture and article that follows (msn.com.au)would have did quite good if it were posted in 2011 when dollar was trading at 1,1, but now it just shows a conviction of the trend, which is poised for rebound. That's classic.

 

[rimtas]

As WTI Oil is heading to new lows, there are quite good short term trading opportunities allong the way. DSI shows that market is overcrowded right now which most likely marks the bottom of 3 wave and a rebound is likely.
Medium term Large Specs still holding almost half of their positions of what they had in 2014, so when they start to unload, a blow-off move to new lows should materializes. Commercials keeps accumulating, which is a buy longer term, but best buy will be only below Mar 2015 bottom.

 

[gartley]

With bearish views already crystalized, aussie dollar has no where to go but up. This picture and article that follows (msn.com.au)would have did quite good if it were posted in 2011 when dollar was trading at 1,1, but now it just shows a conviction of the trend, which is poised for rebound. That's classic.


View attachment 63576

Not Yet. More likely by years end

 

[rimtas]

Not Yet. More likely by years end

Of course not at the moment when post was made. This development covers more than 4 years decline, and media panic nicely captures the extreeme of bearish view.
Few more subdivisions remain, I would say just below 0.7, time will be determined later as waves make a terminal pattern, probably few months from now. Declining US Dollar and bottom in commodities most likely will be the main factor for the AUD rise.

 

[gartley]

An interesting observation. Looking at the monthly chart below. Point A which was April 2001 low to point B low in Oct 2008 which was the 89 Fibonacci months long. From point B to point C high in July 2011 was 34 Fibonacci months. From C to now we arenow 50 months along. IF the downtrend continues till years end it will be 55 fibonnacci months. 34/55 = 0.618 the golden ratio and may an important time factor. At the same time the 89 fibonnacci time cycle will be reached. So it maybe an important period.

 

[rimtas]

Nice math Gartley. Throw in that trendline and media panic and you have a recipe for reversal from ~0.7. Sometimes too much evidence points to one moment which can't be ignored. AUD is super bullish at this stage.

 

[rimtas]

Waves look quite good for another rally to start in XAO.
I am not sure whether it is worth to trade this setup as risk is above average, but I will be looking at ANZ this time as it has one wave missing to above $34. What it needs now is to sport small five from the bottom of 31,70, and then entry point could be seen. Or it will decline to 31 and only then rally, matching the alt scenario in gray line per below chart. Corrections are tough, but even here small waves can be forecasted and traded with a right approach.

 

[gartley]

Nice math Gartley. Throw in that trendline and media panic and you have a recipe for reversal from ~0.7. Sometimes too much evidence points to one moment which can't be ignored. AUD is super bullish at this stage.

Agreed Rimtas, yes super bullish and the cover of the Guardian can't be ignored as measure of sentiment. It's very important for the contrarian trade and usually lines up nicely with developing terminal wave patterns.
It may not be effective for trade timing so much, but at least it emphasizes that sentiment is at extreme levels and further ahead there is an impending trend change.
The math I threw in is no certainty, but it's just something to think about. I like to operate with an IF/THEN mentality. No one can predict the future, but IF the market reaches a certain level at a certain time, THEN we can be in a position to take a trade with higher probability. Ofcourse it's nice to have sentiment, EW and time factor relationships showing confluence

 

[rimtas]

Yes Gartley, agrree with you.
I also found that the AUD bottom if it occurs at year's end, could easily be at the same time when gold and oil bottoms occurs. If you see the patterns in those two, you know what I mean-both gold and oil almost have a nice terminal patterns from 2011 highs, probaly a few year countertrend rally in those, as well as in AUD begins. I expect AUD to reach 0.9, gold 1500, Oil-70-90.

Not sure what it means for stocks though, but usually rising AUD is bullish. And given the 7 year equity cycle(chart is in previous page of this topic), Stocks should bottom in the early/mid 2016. So a lot of thigs are pointing that one should keep tons of cash as next year posibilities for buyers would be just great. And Elliot Wave model in stocks right now predicts that a next leg of decline is on the horizon-as soon as this correction is over, market should tank, not sure how deep, but C or Third waves ussually counts good so there would be no big issue to pin point a bottom. Media should help also, by issuing few bearish statements that Australia is going to recession(again) and realestate is poised for a bust. Would be nice to see WES trading below 20 and CBA below 60 till this time. Patience is key, good moments for entry are rare, but worthy.

 

[rimtas]

Following AUD topic it just came to mind that the bottom in AUD which should occur late 2015-early 2016 could mark not only the bottom in commodities such as gold and oil, but energy stocks as well. I am thinking about BHP.

My most recent timing on BHP was very poor, but now as new probability factors came to light, it might support the case that BHP will finally make it's bottom of Wave (C) of the larger Triangle by subdividing further into only two smaller waves remaining, which should last till year's end and cut the price below $25. If A would be equal C, then the $20 bottom should be the best point.
If lower than this below 2008 bottom , then the entire big Triangle scenario disintegrates, but I consider this low probability due to the already prolonged bearish situation all across mining and commodities sector. I hope I will be able to pin point a bottom and successfully enter this trade, which theoretically should generate almost +100% to the upside from $20ish bottom(if such occurs). So one more wave development saying that before market enters into multimonth/multiyear rally it should tank at least -20% first.

 

[gartley]

Rimtas. Not sure what a low in the AUS means for stocks either.

But I agree with you totally that a low in the AUDUSD in DEC/JAN if it happens will most likely coincide likewise with a bottom in precious metals and oil. If this is the case the fallout of a stock decline on Wall Street may not be as bad here and may affect mainly banks. However our index is so heavily weighted by banks who knows.

I have attached a long term chart for Gold. My apologies for the lack of detail in the EW annotations as the platform I use is not so user friendly in that department. But we can see we have confluence of the 61.8 retracement of red wave 3 and the extension of the first leg of the correction at around 890-910 level. This further coincides with the span of the previous wave 4 of one less degree within red wave 3 and also the previous structure of the 1980 high all in the same price area so I figure this is the most logical place to be looking for an upcoming low.

This is almost an overlap of red wave 1 but as an EW guideline overlap is acceptable in commodities

 

[gartley]

Rimtas, I have attached the following cycles analysis and they seem to gel with your EW counts.

Price should find resistance at the 3rd upper band if we are correct at about 5800

 

[rimtas]

I a bit disagree with your wiev re gold. Long term chart clearly indicates that the rise from 2001 till 2011 is indeed a terminal wave of the larger pattern, and thus this decline from 2011, which is a clear five, is just the first leg. Gold should never see new ATH within decades and for some of us who is over 50, the $1900 top would never be breached in our lifetimes. But $200-500 level is real, as prices tend to correct to previous fourth wave area.





So back to shorter time frames- a five wave decline is approaching it's bottom and the corrective rally towards 1500 should develop in the years to come. Given the size of the decline from 2011 top (in relation to long term prices), whish is quite small, I think it is not wrong to anticipate that this is just the first wave, not A.
Decades and decades of downtrend ahead in precious metals. But short term I would buy it as much as I can as soon as it breaches down 1000 mark. Riding a countertrend moves can be tough, but downtrend from 2011 is almost over, as we both anticipate, bottom could be somewhere into year end.

 

[gartley]

Put 10 Ellioticians in a room with the same chart and you will get 10 different answers!!!

Who is right I don't know. But to be honest I gave up using long term log charts with EW ages ago when I saw Prechter predicting the end of the supercycle bull market in 1987 with a log chart going back to the 1800's and he has been wrong over and over and still is to this day like a broken record. It doesn't work....

Irrespective of the wave count BS hopefully we will see some sort of low years end))

 

[rimtas]

As far as I can see I find most elliotticians sitting on the same counts. The ones who not usually use not EW but something different-they counts constantly ignore the wave formation principles. So I don't know where you found that say about 10 ellioticians in one room.


Long term charts are good when they are clear, like in gold. DOW chart from 1700's is not clear, that's why Prechter is biting a bullet. The only section of DOW which is clear is the rise from 1934 Great Depression bottom till now. At this point I must agree that some sort of a DOW Top is at hand, but whether it is a Grand Supercycle I leave it to Prechter's wild imagination. We never know what kind of top is it because there is simply no data. Having 1000 years of stock data would be much simpler.
But apart from this, every country have it's own path. Have a possibility in mind, but trade what you see. Just compare Greece and Indian charts and you can see what I have in mind.

 

[rimtas]

The ongoing decline is already too big to be a part of the wave that started from 2011 low, thus confirming the Top is in and the bear wave is in progress. There are two scenarios what is going on, but both of them should produce a bottom in mid 2016 as the 7+ year operating Cycle suggests.

Under the Bullish scenario, the decline should sport three waves, ideally within the ascending Channel which suggests the Bottom of wave (2) somewhere in 4500’s about 10 months from now. The corrective/choppy market dynamics will confirm this view and many other instruments should produce a divergences and non-confirmations of the decline, bottoming one after another somewhere in 2016 (Oil, Metals, AUD/usd )




Bearish case is much simpler-Wave c should carry prices below 2009 lows. Because wave c is a third wave, it will have the character of the third wave, meaning that decline will be steep/fast/ and scary for anyone who is long. I expect the first stage of wave c should bottom in 2016 somewhere in 3000-4000 range, then a year long rally should restore some confidence and after, the decline will resume wiping out all of the optimism that accumulated during a 150year long uptrend, bringing down the bubbly realestate and overborowed consumers down along the way.
The ideal bottom for Wave c would be 1.618 times of wave a, at 2100, but technicals are pointing at much lower levels, with 1000 level being a more likely target, wich should be reached somewhere in the year 2021-2023 as the longer term cycles suggests.
Please note that in the past 150 years there were no corrections that lasted much more than 5 years, so this decline from 2007 Top is already 8 years long pointing that the winning streak is over and market could correct the entire 150year advance, meaning that 1000-2000 ASX Target is normal, as market is a fractal.









Short term it is worth to look at Asia-Pacific chart which shows clearly that a crash is unfolding. I must note that Taiwan and Hong-Kong are the main drivers of this decline and when Shanghai Composite enters into the third wave it should accelerate even more.
All Ords matches the Asia-Pacific count to some extent so looking at both can give a good indication of short term countertrend moves that can be traded from the long side. In bear waves, countertrend moves are very violent and if applying right management techniques can bring big gains in a short amount of time.






But most of the people should stay away from the market at least for the next 10 months.
I’ve read some views that dividend yield is now more than 6% and should look attractive to inspire to snap “bargains”, but they forgot that that in 2011 banks yielded over 10% and no one wanted them. Psychology is the main driver of market prices, which is quite different if compared then and now.

 

[rimtas]

Please note that futures Friday in aftermarket dropped another 2% and technically price has broken the lower channel line of wave (1) by a slight margin. This development usually occurs when market enters into the Point of Recognition stage, which marks the centre, or the heart of the bigger wave.
We need to wait what Monday brings, but the cash index "gap and go"(down) dynamics would confirm that strongest part of the decline started. It should produce a 90% down breadth across the board, marking that psychology shifted completely from bargain hunting to seeing assets as highly overpriced. There should be big bullish hopes towards the bottom expressed on financial press/media channels, which are a common trait of psychology in this stage that fuels the decline even further.

If Point of Recognition will happen soon, we should see market at around 4600 within 3-4 weeks. Any rebound and close significantly higher would be unusual for this market stage, which should be a "gap and go", persistent selloff. So I'll monitor it closely, maybe some stocks at the end of it will offer an opportunity for a "quick and dirty" trade. Note that I never suggest the exit point, only entry. Exit is determined upon everyone's greed level individually.


By the way, US stocks lost ground significantly, too. As well as European markets. This means that there are no reason to look for reason, so to speak. It is just herding. Selling because everybody is selling. The same as in uptrend.

 

[gartley]

I think we may fall to about 4800, then get a sharp bounce/rally into September and thereafter the plint of recognition may take hold.

 

[rimtas]

Well, if this happens, this means that market chose to go down through series of first and second waves, instead of a normal decline like I indicated in the previous post. Both possibilities are equal, but the result will be very much different. Series first and second waves usually indicates a bigger crash with an extended third wave. We will see this soon.
One who sits on cash have plenty of time and cold nerves to watch developments with clear mind. I personally see the upcoming events as a massive opportunity for those who have no debt, no shares and no any other commitments. For the rest it will be just pain.

 

[rimtas]

Market action and internals all confirming that today was a Point of Recognition Day, not the capitulation bottom as some pundits suggests. During Point of Recognition(either direction) market is focused to the direction of the trend at around 90%.

Market stats today were as follows: 5,51% advancing issues and 89,19% declining(from Business Day). Wave structures on the major world indexes, channeling techniques and already oversold oscillators also confirms this view.
Decline is usually fuelled by Hope, and Today's Motley Fool Headline shows that the hope is indeed very alive:







Interestingly, many stocks, including TLS, SUN ad even the entire Real estate sector, only Today broke down through Wave (1) bottom, which means that Wave (3) just barely started.