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Elliott Wave and the XAO

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Well Rimtas today we reached 4800 the lower band of the cycles target. Prices at least in the short term have reached an extreme a sharp rally should start. May last into September and then the next down will start.

Negative news ever where supports this. When the media catches on we know are near a low for now anyway.
 
I do not expect this rally to last so long. Rebounds in bear markets usually last just a few days, and to gain say +10% is normal. Anyone who thinks that such big intraday moves(up) are the start of a new bull trend will be very disappointed, as the decline that follows retraces back even faster.

I am not sure about short term subdivisions, but the current bounce definitely is a part of series first and second waves. It just offers the opportunity to unload at still good prices. As I mentioned series first and second waves sequence usually occurs when wave is extended, so the more these bounces occurs along the way, the more extended wave down will be. It already reached levels which I expected only to be reached few months from now if this is a correction in bull market. So more and more evidence that April 2015 top is permanent.

Nevertheless, one stock though still has a bullish potential, it is probably the last stock that I can see a trend change. Waves look good with one more last push down to complete the sequence and then a massive multimonth rally should start. The key level for this count to be in effect is Nov 2008 bottom of $19.98. If breached at least a few cents, the count becomes extremely bearish, pointing to single digits. So last hope for bulls still remains.







As it comes to banks, the best interpretation can be found at the smaller ones, like Bendigo. The structure clearly shows that the series of first and second waves are unfolding, with smaller Point of Recognition of Wave 1 already behind. It looks of course like an ABC decline at this stage, so another wave down will clear the picture for good.



 
If looking at All Ords Cash index, one can clearly see that one more wave to the bottom is missing, as short term subdivision suggests. Yesterday's strongest wave was Point of Recognition, so clearly it is a third and fourth is taking shape today.
Maybe this bounce today is over already, or market will offer one more pop in the next day('s) and tank towards 4750 levels. If this happens, I update chart and most likely it will be an amazing opportunity for a trade in some stocks. I see big4 and TLS are in similar positions so maybe sweet spot will be there, we'll see when subdivisions are on the table, now it is a bit too early. I usually follow futures, but at this stage cash is offering clearer picture.


 
Every moment in the markets is unique. Although the wave principle is a very useful guide quite often there is more than one possible wave count. Knowing which is the highest probability wave count is the key to applying EW successfully.
The ideal situation and highest probality would be to have both your prime and alternative wave counts suggesting the same direction.
How do you know Rimtas you are dealing with the highest probability wave count?

The originator of this thread was waiting for major wave 4 to finish and then wave 5 to start in March of 2009.
It NEVER happened because he did not consider the alternates.
He was waiting for the market to fall off a cliff after it had already done do following EW
 
Some big demand days recently and today is looking strong. Rimtas, any change to your count?
 
gartley said:
How do you know Rimtas you are dealing with the highest probability wave count?
Click to expand...


It is simple-when I know that the count has highest possible probability, I put my money on it. As you mentioned, market sometimes arrives at the stage where there are little or none alternatives. These moments are rare, but they are the times that one must act.
I do not trade every chart that I present here.

I would highly appreciate if you could stop digging further about the reliability of the method I use and instead focus on market analysis. All These talks about what is "working" and what's not are useless. This thread is about forecasting and practical application using EW, so if you don't have any ideas, please leave it to me, as I have plenty. One thought that just came to mind I will post in the next post. Thanks.
 
PinguPingu said:
Rimtas, any change to your count?
Click to expand...

Yes, of course. For the previous count to be in effect, All Ords Cash must not overlap with wave 1, which low is at 5311,5. But I am dropping this count in the bin, because futures already has an overlap. I have a number of alternatives here available, but it is not worth to get into detallization of small wave subdivisions, because they do not offer the trade at this stage.

If market keeps on rising, it will leave the decline from wave (2) Top in three waves, both Cash and Futures index. This means that higher degree count changes as well, invalidating Wave (1) and (2) labelling that was in effect past few months. I need a few more days to confirm the next probable future path that market is presenting here.


Please note that when decline started, all major world indexes started to move in sync again-a common trait of bear wave. This gives us an ability to see a picture more clearly by not limiting ourselves just with All Ords. I have no doubt that ALL impulsive waves Down in All indexes will be at the same time, so one can use any major index and link it to All Ords.
I found one Index which has textbook subdivisions from it's ATH Top. It's Russell 2000, it consists of major 2000 US Stocks, so it reflects herding psychology and thus waves, more clearly. (there is a Wilshire with 5000 stocks, but my platform doesn't provide data on it)

Looking at this chart one can clearly see the textbook EW subdivisions of each motive and corrective wave, and it is hard to see this decline as complete.
So from here I see two options-stocks are working sentiment back in (4) wave, and then (5) to new lows. This scenario feels a bit less likely due to quite short third wave if compared to Leading Diagonal that portended it.

Another scenario is that the last steep drop is only the first wave of (3), so the rebound can go higher and last longer.


 
Market advanced in three waves from the crash bottom and at this stage it looks best as a correction. But as I explained in previous post, this wave can't qualify as a fourth wave, due to overlap in futures chart. Cash index doesn't has one, but I am going with series first and second waves count. This implies that starting on monday market will enter into a new colapse stage, even steeper than the one we had already.

The key level to this forecast is 5293 in futures and amazingly-the same 5293 level in cash. If it is breached, I am already looking at changing Intermediate degree count where only Wave (1) has just bottomed and Wave (2) is underway. This would give a good oportunity to enter into long term position on such instruments like BEAR and similar. Also, this would be the last chance to sell every single investment asset that anyone holds, be it stocks, realestate or artworks of any kind. Later buyers just dissapear. Bull waves, that take weeks and months to build, are erased in minutes and hours in bear markets.

So short term market sported three waves up, take any blue chip stok-all has the same structures. And it best looks as a second wave. Russell 2000 index also has a nice Wave C completed at 115.
Who knws, maybe most Mondays from now will be "black". This was true in 2008-09 with fridays.


 
You've seen the stunning price volatility in stocks and other instruments the past few weeks. The VIX chart for US market puts the massive moves in perspective.
This chart of the 5-day percentage change in the CBOE Volatility Index (VIX) shows the explosiveness of previous Monday's range, as the percentage change shot to a record extreme for the index's 25-year history.




This record change can be explained only in one way-it is the kick-off move indicating that the large wave is starting. Corrections don't produce such spikes, only motives waves.

In All Ords this translates and adds more evidence that Wave c is starting, which should end somewhere below 3000. I am looking for more signs to confirm this trend.

Because it is should be "out of ordinary" in terms of scale, percentage decline and time taken to develop, at the start it should provide more evidence, like record decline in DSI, spike in ROC , call/putt ratio and nice bigger scale structure at weekly time frame. Decline below 2012 low of 3900 would confirm the trend, but it would be too late to act, so understanding now what can develop from here is vital.


 
I think Elliot wave has a lot to offer but sometimes when I see predictions of this nature I wonder if there should not be a bit of a 'reality check' or a realistic test thrown in.

I mean calling the XAO sub 2000 is a pretty drastic move.

The GFC was a huge event in which an enormous amount of wealth changed hands - most likely an economic event not to matched for a very long time.

From a trading and an investing perspective are you really waiting until the XAO hits 2000 before you would consider buying stocks?
 


This is the trouble with Elliotticians, they get a bee in their bonnet and don't let go. Prechter from Elliott Wave International has been talking about Armageddon for over a decade to my knowledge. You have to know when you are wrong and move to the next most likely count (alternate count).

I don't normally read Rimtas's posts but your response made me take a look. His chart of the VIX is from Elliott Wave International, sent today. He removed the copyright so I will repost it...only fair.

As for the XAO...a deeper retracement is now looking likely. Next target 4527 - 4188. Assuming support is breached.
 

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kid hustlr said:
From a trading and an investing perspective are you really waiting until the XAO hits 2000 before you would consider buying stocks?
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No, I will start buyng them as soon as I see the trend change, at any degree, at any level. Making a forecast and trading is two different things.


Porper, yes, from time to time I use EWI free material and repost it here. I also read Teorist and some other stuff, they have really good stuff that is not available for free to everyone. But due to the rules I can't post this paid material until after 3 months passed from its release. DSI numbers alone cost over 1000 bucks for 6 months subscription.


By the way, Porper, It would be nice to see some bullish count from you interpreting current Intermediate degree situation, I missed them very much. Thanks.
 
kid hustlr said:
I wonder if there should not be a bit of a 'reality check' or a realistic test thrown in.
Click to expand...

What do you mean by that? That reality check should be bullish? Sorry, I maybe misunderstood you.

Realistic test also sounds interesting, you can shed some light on that as well.
 
A few more blue chip charts that are backing up All Ords decline below 2009 lows. The clearest looks banks, with ANZ, CBA and WBC most likely in expandet flat corrections, smaller banks like BEN looks like 5-3-5 corections developing, reatailers like WES probably will stop near 2009 lows.

BHP if drops below 20, long Wave C to single digits. Realestate charts very similar(not shown).
Nice structures for any eliotician. Denying these probabilities will ruin lives of those who refuse to see them as a fractal nature of markets(if they materializes) .

Wave c is a Third Wave, so it should be a Crash, from start to finish, in a thin Channel, with relatively small upward corrections. When the bottom is reached, fundamentals and economy will collapse in response, providing grounds for the same linear thinking for everyone like today, just in different direction.

Now I should wait and see how this will play out. If this forecast was just on an hourly chart, probably few days would be enough, but in this case a year or a few is in the cards.
I've also attached EWI chart from June Teorist that shows how extreme situation is now, that can only be resolved with a crash.

I will not be posting short term forecasts anymore.













 
rimtas said:
What do you mean by that? That reality check should be bullish? Sorry, I maybe misunderstood you.

Realistic test also sounds interesting, you can shed some light on that as well.
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Rimtas this isn't the first time you have got defensive in this thread. Please don't take these discussions personally.

I'm not suggesting anything about having to be bullish.

When I talk about a 'realistic test' I'm implying that your 'forecasting' is inherently suggesting double digit unemployment, a plethora of companies going broke, months or even years of recession and a complete loss of investor confidence.

In my view XAO sub 2000 is an 'end of the world' scenario and my 'realistic test' to you is - do you really think that is the most likely outcome?

Perhaps you do, I don't know.
 

Those things have happened previously so whilst not a good situation, I don't think it fits with an "end of the world" description. We are, after all, living in the aftermath of past such events and overall things haven't been too bad.
 
Anything is possible at any time. I would not discount Rimtas forecast for XAO going all the way back to 2000.

It would not be the first time an index has been in a bear market for years. For example the Nikkei 225 was 40000 in 1990 and then fell to under 10000 twenty years later. Back in 1990 Japan was the envy of the world and everyone was poring money into a "sure thing".

What I don't agree about with Rimtas is that wave 3 is coming now. I think there is too much bearish sentiment around at present for that to happen and the market will either hang around this range or slowly move upward a little further in the next few weeks before the next major leg down takes hold. That is why for me it's just waiting game now. Rimtas was mega bullish with the XAO just as it peaked and got caught out. That's OK as it happens to all of us without exception, but it also stresses the importance of alternate counts when using EW as porper mentioned and not creating bias over one wave count
 
Japan ran to 40k on the back of a tech boom and has not had its population increase in 25 years.

This is my point - Build some context into Elliot Wave theory.
 
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