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What is the consensus, a V shaped, U shaped or W shaped recovery?
Elliott Wave and the XAO
- Thread starter OzWaveGuy
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XAO seems to finally be on the right side of what was resistance. Now a support line ?
(click to expand)
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Thanks Boggo, always appreciate your input. There is obviously a lot of trepidation in the market.
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The XAO has broken out of a 'X' wave triangle and continues towards the 6000 resistance levels. The X wave joins two a-b-c (three wave) corrections together and is quite often a triangle.
I doubt that wave 2 will complete as shown, but continue to develop as a more complex correction and thus this initial wave up is the first wave of a more complex wave 2 correction.
At 138% of the width of the X wave triangle, the XAO will be at the 6000 levels, hence a change in trend is possible to start a leg down. Caution will soon be needed as a strong leg down to form a 'B' wave could develop before returning to the 6000 levels (or higher) as a wave C (and perhaps to fill the gap from the initial leg down between 6000-6280).
This slow development of this leg up indicates corrective behavior, so still not a positive outlook for the XAO. Corrective wave patterns are usually hard to follow, esp if they are complex in nature, which this seems to be.
I doubt that wave 2 will complete as shown, but continue to develop as a more complex correction and thus this initial wave up is the first wave of a more complex wave 2 correction.
At 138% of the width of the X wave triangle, the XAO will be at the 6000 levels, hence a change in trend is possible to start a leg down. Caution will soon be needed as a strong leg down to form a 'B' wave could develop before returning to the 6000 levels (or higher) as a wave C (and perhaps to fill the gap from the initial leg down between 6000-6280).
This slow development of this leg up indicates corrective behavior, so still not a positive outlook for the XAO. Corrective wave patterns are usually hard to follow, esp if they are complex in nature, which this seems to be.
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The DJI is moving up in waves of 5 as previously discussed, and with Wave 2 assumed complete, there should be a strong wave 3 advance. If the advance doesn't materialize at this point in time, then there may be a remote possibility of an 'expanded flat' correction forming, where Wave 2 is not yet completed.
This is only a remote possibility at the moment, and is called out since the advance from the completed wave 2 (shown) is at 138% of the depth of the wave 2 decline. An expanded flat B wave usually won't go beyond 138% of the A wave down (in this case shown as wave 2).
This is only a remote possibility at the moment, and is called out since the advance from the completed wave 2 (shown) is at 138% of the depth of the wave 2 decline. An expanded flat B wave usually won't go beyond 138% of the A wave down (in this case shown as wave 2).
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The DJI looks to have completed a fourth wave triangle in the continuing 5 wave advance. Here it becomes interesting as to where the index will terminate. This wave count positions the final wave 5 to be no more than 30,274 (since wave 3 cannot be the shortest).
The previous DJI top is at approx 29,550, hence caution will be needed if the DJI enters the envelope between 29,550 and 30,273 as a major decline could materialise (Biden becomes president? haha). Alternatively, there is still the potential that a larger wave structure is unfolding and the decline will only be temporary as a larger wave 2 decline before a strong advance upwards takes place (trump retains the presidency? haha).
The notion of who is president has no or very little influence on the market.
Caution will soon be needed. Are you ready?
The previous DJI top is at approx 29,550, hence caution will be needed if the DJI enters the envelope between 29,550 and 30,273 as a major decline could materialise (Biden becomes president? haha). Alternatively, there is still the potential that a larger wave structure is unfolding and the decline will only be temporary as a larger wave 2 decline before a strong advance upwards takes place (trump retains the presidency? haha).
The notion of who is president has no or very little influence on the market.
Caution will soon be needed. Are you ready?
Garpal Gumnut
Ross Island Hotel
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The DJI continues upwards with waves (i) and (ii) complete of wave 5.
An observation on the construction of this larger wave that started in March 2020 to be aware of:
An observation on the construction of this larger wave that started in March 2020 to be aware of:
- Wave 1 is the subdividing wave (usually there's one subdividing wave in a 5 wave structure and it is often wave 3)
- It is not expected that wave 5 will subdivide as well as wave 1.
- Wave 5 may instead be forming an ending diagonal, and a hint of this is the small wave (i) could also be interpreted as a small 3 wave advance.
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The XAO appears to be confirming a position previously held: The DJI should see new highs, but the XAO will not and is correcting upwards.
The XAO so far has confirmed this position by exhibiting qualities that indicate a lack of strength to drive to new highs (time & wave structure) and helps confirm that the push upwards is merely a corrective wave.
I believe there's further upside for the XAO based on the difficult to interpret count of the second a-b-c push upwards. Perhaps a target area around 78.6% retracement (around the 6700 area) is a reasonable assumption for now.
Dropping below the first 'b?' would mean something else is unfolding and could indicate the larger decline is back underway.
The XAO so far has confirmed this position by exhibiting qualities that indicate a lack of strength to drive to new highs (time & wave structure) and helps confirm that the push upwards is merely a corrective wave.
I believe there's further upside for the XAO based on the difficult to interpret count of the second a-b-c push upwards. Perhaps a target area around 78.6% retracement (around the 6700 area) is a reasonable assumption for now.
Dropping below the first 'b?' would mean something else is unfolding and could indicate the larger decline is back underway.
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The last push up by the DJI is estimated as a 5 wave impulse pattern, and based on Fibonacci relationships:
- Wave (iii) ends at 28500, which is 161% of wave (i)
- Wave (iv) is a triangle (assumed)
- Wave (v) ends at 30036 (or slightly higher), which is 138% of wave (i), but cannot be more than 100% of wave (iii).
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XAO is continuing upwards and is now supported by the 61.8% retracement level, but....
The index appears to be moving up in a small 5 wave impulse move that almost looks complete, which is expected for the remaining wave 'c' of the 2nd a-b-c corrective wave upwards. If true, what is the expectation once this 5 wave move completes?
It is possible that a larger corrective wave is forming and there's more upside, however, the size of the current i-ii-ii-iv-v wave structure fits with other similar legs within the bigger wave 2 correction (see previous XAO post) and should indicate caution once this small impulse completes.
Dropping below the 61.8% support levels with force should be a warning, and further dropping below the 'b?' level indicates confirmation something bigger is occurring.
The index appears to be moving up in a small 5 wave impulse move that almost looks complete, which is expected for the remaining wave 'c' of the 2nd a-b-c corrective wave upwards. If true, what is the expectation once this 5 wave move completes?
It is possible that a larger corrective wave is forming and there's more upside, however, the size of the current i-ii-ii-iv-v wave structure fits with other similar legs within the bigger wave 2 correction (see previous XAO post) and should indicate caution once this small impulse completes.
Dropping below the 61.8% support levels with force should be a warning, and further dropping below the 'b?' level indicates confirmation something bigger is occurring.
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The DJI continues to climb past the 28500 levels, and the wave structure does support the count below with wave (iv) complete (also MACD is at an extreme for wave (iii)). Under this count, the last push up is now underway to complete wave (v) and the bigger wave 5. Breaking below the trend line would indicate caution for this smaller wave structure.
Looking at the Fibonacci relationships: Wave (v) could reach at least 29850 which is 100% of wave (iii) or move beyond this level.
It should be noted that in the last DJI post an error is made in red:
This is incorrect, wave (v) can be more than 100% of wave (iii). Third waves cannot be the shortest waves, in this case wave (i) is the shortest.
The MACD continues to show weakness (usually expected after the fourth waves), so caution is necessary at least on this smaller wave scale.
Looking at the Fibonacci relationships: Wave (v) could reach at least 29850 which is 100% of wave (iii) or move beyond this level.
It should be noted that in the last DJI post an error is made in red:
"Wave (v) ends at 30036 (or slightly higher), which is 138% of wave (i), but cannot be more than 100% of wave (iii)."
This is incorrect, wave (v) can be more than 100% of wave (iii). Third waves cannot be the shortest waves, in this case wave (i) is the shortest.
The MACD continues to show weakness (usually expected after the fourth waves), so caution is necessary at least on this smaller wave scale.
Long-time lurker but hopefully I'll have something worthwhile to say. I have not read this entire topic so if I go over old ground I apologise.
If you follow XAO/XJO closely you'd have to be disappointed with its only marginal new all-time high in February 2020. From this the most probable conclusion is that XAO/XJO did not resume a healthy trend up (aka bull market) from the March 2009 low. So, from an EWP perspective, the entire wave up from the March 2009 low must be part of a corrective structure or a motive structure that has corrective characteristics (i.e. a leading contracting diagonal).
I rule out the latter on the basis that there is not enough time for a second wave, third wave, fourth and fifth wave to play out of, I would say Primary degree, before the next GFC is due. Hang on you say, you know when the next GFC is due. I can elaborate on that if required but it's due 2026.
Secondly, when I look at the charts of the big four banks I see corrective structures that started at their 2007 highs and that have continued post their March 2009 lows. This supports XAO/XJO also being in a corrective structure.
Looking at the options for a corrective structure in XAO/XJO a zigzag has been ruled out because the all-time high in February exceeded the origin of the A wave (the GFC I decline). This leaves two simple options, a flat or a triangle and a third being a complex correction. I think a contracting triangle fits nicely, a structure that just drags on consuming time moving net sideways would be a perfect fit to end a fourth wave of I would say Supercycle degree. It also fits in with forecasts for no new all-time high to occur over the next 5+ years. If correct, we'll almost have two lost decades.
A more complex structure can't be ruled out but there are many ways this could play out.
As for the rally since the March 2020 low this could the first A wave of a B wave triangle one wave degree larger that fits with a zigzag that started at the February 2020 high. Only time will tell how complex this structure is.
I must express my thanks to @OzWaveGuy. Very few people comprehend that the EWP is the most difficult of all the approaches to TA. I'm sure you value his contributions here.
If you follow XAO/XJO closely you'd have to be disappointed with its only marginal new all-time high in February 2020. From this the most probable conclusion is that XAO/XJO did not resume a healthy trend up (aka bull market) from the March 2009 low. So, from an EWP perspective, the entire wave up from the March 2009 low must be part of a corrective structure or a motive structure that has corrective characteristics (i.e. a leading contracting diagonal).
I rule out the latter on the basis that there is not enough time for a second wave, third wave, fourth and fifth wave to play out of, I would say Primary degree, before the next GFC is due. Hang on you say, you know when the next GFC is due. I can elaborate on that if required but it's due 2026.
Secondly, when I look at the charts of the big four banks I see corrective structures that started at their 2007 highs and that have continued post their March 2009 lows. This supports XAO/XJO also being in a corrective structure.
Looking at the options for a corrective structure in XAO/XJO a zigzag has been ruled out because the all-time high in February exceeded the origin of the A wave (the GFC I decline). This leaves two simple options, a flat or a triangle and a third being a complex correction. I think a contracting triangle fits nicely, a structure that just drags on consuming time moving net sideways would be a perfect fit to end a fourth wave of I would say Supercycle degree. It also fits in with forecasts for no new all-time high to occur over the next 5+ years. If correct, we'll almost have two lost decades.
A more complex structure can't be ruled out but there are many ways this could play out.
As for the rally since the March 2020 low this could the first A wave of a B wave triangle one wave degree larger that fits with a zigzag that started at the February 2020 high. Only time will tell how complex this structure is.
I must express my thanks to @OzWaveGuy. Very few people comprehend that the EWP is the most difficult of all the approaches to TA. I'm sure you value his contributions here.
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The recent declines on the XAO look like a small a-b-c (3-3-5) correction with further upside potential to take the index to around the 6700 levels (78.6% retracement) to complete wave 2 up.
From here, dropping below 6000 would be significant and places the current count in danger and the wave structure to the current high (shown as 'v') would need to be re-evaluated. This whole last segment below can be evaluated in several ways, hence based on the evidence, there's a lower boundary at 6000 and an upper boundary at 6700 to establish some limits.
From here, dropping below 6000 would be significant and places the current count in danger and the wave structure to the current high (shown as 'v') would need to be re-evaluated. This whole last segment below can be evaluated in several ways, hence based on the evidence, there's a lower boundary at 6000 and an upper boundary at 6700 to establish some limits.
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The recent declines have provided some additional clarity on the XAO, namely the hard to follow sideways action on the hourly chart looks to be a large corrective (a)-(b)-(c) wave as a flat correction (3-3-5). The (c) wave being an ending diagonal with overlapping waves.
The (c) wave looks complete and the XAO should drive higher from here. There is allowance under this count for the (c) wave to drop lower and below 6000 and down to the levels near the end of the (a) wave at 5830 as flat corrections will sometimes do.
This means the 2nd a-b-c wave discussed here should now push up to complete the final wave c up, to possibly the 78.6% retracement levels at 6700.
The (c) wave looks complete and the XAO should drive higher from here. There is allowance under this count for the (c) wave to drop lower and below 6000 and down to the levels near the end of the (a) wave at 5830 as flat corrections will sometimes do.
This means the 2nd a-b-c wave discussed here should now push up to complete the final wave c up, to possibly the 78.6% retracement levels at 6700.
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The XAO has continued downwards to complete an ending diagonal pattern for wave (c). For this wave count to be valid, wave (c) is required to be a five wave structure - an impulse wave or a 5 wave ending diagonal to complete the larger flat correction wave 'b', which in this case is the latter.
A breakout of the ending diagonal has occurred, and the index needs to push upwards from here. A drop below the end of wave (c) means a bigger pattern is possibly unfolding and caution is required.
The MACD has been gaining strength while the index declined, providing some additional confirmation
A breakout of the ending diagonal has occurred, and the index needs to push upwards from here. A drop below the end of wave (c) means a bigger pattern is possibly unfolding and caution is required.
The MACD has been gaining strength while the index declined, providing some additional confirmation
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The DJI could be at a critical point with a potential to be beneficial for the bulls. If you recall in this post, the DJI was estimated to complete a five wave advance with a new high and reaching 29850 or higher. The index completed it's 5 wave advance, but only made close to 29200 before declining. So what's important about this?
There is an expectation once the DJI completes its 5 wave advance, there is a high possibility that the index would decline aggressively, even without a new high (5th wave failure). This decline would start with a small 5 wave drop, and grow into larger 5 wave declines. This has not happened.
Instead, a 3 wave a-b-c decline has occurred which poses the question: Is this a-b-c correction merely wave 2 of a bigger advance upwards? If so, then it appears a small 5 wave push upwards has occurred to support further rises on the DJI. It should be noted that the size of this correction looks small compared with the overall wave size of this advance from the March low, so caution is needed. Also, wave 2 declines can sometimes be deep (eg 61.8%), so this a-b-c correction for wave 2 does look out of place by not even reaching the minimum 38.2% retracement.
More time is needed for confirmation one way or the other. Breaking above the wave 5 top with force and in shorter time than the a-b-c correction took to complete should be confirmation of another advance upwards. If the DJI does indeed drive upwards, then a minimum target level could be at the 32500 levels.
There is an expectation once the DJI completes its 5 wave advance, there is a high possibility that the index would decline aggressively, even without a new high (5th wave failure). This decline would start with a small 5 wave drop, and grow into larger 5 wave declines. This has not happened.
Instead, a 3 wave a-b-c decline has occurred which poses the question: Is this a-b-c correction merely wave 2 of a bigger advance upwards? If so, then it appears a small 5 wave push upwards has occurred to support further rises on the DJI. It should be noted that the size of this correction looks small compared with the overall wave size of this advance from the March low, so caution is needed. Also, wave 2 declines can sometimes be deep (eg 61.8%), so this a-b-c correction for wave 2 does look out of place by not even reaching the minimum 38.2% retracement.
More time is needed for confirmation one way or the other. Breaking above the wave 5 top with force and in shorter time than the a-b-c correction took to complete should be confirmation of another advance upwards. If the DJI does indeed drive upwards, then a minimum target level could be at the 32500 levels.
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Small minute wave (iii) looks almost complete so expect some sideways movements to build out wave (iv). 6700 is still a target for this small impulse wave up.
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