The Elliott Wave Analysis Thread

[OzWaveGuy]

.....One of the reasons why it appeared to me that we were about to enter into a period of the market moving down was the perfect EW pattern that was being created by the price of oil......

Hi Rudy,

My view is that markets rarely influence each other. Whilst markets do get "in sync" and trend for periods of time eg S&P500 and XAO, looking at the finer details of the moves within the trends, they regularly demonstrate moves in the opposite direction to what one would think 'should' happen.

There's even a thread in ASX Chat forum that discusses these divergent moves https://www.aussiestockforums.com/forums/showthread.php?t=13652

I try not to let other markets dictate what analysis should be prescribed. The facts are usually in the chart you are looking at. Otherwise if you did, what market(s) would you choose? and how much influence would you believe they play? This is what the mainstream media usually use as 'their' analysis, and is nothing to do with elliott wave analysis whatsoever.

 

[Rudy]

Hi Rudy,

My view is that markets rarely influence each other. Whilst markets do get "in sync" and trend for periods of time eg S&P500 and XAO, looking at the finer details of the moves within the trends, they regularly demonstrate moves in the opposite direction to what one would think 'should' happen.

There's even a thread in ASX Chat forum that discusses these divergent moves https://www.aussiestockforums.com/forums/showthread.php?t=13652

I try not to let other markets dictate what analysis should be prescribed. The facts are usually in the chart you are looking at. Otherwise if you did, what market(s) would you choose? and how much influence would you believe they play? This is what the mainstream media usually use as 'their' analysis, and is nothing to do with elliott wave analysis whatsoever.

Hi OWG,

I understand the essense of what you are saying. There is no doubt that markets do 'influence' each other but it is also true that they are not in 'lock step' with each other. For example if the US market went down 300 points overnight it would definitely have an influence on our market. The degree of influence is obvously determined by many factors and this quite often leads to some surprising results.

I do however understand what you are saying though and agree with you that each market is self contained from an EW perspective and you don't really need another market to help you with your analysis. I very closely watch both the XJO and the S&P500 and they do have quite different patterns whilst at the same time tending to keep to similar major cycle counts. By that I mean that there is no way that the XJO would be in a wave 3 when the S&P500 is in a wave 4 in a major cycle. I find it quite helpful to look at the interaction of say the S&P500 and the XJO and in another case perhaps the price of oil and other commodity patterns. Observing the interaction between different markets sometimes (but not always) gives you an edge in your analysis.

 

[Page]

I can understand the spirit of what you are trying to say. I agree that with National and International economic news, this market manipulates each other but another truth is that these markets are not bounded with each other. It is true what you have explained by the help of an example. I do agree with your point. However, there is sometimes news in the market but people depending on news and updates are frustrated because they do not find any fluctuation in that particular currency or in the market. I had been working as a dealer for a forex company. Moreover, in my working period I have seen many people losing their money in this market in no time the reason was lack of knowledge and greed to make money in a short period.

Trading in this market requires patience and discipline in doubling your invested money. Keeping patience and discipline, I have learned through Insurance companies. What do these companies do they take your earned money for a particular time period and ensure you to double your money. You keep patience and discipline for it and after the maturity of that period; you get your money with interest. The reason is that the period given to you to withdraw your money. You will get the money at that time and cannot withdraw in between. Therefore, you wait for that period and get double amount what you have invested.

 

[OzWaveGuy]

For example if the US market went down 300 points overnight it would definitely have an influence on our market. The degree of influence is obvously determined by many factors and this quite often leads to some surprising results

Speaking of surprising, it reminds me of Nov 21st, the S&P500 lost around 50 points the night before (-450 on the DJI), so the expectation was a huge decline on the XAO. However, during the previous trading day, the XAO contained a very small secret - a small triangle was evident and indicated a change of trend or a correction was at hand. The obvious key was that 5 larger waves down was about to complete. A turn occurred at 1pm with a 190 point move to the upside and into the close with 50 points up for the day - the 5th wave down had completed at 1pm.

The XAO told the story, not the S&P500. So what's the XAO? I treat it as the combined psychology of all the traders and investors.

For example it was also the combined psychology of the ASF members who predicted the turn on the 21st even though they didn't know it - https://www.aussiestockforums.com/forums/showpost.php?p=364384&postcount=231 . Notice the last bar on the chart - it's the 20th of November, the members themselves indicated a turn was about to occur. Just like every major turn prior.

So the moral is, whilst markets may 'correlate', i try to avoid basing any analysis on external markets when looking at the XAO or other indexes. I may comment that markets appear 'in sync' for periods of time - but ultimately it is the chart that hides the truth, begging to be discovered

 

[OzWaveGuy]

As for the market action today and following on from here https://www.aussiestockforums.com/forums/showpost.php?p=382786&postcount=303

It looks as though a 3 wave move downwards is complete (in the form of a 5-3-5 zig-zag wave pattern). The push up today makes it a little too big to be a smaller correction as a subdivision of the thrust downwards. Something else may be unfolding.

Either there is still downside to go in the B leg of a triangle (or flat), but it must go up first in a 3 wave move before the downside kicks in again.

Note: See this posting https://www.aussiestockforums.com/forums/showpost.php?p=384380&postcount=314 on expanded flats, there was a reason I posted it when I did as it's possible that one may appear in a triangle leg - you may need to turn the chart upside down for this particular leg to make sense. Also a more complex correction downwards may play out with a flat (not necessarily an expanded one) being part of the correction itself.

OR

There could be further upside potential. A break above 3762 on the XAO would strongly suggest a different wave count is unfolding with more upside potential to follow. Like always, analysis of the waves in the short term will give more clues.

 

[Lachlan6]

So much for mybounce theory! Market tanking now. I spose the next question is how will this wave 4 pan out. In a larger triangle (now being the d wave) or just storm through to new lows. I will take another look at the end of today.

 

[Rudy]

As for the market action today and following on from here https://www.aussiestockforums.com/forums/showpost.php?p=382786&postcount=303

It looks as though a 3 wave move downwards is complete (in the form of a 5-3-5 zig-zag wave pattern). The push up today makes it a little too big to be a smaller correction as a subdivision of the thrust downwards. Something else may be unfolding.

Either there is still downside to go in the B leg of a triangle (or flat), but it must go up first in a 3 wave move before the downside kicks in again.

Note: See this posting https://www.aussiestockforums.com/forums/showpost.php?p=384380&postcount=314 on expanded flats, there was a reason I posted it when I did as it's possible that one may appear in a triangle leg - you may need to turn the chart upside down for this particular leg to make sense. Also a more complex correction downwards may play out with a flat (not necessarily an expanded one) being part of the correction itself.

OR

There could be further upside potential. A break above 3762 on the XAO would strongly suggest a different wave count is unfolding with more upside potential to follow. Like always, analysis of the waves in the short term will give more clues.

Hi OWG,

Here is an extract of a post that I did on another site yesterday near market close.

===============================================================================

I thought that it may interest you to see what's been happening with the XJO since our top at that famous 3818 level.



Now I'm probably jumping the gun in the above chart labeling the termination point of wave (b) at 3690 but the fact that it was spot on a Fibonacci point tempted me greatly. Of course there are many other Fib points and we may go up even higher tomorrow (eg. 50.0%, 61.8%, etc).

In fact there is nothing to say at this stage that we haven't even completed wave A yet. That's the beautiful thing about this EW stuff; it gives you the possible patterns but on occasions it takes time to determine which the correct pattern is.
==================================================================================

As it turned out my call was correct. The market opened today and plunged over 100 points. Fibonacci strikes again !

My view is that if wave A was completed as suggested in my post of the 13th January https://www.aussiestockforums.com/forums/showpost.php?p=384968&postcount=318 then wave B should retrace a minimum of 70% of wave A based on a Flat pattern scenario. In that scenario I still have us forming wave (a) of wave A.

If the XJO doesn't fall the anticipated 70% then my next scenario becomes the corrective triangle wave A that I posted in my post of the 11th January https://www.aussiestockforums.com/forums/showpost.php?p=384037&postcount=313. This is the scenario where wave A in fact is still incomplete.

 

[OzWaveGuy]

So much for mybounce theory! Market tanking now. I spose the next question is how will this wave 4 pan out. In a larger triangle (now being the d wave) or just storm through to new lows. I will take another look at the end of today.

Wave d?

 

[OzWaveGuy]

....probably jumping the gun in the above chart labeling the termination point of wave (b) at 3690 but the fact that it was spot on a Fibonacci point tempted me greatly. Of course there are many other Fib points and we may go up even higher tomorrow (eg. 50.0%, 61.8%, etc).

So what we have at the moment is a 3 wave decline with a 3 wave correction and another decline. I suspect that it's not a flat as the wave b you have hasn't traversed high enough (eg to 61.8% retrace or higher).

Whilst there are several possible interpretations, a double zig-zag with a joining X wave (your b) could unfold.

In any case, the good news is: the case for an unfolding triangle or flat for the larger wave (4) correction becomes stronger - as a corrective leg down (for the larger wave b) is expected , and it could be a complex correction that will be hard to stay in front of.

 

[Rudy]

So what we have at the moment is a 3 wave decline with a 3 wave correction and another decline. I suspect that it's not a flat as the wave b you have hasn't traversed high enough (eg to 61.8% retrace or higher).

Whilst there are several possible interpretations, a double zig-zag with a joining X wave (your b) could unfold.

In any case, the good news is: the case for an unfolding triangle or flat for the larger wave (4) correction becomes stronger - as a corrective leg down (for the larger wave b) is expected , and it could be a complex correction that will be hard to stay in front of.

Hi OWG,

Well spotted. My wave (a) of this B wave certainly looks like the 3 wave move and the (b) wave certainly looks like the 3 wave move you describe.

The chart below shows what the picture looked like a couple of hours ago.




Ignore the i and ii labels I put on the chart as it looked like we were in the early stages of forming an impulse wave.

If the pattern for (c) does turn into another Zigzag it will ensure that the B wave will qualify for a Flat pattern for corrective wave (4).

 

[OzWaveGuy]

For those EWers that have been following along - anyone care to take a guess as to what happened at around 2:45 this afternoon. Something fairly significant has occurred and has probably removed a key long term scenario from a 'possibility' to 'very unlikely'.

 

[Rudy]

For those EWers that have been following along - anyone care to take a guess as to what happened at around 2:45 this afternoon. Something fairly significant has occurred and has probably removed a key long term scenario from a 'possibility' to 'very unlikely'.

I'll bite. What was that event? Was it the fact that the market dropped below the start point of your circle c wave for wave A?

 

[OzWaveGuy]

It was indeed Rudy. This means the scenario for the "end of the bear market" from the low on the 21st Nov is no longer a valid interpretation. What would have made it valid was seeing 5 clear waves up from the low - which we did initially see a small 5 wave advance (to make wave 'a' circle upwards).

However, 5 larger waves up can no longer be considered, since the start point of the small second 5 wave advance shown as wave 'c' circle (or end of the double 3) has been broken by today's market action. It is still possible for the XAO to advance higher, but in a corrective capacity of higher complexity. This scenario will be a second count, and has been discussed in the past on some of the long term predication charts.

The long term primary count now starts to become a strong possibility with major new lows in the not so distant future.

Following on from here https://www.aussiestockforums.com/forums/showpost.php?p=385699&postcount=325 In the short term new lows should occur soon either as a result of the current wave (4) correction unfolding now or as wave (5) down commences a strong push down. I have updated the chart below to provide a possible path based on the 3 wave decline. An X wave joins the two 3 wave a-b-c corrections

A possible double zig-zag correction is unfolding for wave 'a' circle in the declining B leg of a flat or triangle. If true, wave 'b' circle up would be 3 waves and retrace 61% or more of wave 'a' circle down. Following would be 5 waves down to complete wave 'c' circle. The B leg would end up being a flat of some type.

 

[Rudy]

It was indeed Rudy. This means the scenario for the "end of the bear market" from the low on the 21st Nov is no longer a valid interpretation. What would have made it valid was seeing 5 clear waves up from the low - which we did initially see a small 5 wave advance (to make wave 'a' circle upwards).

However, 5 larger waves up can no longer be considered, since the start point of the small second 5 wave advance shown as wave 'c' circle (or end of the double 3) has been broken by today's market action. It is still possible for the XAO to advance higher, but in a corrective capacity of higher complexity. This scenario will be a second count, and has been discussed in the past on some of the long term predication charts.

The long term primary count now starts to become a strong possibility with major new lows in the not so distant future.

Following on from here https://www.aussiestockforums.com/forums/showpost.php?p=385699&postcount=325 In the short term new lows should occur soon either as a result of the current wave (4) correction unfolding now or as wave (5) down commences a strong push down. I have updated the chart below to provide a possible path based on the 3 wave decline. An X wave joins the two 3 wave a-b-c corrections

A possible double zig-zag correction is unfolding for wave 'a' circle in the declining B leg of a flat or triangle. If true, wave 'b' circle up would be 3 waves and retrace 61% or more of wave 'a' circle down. Following would be 5 waves down to complete wave 'c' circle. The B leg would end up being a flat of some type.

Hi OWG,

The idea of a double Zigzag does ring true for me. My only question mark is that whilst the general shape of the 3 wave move from the termination of your circle c looks like a Zigzag, the first wave (a) could be seen to be an impulse wave but if you correctly label wave (b) as a 3 wave move then wave (c) only looks to have 3 waves in it rather than the required 5 waves. At present your (b) wave only has one wave in it.

Cheers

Rudy

 

[OzWaveGuy]

...In any case, the good news is: the case for an unfolding triangle or flat for the larger wave (4) correction becomes stronger - as a corrective leg down (for the larger wave B) is expected , and it could be a complex correction that will be hard to stay in front of.

The short term XAO structure is moving in 3 wave moves (in just about all directions) at the moment which indicates corrective wave formations both down and up.

There are still a few interpretations of the EW structure and I have provided my primary count below. The count indicates a possible short term upward move before wave 'b' circle finishes and heads lower. The rationale is that the upward move from Jan 15th is corrective and will count better with another 3 wave move to the upside (perhaps to 38.2 or 61.8% retracement).

Consolidation patterns like the current wave (4) can be difficult to trade overnight due to the complexities with 3 wave short term moves. However, the recent double three (part of the A leg) was quite an outstanding signal and the thrust out of the double 3 was a pleasure to trade - even though it was short lived.

If a triangle is unfolding for wave (4), then catching the thrust downwards into wave (5) at the right time will be key as it is expected the remaining contracting legs of the wave (4) triangle will become harder and harder to trade and will most likely suit intra-day strategies.

Cheers

OWG

 

[Rudy]

The short term XAO structure is moving in 3 wave moves (in just about all directions) at the moment which indicates corrective wave formations both down and up.

There are still a few interpretations of the EW structure and I have provided my primary count below. The count indicates a possible short term upward move before wave 'b' circle finishes and heads lower. The rationale is that the upward move from Jan 15th is corrective and will count better with another 3 wave move to the upside (perhaps to 38.2 or 61.8% retracement).

Consolidation patterns like the current wave (4) can be difficult to trade overnight due to the complexities with 3 wave short term moves. However, the recent double three (part of the A leg) was quite an outstanding signal and the thrust out of the double 3 was a pleasure to trade - even though it was short lived.

If a triangle is unfolding for wave (4), then catching the thrust downwards into wave (5) at the right time will be key as it is expected the remaining contracting legs of the wave (4) triangle will become harder and harder to trade and will most likely suit intra-day strategies.

Cheers

OWG

Hi OWG,

Here's my estimated target levels for the termination level of wave B.

 

[OzWaveGuy]

The All Ords continues to decline in a stepped structure which is leading me to believe wave B may be a triple zig-zag correction (11 waves). The next few days should validate this scenario.

If a triple zig-zag unfolds as indicated below, then I would be a little hesitant to call wave (4) a triangle and lean towards a flat (3-3-5) instead.

Under a flat scenario, wave B should complete similar to the chart below and wave C up should complete as a 5 wave impulse move. Wave C's in a flat can be as long as wave A (or longer), but they can also fail as well and only traverse a small amount. This certainly could happen due to the negative sentiment on XAO.

I'm in the US at the moment, and the mood is certainly negative and the massive turnout for Obama's inauguration indicates to me that many are 'hoping' for change in order to resurrect the US economy amongst other things. This 'hope' didn't translate to US stocks on the day, seeing a massive slide on the major indexes.

I suspect wave (5) down on the S&P500, XAO, DJI should commence soon and it could be a significant affair.

 

[OzWaveGuy]

Discussed a couple of weeks back here https://www.aussiestockforums.com/forums/showpost.php?p=382786&postcount=303

I previously discussed a triangle for wave B of wave (4) on the XMJ and thus indicated a turn was soon approaching. The turn on the XMJ has occured and there is a case for the completion of wave (4). Obviously a new high above the labeled wave (4) would indicate a different count in the short term.

However, I believe the completion of wave (4) ties nicely into the overall market position on the XAO. Hence, I would expect the XMJ to decline and the first correction (wave 2 up) would tie in with the XAO wave C as discussed earlier.

Under this scenario wave (5) could head down towards some key Fibonacci levels acting as support around 4600-4700 (at this level there is also support dating back to 2002-04). This where wave (5) could equal wave (1) and be 61.8% of wave (3) at roughly the same time. We should have a clearer view once the first 2 waves are complete and after further analysis of the XAO and XMJ.

Cheers

OWG

 

[OzWaveGuy]

From reading various posts in other threads on Fibonacci and how best to apply it, i am under the impression that there's probably an even split between people who think Fib provides value and those who think it does not.

I hope there are compelling reasons for using Fib for trading purpose under EW as the accuracy can be quite good if used correctly. Unfortunately for the non-EW folks, Fibonacci may not be quite as useful.

One reason is that under EW, there are clear wave relationships that can help identifying turn points. However, the starting/ending points of waves may not be obvious to non-EWers (eg wave 4 triangles), hence fib relationships can be much harder to find (or non-existent).

This also applies to time as well. Fib relationships can also be found here also.

Anyone with specific thoughts on this topic?

 

[Hudlass]

Hi OzWaveGuy,

Firstly, thanks for the greats posts. I've subscribed to some of the more well known EW services over the years and your commentary is definitely up there.

I would vote for Fib relationships having value - especially with EW. I think it would be harder to apply those ratios without EW.

Cheers.