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The Elliott Wave Analysis Thread

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Thanks for the positive feedback Hudlass.

I consider Fib techniques to be key for EW analysis

Cheers

OWG
 
Following from here https://www.aussiestockforums.com/forums/showpost.php?p=389134&postcount=337 , 11 waves down did not eventuate. Instead 9 waves down is complete - or in other words an impulse wave that implies more downside to follow after a short lived correction.

This short lived correction should take several days to unfold and may reach between 3460 to 3540 (a previous wave 4) with strong resistance at 3500. When complete, would be considered a small corrective 'b' wave, to be followed by another leg down. The completion of this leg down should finalize wave B of a wave (4) flat. This may take the XAO to new lows before wave C up commences.

An alternate count should be considered as well. There is a case for Wave (5) down having commenced already, with wave 1 of (5) completed, and the current upwards move is wave 2 of (5). I don't favor this count as this would mean wave (4) has unfolded as a zig-zag in a very short timeframe and is similar to wave (2) that started in March 08. Hence, not enough alternation between waves 2 and 4 for my liking

Cheers

OWG
 
X wave interpretation?

Hi OWG,

Apologies for defacing your chart, but could the following be at play...

The 21st Nov to 7th Jan was the 1st a-b-c
We've concluded an X wave at the recent low
Another a-b-c is about to take us up to around 7th Jan highs
This completes a 'complex' wave 4 (alternating with the 'simple' Mar-Sep 07 wave 2)
Then 5 waves lower for the final 5th?
 

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Re: X wave interpretation?


No probs, always welcome other views as there can be several interpretations.

Some rationale on why this scenario may not happen:
If the 'X' wave on your chart had completed with 11 down (eg A triple zig-zag correction) then a double zig-zag could have been a possibility for the larger wave (4) - at this point in time.

However, as the 'X' wave completed with only 9 waves down, which is an impulse move - then there needs to be at least another 5 waves down once this correction completes (to complete wave B)

It is possible that once this second wave of 5 down finishes, then the corrective 'X' wave becomes a reality should the market move up in three waves. However in that scenario I would lean towards an unfolding triangle for wave (4) which typically has greater odds in wave 4 positions

Hope this clarifies my thinking

Cheers

OWG
 
One way to leverage various indicators in Elliott Wave is the use of MACD. Although you can use EW by itself without indicators (and some people do), there may be times when the use of an indicator or two may help in identifying wave termination points

Many folks use MACD for it's crossover or diverging/converging qualities in trade setups. As an EWer you can also use the MACD signal line to identify wave 3 termination points or even to determine whether a 3 wave correction has run it's course (hint: like today's XAO action)

The MACD signal line tends to move into under/oversold positions at or near the termination of wave 3. Wave 5 will usually not see a move past the wave 3 under/oversold position.

For those that are interested, I suggest trying it yourself, looking for oversold/undersold MACD positions at various time scales to see whether wave 3's terminate as described above.

More info on MACD is here http://stockcharts.org/help/doku.php?id=chart_school:technical_indicators:moving_average_conve
 

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The 3500 resistance level was almost hit today, and I was looking for a series of 5 waves down to determine if this small upwards rally was near completion. It appears a small zig-zag correction (5-3-5) occurred from the high this morning, indicating that there needs to be a push higher to complete this upwards correction.

Wave b of this small zig-zag appears to be a triangle (11:50 - 14:40 on the 5min XAO chart), indicating more upside to go or a more complex correction needs to unfold.
 
As mentioned today on the XAO analysis thread - the current count would look a whole lot better with another push up.

The final push upwards to complete wave 'b' circle is estimated to be 61.8% of wave (a) up - around 3533 (which is also a 50% retracement of wave 'a' circle down).

The 28.95 point decline on the US S&P500 in last night's session did little to influence the XAO after the first 15 mins trade today - seeing the XAO finishing 16 points up at the close. This can certainly undermine confidence if the belief is the Australian Market simply (or blindly) follows the US markets.

There are other interpretations that are also valid, but the impulse move down to form wave 'a' circle indicates another push lower is needed to (at a minimum) complete a zig-zag (5-3-5) correction for the larger wave B. Hence, wave 'b' circle up will need to end now or very soon - ideally at one of the previous wave 4 positions (as shown on the chart below).

Cheers

OWG
 

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  • 30 Jan 09 XAO.jpg
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Market updates for the day
To end the week in Asia, traders scurry to the security of the so-called ''safe haven'' the currencies of US and Japan, amidst inferior equities spread from the US to Asian markets. With prosperity of depressing data to go around, counting horrid Japanese Industrial Production and employment data in Asia and deprived durable goods, and employment in the US, traders looked at the worldwide recession as worsen. Currency of US and Japan dropped like a stone through the session, falling from original highs of 90.14 to lows of 89.19 as the hours passed. The EUR/USD made similar moves, opening near 1.2946 highs and gradually grinding to lows of 1.2881 before steadying out ay 1.2900 by London's open. Overall, both the Dollar and Yen victimized the Euro today while ECB members sustained to talk in circles about the destiny of Europe's single currency. EUR/JPY opened close to its highs of 116.65 and chop down to just a pip under 115.00 over the day. Later we have the Euro Zone CPI and employment data to watch.

Other currency pairs of note, GBP/USD declined with the stronger Dollar, affecting from near 1.4300 to just less than 1.4200 before bouncing 50 to end the session. The AUD and NZD both originally dropped, but both managed to make up about half of their losses by the end of the sessions. Australian Dollar and US Dollar were at 0.6480 up from a 0.6423 low, New Zeeland and US Dollar were near 0.5125, up from session lows of 0.5076.

Upcoming Economic Data Releases (London Session):

1/30/2009 7:45 FR Producer Prices (MoM) DEC -1.90% -1.10%
1/30/2009 7:45 FR Producer Prices (YoY) DEC 1.60% 0.30%
1/30/2009 9:30 UK Net Consumer Credit DEC 0.8B 0.7B
1/30/2009 9:30 UK Net Lending Sec. on Dwellings DEC 0.7B 0.6B
1/30/2009 9:30 UK Mortgage Approvals DEC 27K 26K
1/30/2009 10:00 EC Euro-Zone CPI Estimate (YoY) JAN 1.60% 1.40%
1/30/2009 10:00 EC Euro-Zone Unemployment Rate DEC 7.80% 7.90%
 
OzWaveGuy said:
The final push upwards to complete wave 'b' circle is estimated to be 61.8% of wave (a) up - around 3533 (which is also a 50% retracement of wave 'a' circle down).
Click to expand...

Hi OWG,

Could we push a bit higher toward wave equality with wave (a) up and the 61.8% retracement of wave 'a' circle down?

Cheers,

Paulh.
 
phudlass said:
Hi OWG,

Could we push a bit higher toward wave equality with wave (a) up and the 61.8% retracement of wave 'a' circle down?

Cheers,

Paulh.
Click to expand...

Yep - there's no reason why it can't, and waves will try for equality. 61.8% is simply a 'safe' target where a reversal can occur. 50/50 odds on hitting 100% or 61.8%
 
OzWaveGuy said:
Yep - there's no reason why it can't, and waves will try for equality. 61.8% is simply a 'safe' target where a reversal can occur. 50/50 odds on hitting 100% or 61.8%
Click to expand...

What's your view with today's action. A bit more to go?
 

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It appears that the small wave (b) from the chart here https://www.aussiestockforums.com/forums/showpost.php?p=392272&postcount=347 , is still unfolding and looks to be a triangle. If true, then a push up should be forthcoming to 3533 or slightly higher.

Once the downtrend has resumed, we will need to assess the possibility that wave (4) has already ended and wave (5) down is currently underway OR if wave (4) is still unfolding (likely).

Also, I believe it will soon be a good time to assess when possible events (planned or unplanned) may unfold as social mood continues to turn negative. Wave (5) down could be a catalyst for such an event that appears to push the indexes lower before the market reverses (eg like on Sept 11 2001)
 
So who wants to call this one?

Has the XAO topped? Possibly, the leg up today is 38.2% of the (a) leg - so there's a fib relationship, although the time to complete this last leg up was a little quick compared to the (a) leg.

There is evidence of a small series of 5 wave structures down that has unfolded. A break below the end of the wave (b) triangle of 3438 will confirm the resumption of the downtrend (or a more complex correction is unfolding for the (b) wave).
 


Hi OWG,

When the wave from the 7th January to the 23rd January (your wave circle a) turned out to be an impulse wave I believe that the possibility that the 7th January could have been the completion of wave (4) turned into a real option.

I still have a leaning towards your current wave count which suggests that we are still constructing wave (4) and that we are in the process of creating the later stages of wave B of wave (4).

Your main arguments in a previous post against the wave (5) proposition was on the grounds of 'time to complete' and alternation (ie, wave (2) and wave (4) should be different) but we need to keep in mind that alternation is a guideline and not a rule. Statistics that I have seen on the occurence of alternation puts it at around 61.8% of the time so it is not an argument that can be used to definitely rule out a particular wave count. As I understand it wave 4's usually complete in a range of 100% ~ 268.1% of the time take by wave 2's so your your 'time to complete' argument is reasonable. Mind you the time to complete wasn't too far short of 100%.

My main reason for ruling out the wave (5) proposition is that it would require a complete layer of wave level to be 'disappeared' in order to come to the conclusion that the wave (5) proposition was correct.

What I mean by the above statement is that your current wave count has wave A terminating on the 7th January. Wave A was made up of 3 lower order waves; from memory you used waves (a), (b) and (c). Wave (a) terminated on the 28th November 2008. Now for your current wave A to become wave (4) it would mean that your wave (a) would have to be wave A, and your current wave A termination would have to be the new wave C termination point. Hence the level of waves (a), (b) and (c) have disappeared into the ethers.

I'm not sure if I'm explaining myself clearly enough but it's the best I can do.
 

Correct. But the odds are high that a triangle will unfold for 4th waves, so one needs to lean in that direction until proven incorrect. In any event, the move should be down and very tradeable, but be aware that a leg up to form wave C of a triangle or flat may appear.

Not sure I follow the rest of the post - sorry

Cheers

OWG
 

Hi OWG,

I'll try and explain that last bit of my post again

I believe that one of the biggest problems facing EW analysts is what I call level confusion. For example assuming that we have labeled a completed cycle as waves (1), (2), (3), (4), (5), (A), (B) and (C). That would mean that the waves one degree/level down would be labeled waves 1, 2, 3, 4, 5, A, B and C.

If some one labeled a completed cycle as waves (1), (2), (3), (4), (5), A, B and C you would immediately say that the corrective waves A, B and C were labeled at the wrong level.

Now, I take you back to an earlier post that you kindly provided us in which you had the following chart.



Please ignore the fact that at the time not enough of the pattern from the 7th January had revealed itself so that it could be identified as an impulse wave. The thing I want to concentrate on is purely the labeling notation of the waves.

As you can see the sub waves of A were circle 'a', circle 'b' and circle 'c'. I suggest that you used that labeling to indicate that you were keeping the wave count at the same level as the previous market action.

To propose that the termination point for wave A to suddenly be the termination point for wave (4), it would require sub wave circle 'a' to become wave A, sub wave circle 'b' to become wave B and wave circle 'c' to become wave C thus completing wave (4).

This is what I mean when I say that this propostion would require a complete level of waves to disappear into the ethers, namely wave circle 'a', circle 'b' and circle 'c' (it would also obviously affect the labeling of all of the lower level waves as well).

The only other explanation would be that when you commenced labeling your chart of the market action subsequent to the 21st November 2008 that you had incorrectly selected the labeling for one level down. I certainly don't say this as a criticism because I have done exactly the same thing. Our labeling led us to the conclusion that we are currently still creating corrective wave (4) and not in a wave (5) down leg.

I hope that I have explained myself a little clearer this time.
 

Yes, basically the analyst could remove a label (representing a wave degree) depending or not if the wave subdivides. So if wave (4) has already finished, then the subdivisions within it will (most likely) no longer be represented by wave a, b and c circle, but instead would be A, B, C. It isn't an exact science and analysis of prior wave action will help working out the right degree.

For wave 2 and 4's it's no big deal as corrections are always hard to stay in front of anyway and re-labeling is common. The key is to pick sub-divisions within waves 1,3 and 5 as these are the impulsive waves that can stretch on for sometime. Back in Oct/Nov last year when charting the projected roadmap for the XAO, I simply assumed that wave (3) down would be subdividing and also be the extended wave as this is common for wave 3's. It turns out that this assumption was correct.

I wouldn't call it label confusion, many EW analysts simply don't take the time to work out a suitable labeling system. If your not posting charts for others to see then a detailed labeling system may not provide a whole lot of value anyways.
 

A break below 3438 has occurred. I seriously doubt that the XAO will form a new short term high, although there is room for a bounce.
 
OzWaveGuy said:
A break below 3438 has occurred. I seriously doubt that the XAO will form a new short term high, although there is room for a bounce.
Click to expand...

Hi OWG,

I agree with your doubt that we will get a short term high in our market however I can't think of a pattern to explain sensibly the market action from the 23rd January to the current date. I had thought that the rally from that date (wave (a)) was an impulse but if it was a 3 wave move then one pattern that perhaps may fit is the following. This proposes what Prechter calls an 'expanding reverse symmetrical' corrective triangle for wave (b).

Apologies for using the XJO rather than the XAO but that's the index that I tend to follow.

 
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