XAO Technical Analysis

[rimtas]

Hi Penn,

Further deterioration in some regional indices calls into question whether short-term lows are nearby. Australia and Hong Kong continue to decline steeply. India is at a critical juncture where a rally is required to maintain the intermediate-term bullish trend.

The ASX 200 broke lower today and as I write futures continue to slide to new lows this night.
The brief sideways correction last week counts best as a fourth-wave triangle as shown on the intraday chart, though smaller time frame subdivisions are not a triangular waves so this count is questionable. If you notice the RSI index below does not show any positive divergences that should be typical for 5th waves, so I should be cautios about labeling it as a first wave down which implies a temporary bottom and rally ahead starting this week.

My discipline tells me to avoid picking bottoms during steep declines, especialy when the trend in momentum indicators remains bearish.




The Australian market is extremely weak here. When looking at the weekly, we can see that recent decline is so powerfull, that it instantly reached the 5 year RSI uptrend line-a good spot to stop and start a rally.
iF this week closes lower it tells me that this medium term uptrend is broken. This event will immediately puts us to longer term timeframes which are very very messy and unclear.





But for now let's see whether this decline is over as a first wave (circled), because if it is, it should rally almost immediately tomorrow, unless market decide to sport a small Ending Diagonal as the (v) wave.

One more note-because market is oversold short-term, failure to relieve a pessimistic presure will usually result in a crash. I am monitoring a US markets(and the rest of the world as well) and they seem to be in a juncture of either crash or rally, I can't see any sideways from here in US.

Tommorow I'll post more charts and thoughts... Cheers

 

[rimtas]

One interesting ASX long term chart, but I am suspicious about Cycle Wave b being so short in terms of time... But not ruling out this possibility, for this to gain more weight we should decline in 5 waves till the middle of next year, which should be Primary 1 of Cycle c.

 

[Porper]

One interesting ASX long term chart, but I am suspicious about Cycle Wave b being so short in terms of time... But not ruling out this possibility, for this to gain more weight we should decline in 5 waves till the middle of next year, which should be Primary 1 of Cycle c.

View attachment 59612

Not sure what you mean about wave-b as it's taken much longer to form than wave-a so looks ok time wise i.m.o. Also, the recent high has terminated around the wave equality level & the 61.8% retracement level of the prior leg down. No doubt that we have been correcting higher the past few years though which doesn't bode well. It's a bear market bounce...unlike the U.S.

 

[rimtas]

Not sure what you mean about wave-b as it's taken much longer to form than wave-a so looks ok time wise i.m.o.

I meant wave b is short relative to prior impulse wave from 1974.(the same with wave a) It could extend to new highs forming a much bigger wave b of an Expandet Flat , like US.

It's a bear market bounce...unlike the U.S

USA is also in a bear market bounce....With current most extreme sentiment readings it will unlikely to form a full impulse wave from 2009, leaving it as a b wave.

 

[rimtas]

The ASX 200 was deeply oversold (and still is). The 5-day breadth oscillator shows a bullish divergence signal, which ads confidence to the count that wave I (circled) is complete. But any rally now is likely to be minimal. The downside momentum is strong on the larger timeframes. The ASX is very much on my avoid list, but I recognize that a rally back to the 5400-5500 area is likely in coming sessions.

 

[Porper]

I meant wave b is short relative to prior impulse wave from 1974.(the same with wave a) It could extend to new highs forming a much bigger wave b of an Expandet Flat , like US.



USA is also in a bear market bounce....With current most extreme sentiment readings it will unlikely to form a full impulse wave from 2009, leaving it as a b wave.

View attachment 59629


View attachment 59630

If you are correct then wave-b is extremely deep and looks impulsive in nature. Usually wave-b will not be more than 1.382x the length of wave-a. In this chart it has exceeded 1.618 the length of wave-a. To me the larger correction that commenced in 1999 completed as a flat with strength from 2009 being the initial stages of a multi-year trend that has plenty of room to run. A correction is overdue though.

 

[Porper]

The ASX 200 was deeply oversold (and still is). The 5-day breadth oscillator shows a bullish divergence signal, which ads confidence to the count that wave I (circled) is complete. But any rally now is likely to be minimal. The downside momentum is strong on the larger timeframes. The ASX is very much on my avoid list, but I recognize that a rally back to the 5400-5500 area is likely in coming sessions.


View attachment 59631

We totally agree on the XJO chart...a bounce only expected, then down to 5000. Good support down there though so whether we'll get lower is debatable.

 

[rimtas]

In this chart it has exceeded 1.618 the length of wave-a.that has plenty of room to run. .

I do not know how you calculated, but it is 1.38 retracement.
As noted in Elliot Wave Principle(p.89), normaly the maximum retracement for wave B of an expandet flat is 1.382 times the lenght of wave A.
In the current case, wave a itself is an expandet flat, so the retracement pertains to its total height. Using Daily closes, wave b from the 2009 low of 6547 to the high in 2014 of 17.280 covered 10.733, retracing ~1.390 of wave C (circled) of a.




In other chart we can observe that the 2007 and 2014 highs are each ~20.85% above the respective highs of 2000 and 2007. This is manifestation of symetry in the form of equal net gains above previous highs by adjacent advancing waves. And in shorter time frames(not shown) DOW already has started to decline, so probability for a massive reversal is very high. I think ASX will follow if this count is correct.

 

[Porper]

I do not know how you calculated, but it is 1.38 retracement.
As noted in Elliot Wave Principle(p.89), normaly the maximum retracement for wave B of an expandet flat is 1.382 times the lenght of wave A.
In the current case, wave a itself is an expandet flat, so the retracement pertains to its total height. Using Daily closes, wave b from the 2009 low of 6547 to the high in 2014 of 17.280 covered 10.733, retracing ~1.390 of wave C (circled) of a.

View attachment 59632


In other chart we can observe that the 2007 and 2014 highs are each ~20.85% above the respective highs of 2000 and 2007. This is manifestation of symetry in the form of equal net gains above previous highs by adjacent advancing waves. And in shorter time frames(not shown) DOW already has started to decline, so probability for a massive reversal is very high. I think ASX will follow if this count is correct.


View attachment 59633

The difference is you are calculating from the 2007 high...which as you correctly state is the actual high of the expanded flat. The start of wave-A however is from the 2000 high. That is where I think the projection should be made from as it's the terminal point of the prior leg. My count is less bearish but allows for a significant decline... assuming a top is in which is by no means certain.

 

[rimtas]

Hi Proper, what do you mean in your chart by labeling advance "1 or A"?

I think you need more history to assess the size of the waves...









There are even more data, but for this time it is enough to see that this is definately not the 1st wave...

JUst hipoteticaly guesing where will be ASX if the DOW crashes below 1000 in the next 8 years? I gues somewhere below 500....Cheap houses once again for those who will manage to keep cash safe, and broken lives for those who are in debt or in stocks...
Many companies will fail and be delisted, majority of blue chips will seek mergers to survive, dividends will be off the table for very long time, uneployment will soar and realestate prices will crash.

Hey, don't judge me, it is just a wild ques what could hapen if market enters a big bear. As for now better let's focuse of what is happening-the markets are in uptrend medium term, no any confirmation about the biger size top.


Sorry for offtopic, looks like XAO technical analysis turned into DOW technical analysis...Next time I will work out more with ASX, just before I heavily traded in US markets so have a massive amount of material about it.

 

[Porper]

Where to start the count is the grey area to me. That aside I just can't see Armageddon unfolding which is what you offer with your wave count.

This is the main problem with Prechter and his merry men i.m.o.. (not suggesting you are one of them) he has been bearish since 2000 to my knowledge, maybe earlier. He has lost his subscribers all their money advocating short positions and DOW sub 100. He still runs the doom and gloom message. It just isn't going to happen...it's not reality. However, it is good for gaining more subscribers...people love the big calls. Yes, totally off topic so back to the XAO next time!

 

[rimtas]

Where to start the count is the grey area to me.

You can start it from here






And a bit about Prechter and his team-first and foremost they are market forecasters, not traders. Forecasts do go wrong sometimes, no one has a crystal ball.

 

[Porper]

You can start it from here


View attachment 59737



And a bit about Prechter and his team-first and foremost they are market forecasters, not traders. Forecasts do go wrong sometimes, no one has a crystal ball.

I was talking about the longer term count, the smaller degree patterns are crystal clear. Impulse down to be corrected only...then more downside to 5000 - give or take. Longer term patterns not so clear.

As for Prechter there are 2 positives. He almost single handidly brought back the Wave Theory from the dead. Secondly he won the trading championships, albeit many years ago.

Yes, he is a forecaster but do you think his subscribers join just to see a forecast? No, they use his analysis as buy/sell signals. He has been wrong for decades now, not months. I was a subscriber in the past and his calls were dismal to say the least. I give credit where it is due, but he says the same old thing...doom and gloom and Dow to 500. He has been wrong and will continue to be.

 

[rimtas]

Well...what can say...before judge anyone using EW as a trading tool, first show your counts and forecasts near/intermediate and long term, show how you trade, what you see. Where the setups are and why.
DOW, ASX, any stocks.
I do not know why you are in the markets, but I am here to make money. And money can be made not by using someone forecasts, but by using your discipline. Even In the greatest bull markets, most people are loosing money despite everyday piar form mass media about "average annual returns" which they say, are always positive long term(which is a bogus).
Trading/investing has nothing to do about economy or stock picking, it is a battle with your own emotions.

Cheers

 

[rimtas]

Back to TA..

looks like the wave i(circled) bottom is in, so a multiweek corection is ahead. Because market crosed two bullish trendlines, the most likely targets are backtesting one of them from below. So it could be a shalow corection, like EUR/USD (in time), o sharp and scary(for bears) in price. You never know in advance.

 

[Jens]

Trading/investing has nothing to do about economy or stock picking, it is a battle with your own emotions.

It sure is...I have been battling with my emotions for years.

 

[Porper]

It sure is...I have been battling with my emotions for years.

For those that can't get to grips with the emotional side of trading there is always the option of using a mechanical system. There are many around though you will have to pay a small fee for the good ones.

 

[PennD]

Hi Rimtas,

looking at the over night action in the US and asx futures, wave one bottom look to be taken out today...?

This wave 2, (if it ever materialises?) would be a very profitable trade... Finding it is the hard part

Cheers

 

[rimtas]

Hi Rimtas,

looking at the over night action in the US and asx futures, wave one bottom look to be taken out today...?

This wave 2, (if it ever materialises?) would be a very profitable trade... Finding it is the hard part

Cheers

Hi Penn, I suggest never trade wave 2, no mater what size it could take. It can only be used to liquidate the remaining positions that were not sold near the top, before the wave 3 crash. This especially can be said about the moves from an Ending Diagonals, because they accumulate so much optimism without rising prises, that the movements from their top almost always are sharp and scary for bulls, producing only little corrections underway.

Maybe wave 2 is already upon us, but this shows that a market is very weak, and crashes occurs only when the market is oversold and is unable to rally.

US indexes are still not in the wave 3 zone and price action suggests that series of first and second waves are in operation, or when you look on a smaller timer frames it started to get the shape of an Expanding Leading Diagonal, which when forming from the top suggests that a 3 wave would be very steep. This pattern appears to be ending, and if it ends today, next week we could see a sizable wave 2 rally, ASX should follow.

But if DOW crosses (and closes below)the ED lower line, there will be no corrections up and most likely wave 3 is underway. It is better not to have any long positions open during this time.

 

[rimtas]

I decided to take a look at a smaller time frames, though the best for wave analysis is to go with daily or weekly charts. But anyway, today market crashed 2% and I thought it is worth to take a look.

What I see right now is that from the last corrective top which I labelled wave (iv), market started to move in tree waves, which immediately forced me to think that an Ending Diagonal is in the works. They take time to form, but each wave within is slower and slower, as RSI at the bottom suggests. If this scenario materializes, next week All Ords will hit the bottom somewhere in 5100-5000 range. It could also sport an Expanding pattern (not shown) which will go to the lower range.
If I were a "bargain" hunter like some people here, I would wait for at least 5 waves up on 1H chart as a confirmation that wave i (circled) bottom is in.





Banks are holding quite well, not moving below the bottoms established at the start of this month, creating a non-confirmation of the decline with All Ords, which is typical for fifth waves. As an example I show ANZ chart, which has pretty nice wave combination at this stage.





So basically situation is as follows-the decline started to slow down and market is sporting an overlapping waves which is a sign of a probable turn soon. It is like a car-before the turn it slows down. Of course, the driver can change his mind at the last second and decide not to turn, and we can do nothing about it. But the probabilities at this stage are more bullish than bearish.