Recession fears cripple stocks
That was the headline on CNN Money this morning, I thought we were already in a recession/depression/major correction/or something - when you can't pin the market action on an event - make up a headline, a usual Media tactic.
Another way to interpret the recent down leg is that wave D of an expanding triangle is now underway on the XAO.
The 4070 mark was hit and exceeded last week topping at 4079 or almost spot on 61.8% of the previous 'a' circle leg. The 4079 level should not be broken in the expanding triangle scenario - if it is, then something much more complex is unfolding. The wave structure from the recent top is moving in 5 waves down, so there is supporting evidence that more downside is to follow. This supports the probability that wave 'D' down is underway.
A rough short term wave structure is provided that suggests a retracement is needed soon before wave (iii) takes hold for more aggressive downside (should this short term wave structure unfold, then technically a head and shoulders pattern would unfold).
Wave 'D' should head to new lows (possibly to 2700-2800 on the XAO) before wave 'E' upwards kicks in.
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