XAO Short Term Update

The wave count has been updated slightly to take into consideration an 'anomaly' - well, I did say triangles have a habit for tricking. It appears a triangle has unfolded as a wave within the larger triangle itself - thus delaying the commencement of  wave 'd' down. Time wise, wave 'c' can be a long wave within triangles.

Also, RBA Interest rates are on this week - cash rate target is currently at 4.25% and 90 day bill rate has come down to 4.3% (4.45% at start of March). I doubt the RBA will lower rates this month (but there's a slight possibility) since the cash rate target is still under the 90 day bill rate - not by much though. The average gap is 0.15%.

GOLD - Holding the Fort at the 1600s

Gold's rapid completion of the final D and E waves within the larger wave (iv) triangle and breaking the 1600 levels as described back in May now has the bulls paused at just under 1600 - so what's next?

A 4th wave triangle always indicates an impending change in trend - this could be in the form of a minor correction, or as in this case a much larger corrective move.

Perhaps Gold news could kick off a decline although events rarely influence market moves since it is the social mood from the herd that drives markets.  Bad news in bull markets is usually shrugged off, but as the mood turns, and the market falls - bad news isn't shrugged off so easily. Perhaps Ron Paul knows something we don't? Ron Paul worries Fort Knox gold is gone


The short term chart has a couple of interpretations. The first is the ending of wave E within the Triangle. If it's the Green E, then it appears an ending diagonal is forming and the ending of the Gold bull market may not be far away - this is a loose statement at the moment as channel lines, estimated targets need to be taken into consideration.


The Second, if the wave (iv) Triangle finished at the Black wave E, then it appears a 5 wave move upwards has completed and a small wave 'ii' down is underway - this is the pullback one expects when hitting/breaking psychological levels. The preference is for the black count to be the primary view at this stage with a view to heading up to the 1640-1650 levels.


Once wave 'ii' down gains some footing, we can establish some channel lines and bullish targets. A break below the black wave 'E' at 1520 would certainly be a bearish signal.

Gold - Short term update

*** 13th July UPDATE: It now appears the triangle has completed with a very small wave 'E' and the expectation is for Gold to head higher (with the obvious pull backs along the way) to 1600+. In the short term, Gold should not drop below 1540 (the ending of wave 'E'). ***


Gold's 4th Wave triangle is nearing close to completion with waves 'D' and 'E' to complete. Once finalized Gold should head upwards either in a 5 wave impulse or perhaps an ending diagonal pattern finishing above the 1600 levels.

Once a breakout of the triangle has occurred, the first pullback should provide some clues as to the future action and where Gold may end up. The final longer term action of  Gold can be seen here.

Should Gold drop below the start of wave 'C' at 1480 would cast doubt on at least the short term outlook.

Short Term Gold Update

Gold has seen some decent moves both up and down over the last 3 weeks. This structure labeled as triangle  wave 'C' appears to be a near completed expanding flat (3-3-5) - a corrective structure and valid within triangles and wave 2's.

Both the triangle and the green wave count (that sees a shorter term triangle completed) anticipate a push higher in the coming days. Again, the preferred count is in black with triangle waves 'D' and 'E' yet to complete.

The longer term wave structure that sees a higher Gold prices is here and anticipates levels in the 1600+ range before a significant top is in place.

Australian Financial Sector - Long Term update

The Australian Financial Sector index - XFJ, has not declined in smooth waves of 5 from the all time high like the XAO. Instead, the XFJ has declined in waves of 3 and the decline has been difficult to predict due to a lack of 5 wave moves. However, if we were to use the same assumption as the long term XAO - a zig-zag correction down to the 100yr trend line, then we can assume (for the moment) that the XFJ will zig-zag lower but with a triangle for Wave 'B' circle.

Thus, the rules for a triangle need to be observed until proven wrong as shown below with expected paths for waves 'd' and 'e' labeled:

Wave 2 regains some momentum

In the last chart,  there was a real possibility that a top was at hand for wave '2', however, we have seen a new short term high on the index that invalidates the short term count.

What one hopes to see after the top is at hand is:  1) fives waves down, and 2) a break of the 'ii-iv' trend line in less time that wave 'v' took to form. It appeared a very small five wave decline had commenced at the green dot in the chart below, but it failed to break the light green trend line (the previous 'ii-iv' line) quickly enough -  taking twice as long as wave 'v' before a break eventuated. This condition provides a warning that  wave 'iv' may not have completed.

With the long drawn out sideways action on the XAO, consistently moving in waves of 3, it is very likely that a larger triangle has been forming as shown below. It's unclear how much further wave 'v' has to go depending on how you count the internal subdivisions, but I suspect further upside is needed perhaps to the 76% retrace.

The new "ii-iv" trend line is now drawn - same rules apply.

XAO - Expanding Triangle for Wave (4)

XAO - Expanding Triangle for Wave (4)

The Wave 'C' up leg in the Expanding Triangle Scenario for the XAO could well be complete (or very near completion with an additional sub-divison that takes the XAO above 3950).

The 3950 target was almost reached today and is a site of solid resistance and does provide a suitable area for a turn down into the wave 'D' leg of the Expanding Triangle.

Timewise there is relationships between the two upward sub-divisons of wave 'C'. The 'a' circle leg and the 'c' circle leg (not labelled) - the 'c' leg is 63% of 'a' - a very close 61.8% fibonacci relationship of time.

I've also include the MACD signal line, a short term high representing the end of wave 'iii' shown with the dashed line, and the subsequent divergence of the MACD as price hits a new short term high (representing wave 'v').

XAO Next Steps

Prices need to turn down from here (or perhaps after one more small push upwards) for the Expanding Triangle to continue to be a top contender. Five small waves down and a break of the short term trendline will be an indicator that suggests a turn has started.

Looking at the wave structure since the 21st Nov, I'm finding it hard to see other wave scenarios under the current long term count. A triangle is highly probable for wave 4's, in this case it would need to be an expanding one.

EUR v's USD

The Euro surged against the USD overnight, hitting 1.35 up from around 1.30.

This surge can be considered as part of wave 'E' as the last leg in a multi-month triangle. This interpretation fits into a bigger zig-zag correction (5-3-5) scenario where this large triangle is corrective wave (B).

Triangles indicate the current trend will soon change (or at least correct). Since the trend is down, then one more wave down needs to unfold - in this case Wave (C) as a 5 wave move.

Wave 'E' of this triangle, the last wave to complete, should end very soon - perhaps up to the 1.38 area (or even higher, but cannot move beyond point 'C'). Once complete, there is an expectation that wave (C) will commence and head down to the 1.15 - 1.10 area.

The completion of this large multi-month zig-zag correction should see the EURO re-commence the longer underlying trend upwards.