XAO Short Term Update

The XAO appears to be ready to head lower, but first I'd like to see the index quickly break 4075 on the downside (the start of the c wave in the small wave 2 correction) before correcting briefly and then continuing aggressively lower.

XAO Short Term Update

The 4000 level is almost upon the All Ordinaries and the possibility of a bounce is increasing with a divergent MACD and strong support levels at 4000 and 3940.

Both these target levels represent Fibonacci ratios of wave 'iii' circle as described below in the chart. MACD divergence is covered in more detail in this post and it is usually a very good indicator for determining the endpoint of wave 3's.

There is a possibility that wave 'v' circle down is complete and would mean wave '1' down is complete.

 

XAO Long Term Update - May 2012

This post is an update to the long term chart here and updates the current view (no change to the wave count). What's different is the ending of the wave 'B' circle - ending a triangle. Some suggested downside targets are included based on Fibonacci relationships of wave (1) down of wave 'C' circle and updated downside targets based on Fibonacci relationships of wave 'A' circle.

A downside target of 2350 is an interesting target area as it represents several relationships: 61.8% of wave 'A' circle and a relationship of wave (1) down: using wave (1) = wave (5) and wave (3) is 161% of (1) will give an approximate target of 2350.

The extreme downside targets are also valid since they correspond to previous wave 4's of different degrees:

• 1500 for the 1987 wave 4, and
• 300 for the 1975 wave 4 of one larger degree

The 900 target area represents wave 'C' circle = wave 'A' circle and would be another target of high interest.

Think any of these target areas are unrealistic? Just take a look at the MSM financial assertions and the postings from numerous people in the 'know' on the internet as wave 'A' circle started to unfold back in 2007 - hardly anyone believed the XAO could more than halve in value in under 2 years. Are we on the precipice of a new bull market to regain all those losses or is there more uncertainty than ever before?

Short Term Update - Start of a new trend

The substantial sideways move on the XAO looks to be complete. The rapid declines have taken out the 2nd flat that starts at the end of the 'X' wave – a good indicator the wave (2) correction is complete and  change in trend and wave count has occurred.

The MACD price oscillator has been divergent for many months indicating weakening momentum which combined with wave structures advancing slowly upwards in waves of 3's is a bearish indicator.

For the decline, the orange lines represent a declining channel that appears to still have room to fall to deliver a 5 wave decline. If the index continues to fall with a divergent MACD, then expect a bounce soon probably at around 4000. This level also represents 38.2% of wave 3 in the decline (not labelled). Right now, the index looks to be consolidating as a triangle

It should also be noted that the first A-B-C flat isn't strictly correct since wave 'C' doesn't clearly show 5 waves up. This was discussed some time ago but we had to go with what we saw until the wave counts proved there was something wrong (such as a small 5th wave failure within the B wave). Apart from this anomaly, both flats retrace at least 61.8% and are a 3-3-5 structure with a triangle for the X wave.

XAO Short term update

The long drawn out stucture on the XAO does not appear to be a double 3 correction from what has transpired, however the recent declines may provide some further clarity on the short term wave count. It's possible that a double flat correction may have ended and the declines (in a 5 waves) may be a significant indicator.

The next week or 2 should provide clarity...if major near term support regions are broken then a significant leg down may b underway.

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%.

XAO Brief Update

The end of the ever unfolding triangle is close to the upper limits in terms of price and in order to support the short term count, the requirements call for:

• a decline from the current levels,
• cannot break above 4400

XAO Short Term Update

The sideways correction on the XAO still has some more 'sideways' to go. The last XAO post indicated a possible move down to the 4200 levels (maybe lower to 4150) to complete wave 'd', this appears to be occurring as anticipated, once complete, a push up to complete wave 'e' is needed. This next set of moves should complete one of the largest Double Three Combination corrections seen on the XAO.

The Australian Job market appears to be catching up to the bearish social mood with several major brands announcing job cuts this week. I don't believe the cuts are significant at the moment as I'm expecting a much larger round of cuts if the market falls as anticipated. Major job cuts tend to occur near the market bottom when conditions are the worst.

As for the chart below, the index needs to keep within the approximate boundaries for the time being so waves 'd' and 'e' can complete. A premature push out of the triangle with momentum could be an indication that the short term count is not accurate - or as triangles love to do, create uncertainty.

XAO Brief Update

With a small break above the recent high today, indicates that a different wave pattern may be unfolding for the short term count. This Double three combination correction is still in play and a primary count, but this leg up may be wave 'c' of the triangle.

The rationale behind this is that the structure that commenced on the 25th Nov 2011 (end of wave 'b' in the previous chart) to now - is a flat and considered wave 'c'. The last leg up is in 5 waves, leading to a 3-3-5 structure ending at around 4400.

The short term view is for more sideways action on the XAO, heading down to 4200 to complete wave 'd'.

XAO Short Term update

The XAO should have completed the Double Three Correction. Downside should now follow...

XAO Brief Update

The last leg up appears to be almost ready for a change in trend. One last push up should place the finishing touches on a 3-wave flat correction for triangle wave 'e' up. 4340 should be the target area.

XAO brief update

The XAO is laboring on the last triangle leg up which can be seen clearly on the 60 minute chart.

The last XAO short term post indicated wave 'e' was already underway, but this was slightly premature. From here, I suspect there could be a little push higher to 4270 to complete the final leg of a triangle and thus a double three combination should be finished. The MACD is divergent suggesting a change in trend is at hand on the 60 minute chart.

Breaking above 4300 would be a concern and would suggest caution in the short term wave count (but would not invalidate the ending triangle)

XAO Short Term Update

The XAO is still applying the finishing touches on the last wave of a Double Three Correction. However, caution is required as triangles can sometimes be unpredictable, leading to premature or late entries. 

It's also possible that the Triangle (on the 16th Dec) has completed and a decline to 4000 and below may be approaching. A drop down to 4000, then a solid break below this level would be an indication the bears have arrived.

XAO Short Term Update

The previous post covered Double Three Combination corrective waves and provides insight on what may be unfolding on the XAO right now. The sideways action on the XAO since the beginning of August without any clear 5 wave impulse moves (in either direction) could signify a Double Three correction.

The next steps for the Double Three would be to complete the finishing touches on the triangle (wave y), keeping in mind it's entirely possible that one of the legs in the triangle could be a triangle itself as discussed in the post linked above.

XAO Short term update

The XAO bearish short term count needs to be approached with caution since the expected aggressive downside action has failed to materialize. What is apparent is either a smaller wave 'ii' flat that has now completed with the bears moving back in or, a large wave '2' correction that could be a double combination correction and has further sideways to go that will take it into Mid-Late Jan in 2012.

XAO Medium Term Update

The XAO is declining as previously anticipated with some strong support at the 3940 levels approaching.

The medium term view for a zig-zag correction on the XAO is shown below with the index anticipated to ease on the declines in the lead up to Christmas. Under the count below, the wave '2' top should not be broken.

XAO Short Term update

The chart below provides some additional insight on corrective Wave '2'.....

XAO - Short Term update

The corrective wave '2' appears complete. It has taken a little longer than anticipated - the fifth wave failure at the termination of 'b' shown circled initially threw off the count of the final leg up to complete '2'.

The XAO cannot drive higher beyond the end of '2' to remain valid in the short term. Expecting plenty of bears.

XAO Short Term Update

The XAO is unfolding as anticipated in this post and a further push high is likely perhaps to the 4400 levels or slightly below/above. Once at this level (and having completed a 5 wave advance for this final leg of wave 2) the index will need to begin falling aggressively - Failure to meet this requirement will indicate caution.

XAO Update

In the last XAO update the view was for a decline to finish wave 'b' of a flat before an upwards climb back up to the 4400 region to complete wave 'c' of the larger wave '2'. This market action is playing out as described (so far) and I will assume because wave 'b' retraced 85% of wave 'a', then there is a good chance wave 'c' up will retrace almost all of wave 'b' and hit 4375+.

It's also interesting to note how the MSM are reporting the latest declines - when in doubt:  pick a country and the headline will read something like "Market falls on Greece worry". When the market turns up the next day - "Investors have high hopes for Greece". Pure rubbish.