XAO - Short Term view

The XAO short term view (60min chart) shows that wave (ii) has likely completed yesterday.

The rationale is that:

1. An expanding 'b' wave triangle is evident within wave (ii), suggesting completion of wave (ii) was imminent.
2. The decline today retraced wave 'c' in less time than it took to develop - a key indicator that strongly suggests the next leg down is underway.

There is a chance that wave (ii) could subdivide and form a more complex correction, hence the decline today could be part of the 'X' wave - but it's not a favorable option at this time.

Some of the rationale behind this is that the Resource sector (XMJ) has retraced only just over 23.2% of the decline. Whilst this is perfectly acceptable, there's a chance that additional corrective action could unfold (eg a double zig-zag).

Australian Resource Sector (XMJ)

The XMJ has been correcting since November last year and has unfolded as a Double zig-zag correction (so far) for either the (A) wave of a much larger correction or 'B' circle wave to complete the correction.

The first chart here, was posted on ASF back in April and provided two likely wave structures for the XMJ: Either wave (A) had completed and the index was heading lower or another push up to complete a more complex correction (double zig-zag) was needed.

The double zig-zag played out and took the index higher, which has now topped mid-June at around 11200. So the question now is: Will the index complete wave (B) lower and fulfill a long term flat correction that effectively sees the index playing out sideways for many months? Or will the index head lower and commence the next 5 waves down? In any event, it is extremely likely that a significant down leg is now unfolding.


Considering that the current count on the XAO is calling for an expanded triangle, I'm giving the odds in favour of a flat on the XMJ. Hence, wave (B) and (C) need to play out. The second chart here from 17th June, outlines the preferred wave count. This may mean that the XMJ won't see a new low (perhaps Double bottom, or close to) until wave 'B' circle completes.