Short term XAO update

THURS UPDATE: It appears a very small triangle wave 'e' has completed after all, and the XAO has broken above the channel line. Next leg up now appears underway.

The last several trading days have not provided clear impulsive patterns higher, suggesting corrective action is ongoing and thus brings a clue - raising a strong possibility an Elliott wave triple combination corrective pattern is unfolding for this entire leg down. An ending triangle will appear at the end of triple combinations, however there tends to always be a challenge with triangles and how they play out - sometimes triangles can form one of the waves within a triangle itself. Hence, the chart below provides a rough idea how the triangle is unfolding

The down sloping channel lines now have a role to play - a solid break out and higher after the triangle completes will be a strong signal. However, there will possibly be a false break that can sometimes occur with triple combination. Supporting an end to this correction is the MACD price oscillator as it is clearly divergent on the 60min chart (not shown) since the second week of June.

The bottom line: A change in trend appears to be close at hand

XAO Update

It appears the downwards corrective action on the XAO may still not be complete with a distinct lack of a 5 wave impulse from the lows discussed in the second part of the last XAO post.

This may mean a triple flat or a triple combination correction is unfolding.

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.

Medium Term XAO update

The recent declines on the XAO have resulted in questioning of the wave count since the low of 4560 in March was broken. In addition, the down leg that started in April still looks very corrective, hence the evidence at hand implies a larger correction is most likely still unfolding. This corrective wave may in fact be a large sideways triangle.

The alternative bearish count still has validity until proven incorrect.

On the short term, Triangle Wave 'C' is below as a double flat correction. This leg should be complete or very near complete, wave 'D' should soon be underway.

Short Term Gold Update

Gold is still moving as described in previous posts - a triangle is most likely unfolding that will continue to see further sideways moves.

Medium Term XAO - Alternative Count consideration

The recent declines on the XAO do seem to indicate that this down leg may be a lead in to a bigger structure, therefore it's prudent to review an alternative count should the recent low at 4584 be broken.

The chart below shows an alternative count that has the 'B' circle wave completed implying declines will now continue. There are several reasonable interpretations at this stage but the waves aren't clear enough to give a solid interpretation. The consideration is: Has the decline since the 11th April  top been in 5 waves?

The short term chart shows a decline of 5 waves. Wave (ii) a expanded flat and Wave (iv) and expanding triangle (rare). I don't like the odds of these wave structures being in the same move but it is here for consideration until clarity is seen. Under this count, a correction upwards needs to occur before the declines continue. A break out of the channel (not shown) either up or down will provide some additional clues.

 

XAO Short Term Update

The XAO continued to decline and invalidated the notion of an ending triangle for this correction discussed in the last XAO Short term post.

There is a little further clarity with the XAO, specifically two flat corrections joined by an intervening 'X' wave - Double Flat correction. The flats contain the right structure with the 'A' wave being a 3 wave move, and the 'B' wave retracing at least 61.8% of  'A'. Wave 'C' being a 5 wave move. The 'C' wave in the second flat is a little unclear, so there's still potential for a little more downside. I'm happier with this count as it seems to fit better with rules of Elliott Wave (and the Glenn Neely extensions).

There is an alternative count that is bearish and would come into play should the short term low be broken but it requires the XAO to correct upwards before an aggressive down tread commences.

The primary count is still to medium terms highs before the real fun begins.

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Long Term Interest Rates - Higher rates to come?

Discussed in this post was a possible ending of a long term trend in Australian interest rates. Started in 1982, a long term decline of interest rates appears to have completed as a very obvious elliott wave pattern. On the horizon are higher interest rates but after some medium term declines or sideways action that may last for many months.

This long term decline comprises of an Elliott Wave flat pattern: a 3-3-5 structure, thus a completed flat will have an A, B and a C wave with A & B having 3 waves and C with the standard 5 waves.

There is a difference between elliott waves seen in the stock market and what can be seen in interest rates and currency markets. Stock markets move up in waves of 5 and are an indication of progress where interest rates operate in waves of 3 over long periods of time. If they didn't, then conceivably interest rates would eventually reach 100% and higher.  Operating in 3 waves makes it very difficult to estimate long term trends as these 3 wave corrective patterns are the most difficult to predict due to their complexity and the range of many different types.

Therefore, it's usually easier to look for smaller 5 wave patterns within the larger corrective patterns, unless some very obvious pattern emerges - this seems to have now occurred.

XAO Short Term $30B update

The negative mood appearing in the MSM this week on the $30B loss on thursday may be an indication that a medium term bottom could almost be in place.

The index has unfolded exactly as described in the previous XAO post, however the attempted thrust up out of the Channel doesn't look like a 5 wave advance and this may imply something else is occuring. The pullback has been sharp and it's looking possible that a triangle is unfolding as a valid ending to this correction.

Further drops from here are still valid but the low at 4560 cannot be broken for this count to remain valid.

The MACD is divergent on the 60min chart below, implying weakness in the current down trend.

Short Term Gold Update

Short term Gold has been unfolding according to the wave count here and the question now is: Has the wave 4 correction completed as a small triangle as per the green count below?

Further time is required before the answer will be known for sure and perhaps Gold will give us a hint with a strong push upwards in the coming days. However, my thoughts are still with the primary count in black that sees a longer correction playing out as a triangle. For this to be valid, I wish to see Gold decline in the coming days and head downwards to the 1400 levels to complete the 3rd leg in this correction.

Longer Term Gold is here and a push to the 1600 levels or slightly higher is required for a significant top to be in place.

Short Term: A break upwards out of the channel as shown would imply that the short term correction has most likely completed.

Australian Interest Rates

The next RBA meeting is almost upon us and there will be the usual adjectives and complexities in describing the rationale for the pending decision on the target cash rate. The sideways movement in the 90 day rate for the last several months will probably see the RBA leave their cash rate target on 4.75%.

So where will interest rates go? Using Elliott Wave for interest rates is more complex since rates cannot be anticipated in waves of 5 (like the stock market) otherwise the rates would eventually be over 100%. Interest rates move in waves of 3 oscillating over many decades and I'm assuming a bottom has been reached on the chart below - since a 3 wave multi-decade decline that started in 1982 now looks complete as of March 2009.

This 90 day rate has now seen five small waves up and a correction needs to occur which may see slightly lower interest rates or more sideways depending on the depth of the correction. Longer term, higher rates are on the horizon.

XAO Short Term Update

The XAO has continued to correct within a well defined channel. The structure as it stands now looks complete as a triple combination elliott wave correction.  A push up thru the channel lines needs to occur now, although this is still no guarantee that this correction is complete as sideways move could still unfold. What will provide clarity is an aggressive push up out of the channel.

Short Term XAO update

The XAO came close to invalidating the current count today and may still do so tomorrow. In the first instance, further declines will imply a correction of higher complexity unfolding (eg a triple zig-zag correction) down to the 76.8% retracement levels.

Pushing higher now will leave the count unchanged and today's pullback would be considered a wave '2'.

The multi-year view is here and the very long term view is here.

Long Term Gold - Daily

The longer term Gold chart implies a push higher is needed to complete a decade long bull market leg. The longer term Gold post is here. Once the current correction is complete (shown at arrow) then a push higher should complete this wave (5).