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.

Double Three Combination Corrections

I thought this to be an opportune time to cover Double Three Combination Corrections (there may be a need to brush up on this type of correction very soon)

Double three's are some of the more complex corrections, but if caught early can offer insight to the unfolding wave count and allow one to be in a position to capitalise on the break out. They are usually rare on the larger time scales, but having knowledge of these structures will be useful for when they do occur.

Below is an example of a Double Three on the XAO taking over a month to complete. Without the labels, it can be a little difficult to see. The give away is a long sideways move that consistently moves in waves of 3. Initial interpretations may be a triangle, however, the expected end and break out of the triangle doesn't appear as one expects - leading to several re-evaluations of the wave count.

 

With the Labels added, the double three is clear. There's even a Fibonacci relationship between the waves - although it's not guaranteed every time. A confusing factor in this example was a triangle for wave 'b' '(b)' in the 'c' leg of the Triangle itself.

The larger picture shows the Double Three is the b wave in a zig-zag correction. This whole structure was the A wave in a triangle that formed over several months.

Interest Rates

The RBA announced today a drop of it's cash rate target to 4.25% - inline with the expectations from my June post on Australian Interest rates.

The 90 day bill rate has been steadily dropping down to 4.56% (as of yesterday), hence the RBA decision to continue to lag the 90 day rate is valid since there is no meeting next month and the global economy continues to weaken.

However, longer term, rates are expected to drive higher - perhaps much higher.

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'.....

Medium Term Gold Update

Gold appears to be consolidating as a 4th wave triangle, labeled as wave 'iv' circle. The outlook is for gold to be range bound for several weeks before breaking upwards towards the $2000 level in anticipation of completing wave (5).

MACD is at an extreme at the top of wave 'iii' circle implying wave iv circle needs to unfold and when complete should break upwards to a new high.

Australian Interest Rates - lower

Outlined in this post in June was an anticipation of lower interest rates for the medium term. From the RBA web site today....

"At its meeting today, the Board decided to lower the cash rate by 25 basis points to 4.5 per cent, effective 2 November 2011"

I'm yet to check the 90 day cash rate upon typing this post, but I wonder if it has dropped prior to the RBA decision, thus forcing the RBA to lower it's cash rate target. Will check later :-)

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.

Australian Financial Sector - Long Term update

In the previous long term XFJ update the index appeared to be correcting as a large Triangle for wave B circle. So far, the wave B triangle is continuing to unfold as highlighted almost a year ago with four legs of the triangle completed. The last, wave 'e' is now underway and needs to push higher to the 4000 levels or slightly higher. Once completed, the next major leg down will be underway and take the index down to unprecedented levels.

Perhaps this trader understands what is really going on as opposed to the mainstream media who pick out of a hat the suggestions on why the markets moved the way they did. Notice the high use of the default verb "hope" in many financial headlines as the international markets continue to remain volatile and "unpredictable".