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.

Interest Rates - RBA asleep at the wheel?

The RBA must have struggled to put verbiage together this week in order to make their very important interest rate decision. Regurgitating views we already know: the usual waffle on Europe we've seen for months now in all the financial media; Food Prices are unwinding (Thanks to Coles supermarket - lucky they slapped together a discount advertising campaign otherwise the RBA minutes would be a sentence shorter), unemployment has risen; etc etc.

Is anyone awake at the RBA and looked out the window? The verbiage is wonderful, but a cursory glance at the 90 day bill rate shows that is has changed very little over the last few months. The 90 day rate is at 4.39% v's the RBA Cash rate target of  4.25%. The RBA "cash rate target" lag of the 90 day bill rate is on average 0.15%, and guess what - the RBA lag is 0.14% as of Thursday, almost bang on average.

Next month I'll get out of bed a little earlier and put up the updated charts of the 90 day v's the RBA cash rate target - and make a way out guess on what the decision will be.

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.

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.