Dec 12, 2013

A 10 year new low in Australian Equities?

Weekly Chart of the ASX200, Australian Equity Index Futures:

The drop into the 2009 March low at 3109 WAS NOT the Bottom but only an ORTHODOX lowest low bottom. The low seen in Nov 2008 at 3211 was the bottom of a clear 5 wave pattern within which the 5th is an extended one with minor inner i,ii,iii,iv,v waves.

The lowest low at 3109 is ACTUALLY an irregular b wave (a correction within the counter-trend move, that dropped lower than the cycle degree bottom of 3211. Such IRREGULAR B waves have a powerful forecasting value. Common-sense approach to breaking down any market movement as comprising of a confluence of movements (waves) over different time-scales would help visualize that when a MUCH LONGER DURATION WAVE / TREND is still down, whenever a correction within a counter-trend wave would come at the first instance it would go lower than the low of the prior wave in the larger direction. Such an IRREGULAR B wave helps create a forecasting courage that whenever and howsoever higher the prevailing counter-trend move of last 4 years would get over, the next move down, will break the 2009 lows!

The rise since this Nov 2008 low to now is abc(W)-abc(X)-i,ii,iii,iv,v(C)(Y). Thats in a simpler notation a completed WXY pattern that is often the structure of a corrective to the main trend. What Next?

The reversal that has already worked out on this market in the last several weeks can:

Either drop in a straight line forming a five part C wave and take us to 3000 area!

Or, it can drop in a 3 legged structure to 4425 area to form another X wave, then rise back into a high higher than seen few weeks ago to form a Z wave and then EVENTUALLY drop to 3000 area in a cycle degree wave C.

In either scenarios, for now we are going to 4425 to begin with and we will know by the time we reach there from the emergent wave counts whether with a rebound back to the recent highs or without, we will go to 3000.

I urge, such steep forecasts be not dismissed merely because they are steep. Why? Did Gold dropping from 1800 to 1200 look like an extreme idea? But it happened. Markets have a very old wisdom that confidence is the top and fear is the bottom as reminded few days ago by a colleague. It then clearly means, things seem impossible all the time in the markets and they keep getting possible.

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