This morning's news is that the rate hike in Australia is spooking markets, but does that really make sense? The answer is clearly no. The central bank of Australia said that "economic conditions in Australia have been stronger than expected and measures of confidence have recovered". This sounds like a recipe for Aussie dollar up - US dollar down, which at least for several months has meant US dollar down - US stocks up/Gold up, etc. I would not be too quick to jump on this morning's weakness as a selling opportunity, as it is most likely wave [5] down to retest yesterday's lows.
Downside targets for wave [5] down range from yesterday's low at 1029.38 to the October low at 1019.95 to the 38.2% retracement level from the 2007 high at 1013.74 to the 1000 area. All of these are within the allowable range for wave [5]. At the moment, this morning's gap down in futures does not appear to have the intensity one would associate with a 3rd wave. If we see a 3 wave rally develop followed by break of this morning's low, then it would be time to reconsider that point of view.
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4 comments:
This daily up/down/up/down/up action actually looks worse than sideways. Action since 10/29 looks like a big running correction in a wave 4.
Craig
IF correct, are w5 following such running corrections long or short in duration ?
12:47 EST
IF today's range does NOT expand from here, we would have NR7 day's on most of the major indices & averages. When you consider that there is a lot of news this week, we could get a big 1 or 2 day move.
Also we have inside days along with NR7's.
I see what you mean, but until we get 5 waves up or break out to new highs I think it would be prudent to stick with the ending diagonal count. The main reason being that we are no where near my expected cycle low date yet, so a new high would be premature.
However, the correction could extend sideways in a combination such as flat, X wave, zig-zag or triangle, which is why I exited my index shorts yesterday.
Just look at gold. The risk is still to the upside.
I don't know of any correlation with the duration after a running flat, but the 1/3 rule is probably as good as any.
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