First lets take a look at the longer term picture. Since the July 20 - 2008 top at 98.49 we have seen a three legged Zig-zag move down to 60.04 ending wave [A]. From 60.04 we have seen a flat correction up to 93.89. Wave 5 of C of [B] became truncated. We are now in the very early stages of wave [C] down. As wave [B] corrected 95.33% of wave [A] and this wave was a three wave decline and wave [B] was a three wave rally we are looking at a flat correction. That means that wave [C] should be a five wave decline slightly exceeding the ending point of wave [A] giving us a final target for wave [C] just below 60.04.
If we zoom in on the time frame and look at the daily chart we can see wave two became a double correction - first a flat and then a zig-zag correction in combination. Wave 2 corrected almost all of wave 1 and took back 98.28%. That is allowed for wave two's and is most commonly seen in the currency market.If we take a look at the some Fibonacci relationships of wave 2 Wave c of the flat correction became 1.618 times longer than wave a and took 21 days. Looking at the zig-zag part wave a = c in length and if we count from the top of wave c it took 55 days.
Zooming in once more and looking at the hourly time frame we should be just about to see the first minute five wave decline end near the 88.54 - 88.86 area. Minute wave iii became 1.618 times longer than minute wave i, which mean that minute wave v most likely will be equal in length to minute wave i, they will be equal at 88.86. ending minor wave 1.Minor wave 2 will most likely end in the 90.35 - 90.84 area. Be aware that we are now entering wave 3 of [C] down and this wave is expected to be the steepest, the longest and the most violent, so the correction could easily become subnormal.
Wow, great thorough analysis - thanks!
ReplyDeleteDo you think it's possible that this imminent correction could exceed the previous high? ...I was looking at a similar target range (the 90.30 - 90.75 area), but do you think there is any probability of making a new high before declining..you mentioned the possibility of a subnormal correction?
Thanks!
Jem
Hi Jem,
ReplyDeleteIf my analysis is correct we should not see a new high, but we can't rule out the possibility before we have a break below 89.02 and more importantly 86.65.
If support at 89.02 held for a new high I would be looking for a new high above 94.02 as wave 5. That would mean that the truncated fifth wave I had at 93.46 would be wrong.
As wave 3 normaly is the strongest, steepest og most violent of the impulsive waves (also in C waves) ther is a tendency for correction to be smaller than normal. If for example you would normally look for a 38.2% correction, then you would often see a correction only make it to 23.8%, that is what I mean by subnormal.
EWS
Right, in bear markets corrections can be more swift and shallow - this is what you meant...
ReplyDeleteYes, I think minute wave five may knock out the first target (the 89 level), but perhaps we'll find out if there's more upside first before we knock down the 86.50 zone!
Thanks for your great analysis - looking forward to your updates :)
Jem