Hi tech, glad to hear from someone who understands the importance of EW not only in stock markets, but in life as well. Many people are unconfortable with EW but I personaly found it as the best aproach to the markets.
In previous post you told that when count is unclear you just leave it. And that is right. But I've found this "unclear" issue very important. If you are in the market, most likely you entered it when count was more or less clear.
When the wave develops, it passes through stages and from the midle to the end of wave 3 there are the greatest amount of alternatives possible. Later when the wave develops, alternatives lose ground one after another and finaly you can see 5 waves, that's when the count becomes clear. This is also true at the bottoms when first wave made it's way-then it is clear and highly tradable. In correction-it becomes more clearer when it's near the end, in the middle you can be short of your fingers to count alternatives.
When I am in the position and situation becomes unclear, this means only one thing-hold on to it, because you will se the pattern sooner or later which you can use as a ground for decision making. This approach makes holding the stock quite comfortble and enables to see movements against you as
normal, when everybody around are just like lost sheeps-they seek reasons for the decline instead of knowing that their stocks are within the normal market cycle.
Anyway, glad to see you here...
How you see All Ords from here? Looks like it made five up from the most recent bottom...
Few months ago I thought that Ending Diagonal is in the works, it was quite a good call (
https://www.aussiestockforums.com/forums/showthread.php?t=4888&p=840431&viewfull=1#post840431 ) , I remebmer sold everything just days after the top was formed, but the nature and size of the decline just fell short of targets that are usualy reached after ED . Instead market rallied and here we go-5 waves up, TLS at new highs, real estate at new highs...
I am thinking that three waves from the 2009 bottom was not the finished development in the light of most recent rise, which I am prety sure, has more to go. This will put us in the stage of "unclear" for a few years, but best what comes to mind is that some sort of third wave can develop with ATH on the horizon.
I am tracking a few posibilities, that's one in a Chart above-((1))-((2))-(1)-(2), or ((A))-((B))-(1)-(2) of ((C)), but both implies the same thing-higher prices. The question is :
Does this correction is over? It can easily sport another 3-3, or 3-5 making to the lower ascending support. The first sign of significant leg up would be making to the ~6000 I suppose. It's pitty that I don't have Zweig Breadth Thrust on ASX but I feel this rally could have trigered the event.
When I realized that the latest decline was just a part of 3-3-5 flat, I remembered the DOW at the time 2011, I was trading full time then in US when the same thing happened- It just reminded me once again that
if market reached new highs in Three waves, always be suspicious about the five wave decline.
Many people will seek reason as to what must happen for markets to reach ATH. But the reasoning should be opposite-what events can be trigered by rising optimistic market mood. Could be plenty, pick one...
From fundamental view it could be the Iron Ore making the bottom, along with China in the early stages of advance, those events could triger a mining sector rally.
The price action in Australia's largest mining company, BHP, sugests that the stock could be in a Triangle formation, which is Primary wave ((4)).
Looking at the fact that BHP is trading close to the long-term trendline support, The Triangle maybe over, and we could expect a thrust to new highs, which will support ASX advance scenario as well. Another case is that Triangle is still in the progress and it could take for the market years to finish it, but both ways advance will follow soon(here is the alternate count :
https://www.aussiestockforums.com/forums/showthread.php?t=1335&p=840445&viewfull=1#post840445 )
Also, the company in August announced that it would spin off about 8% of assets as a separate company-the industry's largest spinoff in a decade, according to CLSA Asia Pacific Markets. BHP continues the industry's process of deleveraging . In January 2013 I observed how four major mining companies, including BHP, had fired their CEOs in just four months following the Wave (C) low within BHP's wave ((4)) Triangle. All four former heads had been appointed near the peak of the mining boom in 2007, and each pursued growth aggressively.
BHP's announced spin-off shows that pessimism about the mining industry remains entrenched. Company's CEO told analysts on August 19: "We are now at a point where the status quo no longer positions us to best maximize value. Change is required." Analysts expect other industry titans such as Rio Tinto and Anglo American, to follow BHP's lead spin off assets of their own.
But from contrarian perspective, a bearish consensus is often a bullish signal for the strongest companies in an industry. The pessimistic sentiment may even support an approaching low in some resource markets important to Australia, such as Iron Ore(see chart above)
Australia's main customer China, shows no signs of reducing its consumption of commodities anytime soon. As Bloomberg reported in late August-
"Qinhuangdao, home to China's largest coal port that's been called an indicator of Asia's biggest economy, is set for record commodity deliveries over the next three years as urbanization boosts demand for the fuel".
But even if mining prices remain soft, the strongest companies can continue to grow. BHP's own price history provides a case in point: during the commodity bear market of the 1980s and 1990s, the company's stock price increased about sevenfold.
I also would like to remind about how the Abbott government proposed its budget in May to greater uproar. The Washington Post claimed that Abbott has quickly become one of the world's most hated prime ministers after he "unveiled" a draconian austerity budget that analysts at that time called the most extreme and least popular of the past four decades in Australia" . His approval rating plunged to 30% after the announcement, according to Newspoll.
The Prime Minister defended himself by pointing out that support fell for former Prime Minister John Howard after he introduced an austere budget in 1996, which preceded a "decade of prosperity". From a socionomic perspective, the analogy could turn out to be prescient.
Austerity drives are a product of the fear that attends the late stages of larger degree bear markets. For example, Europe's austerity budgets of a few years ago followed large-degree stock market declines. So has China's crackdown on government excess over the past two years. In June, the new prime minister of India where, by mine wave counts, a bull market is just ramping up, announced that the nation's government ministries will be consolidated and the number of cabinet ministers reduced from 72 to 45.
The Hovard government passed its budget in 1996 early in a multiyear uptrend in the All Ords. Abbott's government austerity measures provide me an anecdotal evidence to support long term bullish forecast for Australian stocks.
The wave count above indicate the market to be in a similar position at present paralleling long-term uptrends in most other stock markets in the Asia-Pacific Region.
Also, I remember what CB governor said just two months ago in his semiannual testimony to a parliamentary economic committee:
"The thing that is most needed now is something monetary policy can't derectly cause: more of sort of 'animal spirits' needed to support an expansion of the stock of existing assets"
My wave count above shows that those spirits are about to burst higher in a third-of-a-third advance.
Cheers