The ASX200 Index has been waning of late and a lot of commentators are looking for lower prices, myself included up until recently.
The price action over the last couple of weeks has been struggling to go lower. Looking to the chart for the XJO we can see an inverted head and shoulders pattern marking the end of the downward movement. The market in June/June then broke the neckline and put in a target higher than it should have been. The period since September has been trading sideways and not really doing anything. For those of you that follow Elliot Wave theory, there are certain rules that the market is following at the moment. Wave 3 is typically the longest wave, but cannot be the shortest, and as wave 3 is clearly longer than Wave 1 this saying holds true. One of the other rules is that out of Waves 2 & 4, if one is a simple wave then the other must be complex. Wave 2 was simple due to the short sharp nature of the retracement, and wave 4 is complex due to the time taken and volatility during that time. Based on the pattern, the target for a wave 5 would be somewhere about 5400 or so. This coincides nicely with the fibonnaci targets as well.
So be wary of being too short this market at the moment.
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