XAO - Short Term view

Several options exist for the short term count, two are discussed here:1)

Ideally a decline would count well from here since an ‘a-b-c’ correction can be considered complete as of today to finalise wave ‘ii’2)

In this colour, 3900 has been broken and we need to consider an alternate count. The whole wave (ii) correction could be considered an expanded flat. The ‘b’ leg can be interpreted as a three wave move or a 5 wave move. Since ‘b’ waves need to be comprised of 3 waves, an expanded flat is a possibility3)

Other short term options exist as well, but remain in the back seat until the current short term wave counts have been proven invalid or clarity is forthcoming.

XAO - Short term correction

The XAO is correcting into wave 'ii' and should complete shortly at perhaps around 3800 or alternatively may form a more complex correction that will last a few more days.

Exceeding the 3900 mark would have me reconsider the current wave count. As of now, the whole move down from the end of wave 'C' can be considered a completed 'a-b-c' correction. Hence, break above what has been outlined would have me rethink the count.

XAO - Supporting evidence for further declines

The current wave count suggests that the XAO will soon break thru support and head further south to lower levels.

In the short term, there are a couple of scenarios that could play out depending on the subdivisions that unfold for wave (iii) down.

Either a small wave 'iv' upwards needs to unfold now or a further drop needs to occur for more of an aggressive wave (iii) down.

There is solid support at 3500-3470 where a bounce into wave 'b' circle upwards could occur, thus marking 5 waves down complete. At 3470, this is 61.8% retracement of the previous leg upwards and offers a suitable target for a bounce.

XAO - Short Term view

The XAO short term view (60min chart) shows that wave (ii) has likely completed yesterday.

The rationale is that:

1. An expanding 'b' wave triangle is evident within wave (ii), suggesting completion of wave (ii) was imminent.
2. The decline today retraced wave 'c' in less time than it took to develop - a key indicator that strongly suggests the next leg down is underway.

There is a chance that wave (ii) could subdivide and form a more complex correction, hence the decline today could be part of the 'X' wave - but it's not a favorable option at this time.

Some of the rationale behind this is that the Resource sector (XMJ) has retraced only just over 23.2% of the decline. Whilst this is perfectly acceptable, there's a chance that additional corrective action could unfold (eg a double zig-zag).