Small Correction on the XAO

An updated view of the XAO. As described in the last post a small correction appeared imminent and is now underway and may have further downside as described below.

The MACD price oscillator is very useful of establishing the approximate end of wave 3. On the 15min chart, evidence of x2 divergences at the end of wave 3's highlights one more push is required for the wave 5 to complete.

XAO Update

The last post imposed a set of specific rules that were used as a guideline for short term market action. Today, these rules have been broken and the chart below provides a slightly updated view of wave 'C' down. The expectation is to see the XAO climb higher from here (with the obvious corrections along the way, and one is expected in the very near term).

Once a small correction downwards has occurred, this should be wave '2', and we can establish the usual parallel channel and associated rules to manage the index. The market should now move as described in this post back in mid-feb

I have decided to drop MS Office and try the free Lotus Symphony for building the charts - can you spot the difference? Seems to run well (Intel Core duo 3Ghz, 4Gb RAM) with a decent interface and is compatible with MS Office files.

Short term XAO update

A short update on the XAO action today.

Not shown, but worth mentioning, the MACD price oscillator has hit a lower extreme on the 60min chart, this can usually indicate wave 3's have completed. In the chart below, once wave 'iv' has completed and wave 'v' down finishes, the MACD should be divergent to the XAO and thus warning of an impending change in trend.

Crisis Averted

Under the Alternative Count 1
The All Ordinaries has declined and passed the first retracement level described in the previous post at 4565 before climbing back above the 61.8% retracement.

Since many will correlate the recent XAO decline on the 11th March Japanese earthquake, the occurrence of the earthquake has had little impact on the sharemarket: In total, a 92 point decline since the earthquake,  but prior to the 11th there had been a 297 point decline. Hence, the relevance of the earthquake is negligible on the All Ords,  but the mainstream will talk up the slightest of correlations:
  
Sharemarket hits new three-month low

Our market stumbles as Japan falls

only to find today:

Asian, local share markets rebound despite Japan earthquake

Where to?
Fives waves down appears complete and has reached the 61.8% retracement level. The XAO should commence a corrective climb (with an intervening 'X' wave) to new intermediate highs. The short term risk in this assessment is that a drop to 4350 level may still be a possibility until a upwards breakout of the trendline (not shown) is evident in waves of 5.


Alternative count 2 is also still valid and would see the XAO aggressively drive downwards through the 4350 level.