Technicals | Oct 10 2012
Bottom Line 9/10/12
EW Trend: Corrective
Price Trend: Down
Trend Strength: Strong
Technical Discussion
LAYMANS:
In our last review we were looking for that one last probe to the downside to unfold. With 2000 psychological support being the key number we were going to keep a very close eye. And not just for a minor reprieve before a larger continuation lower. Yet potentially for a major low to finally lock into place after three years of sustained weakness. And even though we are still quite a way off in declaring the locking in of a significant base right here and now, the reversal right to the tick on 2000 has not gone unnoticed over the past few trading sessions.
What we now require is confirming upside price action. And that will come initially via a break above 2200. Its only very early days of course yet I am, for the first time in a very long while, liking the evidence that is starting to build. Evidence that could see the Shanghai Composite Index start to attempt to strip itself of the worst performing Index tag for 2012, as it looks to embark on a well overdue turnaround.
TECHNICAL:
It really is way to early to say the bullish freight train has arrived. Yet I’d certainly like to think the possibility is there. We have only had 3 trading sessions off the 2000 lows that were recently tagged. So follow through is what is now required as momentum attempts to build. The final wave-(v) of 5 of C has done everything we have asked off it in relation to completing and sticking to the script we proposed in our last review. And if this is now, at long last, the completion of the bearish move, then there is every chance price is now building towards a long overdue break out of the lowering support channel that has been sustaining prices in this downtrend longer term. Yes we could still be granted another retest of these lows, yet the potential Type-A bullish divergence that would loom, combined with the productive market testing we have witnessed since the solid probe higher on the 7th September, I’d have to say that buyers will simply be lining up at 2000 if price was to retest over the coming weeks.
For mine though, I think we have all the ingredients of a major low now being locked into place. The Elliott Wave patterns back it, the timing aspects back it, and psychological 2000 is as good a platform as any for a turnaround to start evolving from. And if this is now a higher degree Wave-(C) in the very early stages of building, we are not only going to be looking towards a reversal of this downtrend, we are also going to be looking at the move being reasonably sustained. I’m continuing to not call for a longer term bull run at the moment as I still believe that overall, World Indices are still requiring more time to complete larger multi year corrective moves. Yet the fact is, if our Elliott Wave interpretation of these trends proves correct, then these higher degree Wave-(C)’s to the upside are what we are likely to see unfold now for at least for the next 6-12 months. Personally I’m not prepared to look any further ahead than this. I’d like to say we are on the cusp of a multi year bull run higher. Yet as things presently sit I just don’t believe this to be the case. Not yet anyway. So lets just say I’m not prepared to get carried away here just yet. That said, a higher degree Wave-(C) move to the upside is nothing to snub our noses at . And if we play our cards right, there should be plenty of bullish trading opportunities to be had during this proposed bullish cycle that should take us into the first half of 2013 as a minimum. Confirming price action above 2200 now required though before we start blowing too many trumpets.
Trading Strategy
The Shanghai Composite Index has been a no go zone for sometime. As have market related ETF’s. Yet if you are liking the medium term turnaround technical story on this then now just might be the time to start looking at being a participant from a trading perspective. In fact Global markets in general a now providing some very positive signals to suggest we may be in for a purple patch over the coming months. And see them start to make some convicted in roads higher, rather than continuing to coil around aimlessly. Larger degree patterns looking to break higher, whether they be overall corrective or impulsive in nature, can provide fantastic opportunities for trend followers from a trading perspective. So time for prices to start walking the talk.
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