The Australian ASX 200 took a hard hit during the 2007-2009 crash falling from 6852 to 3122. Currently in the vicinity of 5450, you may think that the worst has been left behind us. But is the recovery of ASX 200 real or fake? In order to answer this question we need to look at the charts, because they can show us what is really going on. The weekly chart of ASX 200 is given below. We are able to count a complete impulsive wave to the north with an ending diagonal in wave (5).
In a standard situation we would now expect a three-wave decline and more strength after it. But this is not a standard situation. We want you to pay attention to the labeling at the top of the chart – this five-wave rise is wave “c” of “B”. We need to look at the monthly chart to see where this impulse fits in the bigger picture.
The price action in the blue rectangle represents the zone we were discussing on the weekly chart. As you can notice, the impulsive rise is only wave “c” of a corrective three-wave zig-zag pattern, which started from the bottom of 3122 in 2009. But after every correction the larger trend should resume. In this case the larger trend is down, because the decline of 2007-2009 is in five waves labeled “A”. So, what we have on the monthly chart is the classic 5-3 Elliott Wave cycle, telling us that we have to prepare for another sell-off in wave “C”, which could lead prices beneath the 3000 mark. If we add the 61.8% Fibonacci level to the puzzle, we can conclude that the troubles for ASX 200 may be just around the corner.
Charts by: www.investing.com ; www.trader.bg
