One of the wonderful functions in ProfitSource is going into the future using Elliott and Gann. Another special function allows you to look back, which is not only a great learning tool but is also very handy for analysing a trade.

Recently we saw the Elliott count on the All Ordinaries change three times in less than a week, which is interesting:

On 28 August:

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On 29 August:

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And on 4 September, the day of writing:

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The chart for 28 August displays the range trading pattern that we have been seeing that for some time. But by the next a day the count in the Elliott impulse pattern had changed, with a wave four pull back signaled. And then on Wednesday, 4 September Elliott offered the prospect that the wave four could be complete. It is not saying it is complete, as the wave four is still ‘greyed’.

As always, there are caveats:

Wave four level one was only just reached, so it could also be an early call. Then there is the oscillator, a must-have tool for the assessment of pullbacks. While the above oscillator is saying that a minimum condition has been met, a few negative days could see the oscillator fall below -10% and it would be ‘all over, red rover’.

On the other hand, we could see a spike upwards and if this happens, then I am out. I will not chase such a market. I am looking for safe trades where I can get a run for a few weeks, as occurred during the last slide.

So we have to wait a few days more before buying back in. But even in buying back we should not buy whole the market as it is currently sector-sensitive.

These are the scenarios for the All Ordinaries. The Financial sector is lagging and we will review this next week, should there be something useful to say. And I believe there will be.

(For the record, I did not mean to imply in my article last week that the mining boom is over!!! This is merely a pause and I don’t believe it will be a big pause or a long pause. But the ‘Super Cycle’ is still in play and could outlast many readers!)

Enjoy the ride

Tom Scollon