Tom Scollon

As markets reach major milestones investors and analysts scrutinise even more. And that is what’s happening to the Australian market now and is likely to continue so in the coming months.

Let’s look at the XJO on this occasion:


S&P ASX 200 (XJO:ASX): Weekly Line Chart

Click to Enlarge


Apologies - the two most important views I am wanting to present to you are on the right- and left-hand extremities. The bulk in the middle is not too interesting for this discussion.

I am not using the XAO as it presents a rather ‘’sit on the fence’’ view and fails to bring attention to the looming attempt at the 2007 high.

On the right-hand side of this XJO chart it shows two wave fives around a similar level to the high of 2007.

Let me now cut to a closer view of this apparent five wave impulse move:



S&P ASX 200 (XJO:ASX): Weekly Line Chart

Click to Enlarge


Note we are looking at weekly charts here. Now we know a lot can happen along the way to weekly points of destination. But I always want to know the bigger picture ahead.

So, this weekly is saying a pullback is likely – middish year. That’s ok and healthy. To about 3- and 4-year lows and that is ok too.
The chart then says we zoom up by 18% to the first wave five and points to the possibility of a second wave five – some 23% leap from the wave three pullback.

We often see second wave fives hit but it is not the norm. 23% is also a major leap of faith.

The XJO needs to get to a second wave five high to come anywhere near the 2007 high. Otherwise it is a failed double top, and these can be unnerving as the market at best, is more likely to slide and become directionless for a while.

So a road block at the 2007 is looking very much ‘’touch and go’’

Though these are legitimate Elliott projections, when using weekly Elliott, I do not expect too much fine tuning. I am after broad guidance.

Markets – local and global - still forge ahead with gay abandon but there will surely be a jolt somewhere ahead.



Enjoy the ride

Tom Scollon