Thursday, October 15, 2009

STI Updates

STI broke upwards of the rising wedge against my original expectations, something which was achieved on S&P500 earlier. Indeed, this is a very bullish signal.

I have relabelled the recent correction (and as wave 4) as below:

MACD has turned positive as well. Overall, the sentiments are also very bullish. However, are all very well?

Referring back to previous posts.

It appears that the following count might be the most "correct" at the moment

The alternate count would be, the end of intermediate B might be at the next label (2) instead, resulting in a running flat. If this was true, the next wave would be an intermediate wave 3 (super bullish) instead of an intermediate wave 5 (moderately bullish). Either way, we have a bullish impulse wave upwards, which will occur in 5 subwaves.

Let's recap the wave personalities from wiki:
Wave 3: Wave three is usually the largest and most powerful wave in a trend (although some research suggests that in commodity markets, wave five is the largest). The news is now positive and fundamental analysts start to raise earnings estimates. Prices rise quickly, corrections are short-lived and shallow. Anyone looking to "get in on a pullback" will likely miss the boat. As wave three starts, the news is probably still bearish, and most market players remain negative; but by wave three's midpoint, "the crowd" will often join the new bullish trend. Wave three often extends wave one by a ratio of 1.618:1.
Wave 5: Wave five is the final leg in the direction of the dominant trend. The news is almost universally positive and everyone is bullish. Unfortunately, this is when many average investors finally buy in, right before the top. Volume is lower in wave five than in wave three, and many momentum indicators start to show divergences (prices reach a new high, the indicator does not reach a new peak). At the end of a major bull market, bears may very well be ridiculed (recall how forecasts for a top in the stock market during 2000 were received).

Because of the sentence in red, I would classify it as a wave 5 because most news are now quite bullish and bears were ridiculed badly.

However, wave C tends to extend wave A by 1.618 and beyond... The wave principle generally applies more accurately to waves of larger degrees. For my wave A (1455~2424), 161.8% for wave C would give us another 969 points rise from wave B (either end at 2211 or 2235). For a wave 5 right now (means B end at 2211), we are looking at 3779, and for a wave 3 right now (means B end at 2235), we are looking at STI 3802 at the maximum likelihood. But this is a bit much too bullish to fathom.

Instead, if wave C is equalled to wave A in magnitude, 3200 sounds like a more likely target. But is that also too bullish to fathom? For me, it sounds like it... :(

Do bear in mind, we have the critical 61.8% fibonacci retracement level at the 2970 region and the 71.6% fibonacci retracement level at 3200. Could 3200 happening twice be a coincidence?

I guess we have to watch how the waves unravel themselves, and if 3200 is really achievable. I'm still at the learning stage; there's just so much more to learn...

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