STI Analysis -- the next peak and trough ? (IX)

Continued from STI Analysis -- the next peak and trough (VIII) ?

A very eventful week for the global markets and based on STI reaction it seemed to be go back to square one.  As such this has reopened up all the possible scenarios going forward.  Before listing those highly possible scenarios based on how STI has progressed since the bottom in 2016, one thing to be confirmed is STI is in Primary degree Wave 3.

1. Intermediate Wave 3 Ongoing
This is the scenario mentioned in STI Analysis -- the next peak and trough ? (VIII), STI is doing a 3rd wave extension of 3rd wave in the Intermediate Wave 3 as shown in the chart below.

Despite the fall below the green-colored trendline, there is still not enough conclusion to state that the this scenario is invalid.  The only way to invalidate is when STI falls below the 3353 (peak of Minor 1) level (as indicate in the above chart) as this will cause overlapping of waves to occur.  From the chart the margin for STI to avoid this is very narrow and this makes the probability for this scenario to remain valid very low at the moment.

2. Intermediate Wave 2 Ongoing
The peak of 3611 in January 2018 was the peak of Intermediate Wave 1 and current correction which is yet to finish is Intermediate Wave 2.  This is shown in the chart below.  This was the scenario first mentioned in STI Analysis -- the next peak and trough ? (IV).

However, there was doubt previously as the first drop failed to break the purple-colored trendline.  While there is no rule to define this has to be so, I have yet to see a correction that fail to breakdown at the trendline in first attempt.  Last week STI finally breakdown at that trendline (again) and from the look of it STI is now more biased towards further correction ie falling further down.  Despite the breakdown, it is still not conclusive enough that this scenario is the one going forward.  The degree of the drop should determine that.  A drop to 3200 level or below should justify this scenario.  At 3200 level, STI will do a 38.2% Fibonacci Retracement, a shallow correction for Intermediate Wave 2.  An ideal case will be around 2950, 61.8% Fibonacci Retracement which is most likely to happen for Elliott Wave 2 in general.

From another perspective takes a look at the STI weekly chart as shown

The above chart uses weekly closing price as such STI level wise would be some different from that of daily chart.  The purpose of using weekly chart is to reduce what I called Gaussian Noise from the day-to-day volatility of the stock market.  The chart since the bottom of 2016 has clearly defined the motive wave has completed in January 2018 (wave 1, 2, 3, 4, 5) and now it is the corrective wave undergoing.  Unlike the daily chart where a triangle pattern seems to form, a zigzag (could be double zigzag) pattern seems to be forming for this correction.  This should further reinforce the probability of this scenario is happening.  Some interesting statistic about the end point of this correction (wave C) is highlighted in the yellow region in the chart.  Wave C of a zigzag pattern in textbook case can end at 161.8% of Wave A (STI 3256).  A typical correction ends at the region around the Wave 4 of the motive wave (STI 3209).  A shallow Wave 2 correction ends at 38.2% Fibonacci Retracement (STI 3174).  All these potential end points are around the STI 3200 level.  Thus, that raise the probability based on statistic that around STI 3200 level is the one to watch.

Of course there are still other possible scenarios on top of the above 2 but that will depend on how much STI has dropped going forward.

4 more days to end of 1Q, the quarterly window dressing and about 2 to 3 more weeks to commence another quarter of earning season.  Will STI do a final drop at the end of the month to end this current correction or will the correction extends into next month to see a bottom around the earning season ?

Added 26th March 2018

The following chart tracks the current correction.

Instead of using the convention A-B-C to track the corrective waves, am using the W-X-Y method.  W-X-Y is mostly for complex correction.  Different between A-B-C and W-X-Y is A-B-C does a 5-3-5 structure while W-X-Y does a 3-3-3 structure.  Using the W-X-Y count it seems to track the day-to-day STI movement very nicely.  So far ((W)) and ((X)) have formed and now STI should be in the ((Y)) wave, the last of the correction.  The ((Y)) wave should see a sub-level of (W)-(X)-(Y) happening.  That is to say STI should be having a rebound soon the form the (W) and (X) before another and final drop to form the (Y) to complete the ((Y)).  A level to watch for the end point should be the green-colored channel line.   Let see whether is it so ?

Added 28th March 2018

Firstly, need to correct a incorrect count in the "Added 26th March 2018" section.  As a-b already appeared in the ((Y)) wave so any rebound in STI should be c of the a-b-c to complete the (Y) and finally ((Y)).  That is potentially the end point of the correction.  Unless a rare "triple-three" scenario occurs then STI can see a rebound and then another drop to form the (Y)-(X)-(Z) to complete the ((Y)).

Secondly, after STI rebounded on 27th March 2018, the chart now look like

So potentially, the drop on Monday 26th March 2018 could be the end point for this correction.  To confirm, STI will need to breakout of the green-colored upper channel.  If that is the case, the overall structure of this correction is a triangle pattern.  However, if there is another leg down going forward, that should be the last as the ((Y)) wave could be doing an impulse structure of 1-2-3-4-5.  Did a quick check on US indices (DJ, S&P500 and Nasdaq) and all seem to point to a potential end of correction on the drop last Friday, 23rd March 2018.

Added 29th March 2018

So last day of 1Q where funds will be doing window dressing.  The drop in yesterday presented an interesting view.  See the chart below

The above chart is what happening now on 29th March 2018 as I write this.  The drop in yesterday follows by the rebound today as of now the wave Y does a wave 1-2-3-4-5, a complete Elliott Wave motive structure and if going forward if STI do not drop below yesterday low, STI could be reach the end of the present correction already.  Another interesting point that was discovered was the length of the wave 1-2-3-4-5.  Wave 3 is about 1.618x of wave 1 (the famous Fibonacci Ratio) and wave 5 is about the same length as wave 1.  That fits nicely into a classic Elliott Wave motive pattern.  3 points to note going forward.

1. STI does not drop below 28th March 2018 of 3383, high potential correction has ended based on wave count.

2. A breakout of the upper channel will eventually confirm STI correction is over

3. Should the low of 3383 is broken again in which STI needs another re-count, the potential ending target is the lower channel trendline which is about 3320 level, also the 423.6% in term of Fibonacci Ratio.