Saturday, February 8, 2020

STI Analysis -- the next peak and trough ? (58)

Continued from STI Analysis -- the next peak and trough ? (57)

It's strange and unusual that this is the 3rd STI analysis within 10 days.  Perhaps it is during these crisis periods (Wuhan Coronavirus) that made stock market going "haywire" that seeing this is a good opportunity to archive down for learning.

As usual, only focus on the STI-N scenario and as for the STI-2 scenario is in the stage of awaiting it for rule violation to be invalidated.

Flash back to the period of 1996 to 2003 for STI performance.


STI peaked in 1996 and then went through a corrective phase till 2003.  That was like a 7 years period of correction and it rightly fit the bill of a SuperCycle degree wave (whether it is wave 2 or wave 4 unfortunately is uncertain as there isn't much STI data prior to 1996 to determine the wave count).  During these periods, couple of events happened and perhaps it was due to this chain of events that warrant the SuperCycle degree correction.  First there was the 1997-98 AFC, the dot-com bubble burst in 2000, the 911 terrorist attack in 2001 and the 2002-03 SARS crisis.  STI seemed to recover from the 1997-98 AFC with the rebound surpassing the peak of 1996 but met with the dot-com bubble burst send it down again.  The surpassing of the 1996 peak might have caught investors off guard in believing that the worst is over but as long as the rebound did not surpass the 123.6% Fibonacci retracement with reference to the wave A, it is still consider as wave B.  This is one important lesson any investors must know whenever there is a crash in stock market.  

The downtrend, which is the wave C, continued.  That last leg of the downtrend could have ended in 2001 as there was a rebound into 2002 but further extended due to the 2002-03 SARS crisis.  This has changed the wave count during those periods.  This is another lesson that could be learned, when doing Elliott wave from the perspective of counting up (from lower degree level to higher degree level), there bound to be uncertain or incorrect counting.  The wave count can only be confirmed correct after Elliott wave rules confirmation.  Due to the 2002-03 SARS this also led to a recount on the higher degree.  However, one thing remain the true at SuperCycle degree level, from 2000 onward STI was in wave C, the last leg of the corrective wave.  This is another lesson investors must know, Elliott wave in SuperCycle or even Cycle degree seldom wrong despite possible recounting in Primary, Intermediate and Minor degree levels.  This is why investors with time frame of couple of years or even decade (time frame for Cycle and SuperCycle degree) will do better most of the time compared with those on shorter time frame like few years.

Now, what the STI performance in 1996-2003 got to do with present ?  For every crisis, nature is always the same but underlying is different.  Perhaps it is typical human nature that they only focus on the nature of the events but not the underlying.  Thus, creating a similar pattern for each of the crisis.  This is what Elliott wave is trying to do to describe human behavior toward event(s).  

The STI-N scenario counted that the recovery in 2009 for the 2008 GFC as starting point of SuperCycle wave 1 which eventually peaked in 2015.  Thereafter STI is in SuperCycle wave 2 phase.  Recount those events happened since the 2009 recovery -- 2011 Japan tsunami resulted in global supply chain disruption sending Japan into recession, 2012 starts of the EU euro crisis sending EU into recession, 2015 global stock markets crash due to concern of China economic growth, 2018 starts the US-China trade war that disrupted global growth and now the Wuhan Coronavirus.  Like 1996-2003, STI performance is packed with chain of events.  That's the so-called nature of the crisis but both of them have different underlying.  While 1996-2003 SuperCycle correction ended with the SARS, based on the STI-N wave count, STI this time round has a high probability that the SuperCycle wave 2 correction ended with this Wuhan Coronavirus.


The above is the wave count that was put up in STI Analysis -- the next peak and trough ? (57).  However, the rebound since 4th Feb 2020 which lasted only 3 days appeared to lack the strength to complete the move as shown in the figure.  Meaning, in term of Minor and Intermediate degree level, a recount/readjustment is needed.  The new recount/readjustment is as followed


Note, the Cycle degree of (W)-(X)-(Y) has not changed as expected.  The changes start from the Primary degree level (A-B-C of wave (Y)) down to the Minor degree level.  In previous counting, STI is still in Primary wave B of Cycle wave (Y) but now this recount states that Primary wave B of Cycle wave (Y) has completed with Primary wave B doing a triangular wave of Intermediate ((a))-((b))-((c))-((d))-((e)) which ended in July 2019 at 3386.65.  The stage STI is in now is Primary wave C of Cycle wave (Y).

For Primary wave C, it has completed the Intermediate degree wave ((a)) at 3040.16 in August 2019.  Intermediate wave ((b)) was another triangular wave (a)-(b)-(c)-(d)-(e) which ended at 3283.89 in January 2020.  The sharp drop after CNY due to the Wuhan Coronavirus to 3112.33 on 3rd Feb 2020 followed by the rebound to 3231.97 on 6th Feb 2020 and the retreat on 7th Feb  2020 could either be the formation of a Minute degree or Minor degree.  At this moment, the Minute degree (a-b-c) was used as it is still unsure how the Coronavirus going to develop into in the next few weeks.  

If it is the Minute degree STI is doing now, more downside will come as STI still need to complete the Minor degree wave (a)-(b)-(c) in order to complete the Intermediate wave ((c)) which is also the Primary wave C of Cycle wave (Y).

Whether the Coronavirus crisis going to eventually end the SuperCycle wave 2 correction which started in 2015 still uncertain to conclude despite having a high probability of it being so as any negative event(s) after that could continue the descend and making a recount on the Primary level.


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