Continued from STI Analysis -- the next peak and trough ? (117)
FTSE STI closed 3,191.60 for the week ended 23rd Jun 2023.
Magenta -- STI Positive
For the week of 19th - 23rd Jun 2023, STI tried to capitalize on the rebound from the previous week but was unable to move higher. Instead, it is now pointing towards a downside bias. As mentioned before, in the positive scenario, there are 2 possible wave counts.
Case 1 (magenta labeled) which puts STI in the Intermediate wave ((a)) of Primary wave 2 having completed Primary wave 1 at 3,408.19. For this case, the going forward downside shall be the end of Intermediate wave ((a)).
Case 2 (blue labeled) which puts STI in the Intermediate wave ((c)) of the Primary wave 2, again pointing toward more downside going forward.
The positive aspect of Case 2 is it is the final downside of Primary wave 2 compared to Case 1 whereby more downside to follow as still have Intermediate wave ((b)) and ((c)) to complete.
Green -- STI Negative
The silent killer wave count, STI Negative scenario still remain intact and will be a long battle to fight before the actual bottom of Cycle wave (C) of SuperCycle wave ((C)) is reached. This is the case whereby STI could reach or even break below the low of 2009. Since it is in the Cycle degree, it could take several years to complete.
Above is the overall wave count for both the positive and negative scenario in the perspective of Primary, Cycle and SuperCycle degree of Elliott Wave.
Food For Thoughts
While inflation might be slowing down and Central Bankers either doing a small rate hike or pause, the fight to inflation still a long way to go with the exception probably China. Majority are still focus on will or will not the economy going into recession or will it be a mild or deep recession. Focusing on the wrong thing !!!
It is not the state of economy but rather inflation that should be focused on. Prolong period of elevated inflation and interest rate will only move a step closer to STAGFLATION. Mentioned previously, not a single one presently have ever experienced stagflation, all we know of is just from academic knowledge. Thus, should stagflation really occur, any solution by the Central Bankers or Government in the world is nothing but trial and error approach. Stagflation is decades long or worse century long problem. While stagflation needs 3 criteria (high inflation, stalled economy growth and high unemployment rate) to qualify for it, it just need prolong elevated inflation to kick start into it. Misses the window of opportunity to curb elevated inflation either by slowing the pace of interest rate hike will be nothing but one step toward stagflation.
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