Continued from STI Analysis -- the next peak and trough ? (118)
FTSE STI closed at 3,278.30 for the week ended 21st July 2023
Magenta -- STI Positive
For the past 2 weeks STI closed positive for 8 out of 10 days, staging a rebound since hitting a low of 3,128.70. It does look a promising sign given the events in particular economic events during those periods were not all on the negative aspect. However, nothing has changed from the above chart, at least from Elliott Wave count perspective. STI for the positive scenario still in Primary wave 2 corrective stage.
Green -- STI Negative
Given the fact that the Elliott Wave count from the positive scenario didn't change anything despite the rebound for the past 2 weeks, there is definitely nothing change for the negative scenario. In this case STI is in the Cycle wave (C) of the SuperCycle wave ((C)).
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
For past 2 weeks, global inflation data showed some promising sign by easing. However, they are still way above the targeted level of 2%. Hence, there isn't any reason for Central Banks to lift the pedal off from tightening. At most they could do a temporary pause to observe for the next step. As long as inflation stays elevated for prolong period with high interest rate there to stay, the risk of entering stagflation is still very much there. Apart from this, there is another big risk coming from China. China unlike rest of the world is not facing high inflation but rather they are in risk of getting into deflation. Needless to say what will happen should China get into deflation. Just look at Japan since the late 80s till recently, regardless what policies the Japanese Government rolled out, they couldn't get out of deflation. They are out now is mainly because global inflation negates that effect and not due to their policies finally working. While Japan in deflation doesn't hurt global economy much, that cannot be say for China. China unlike Japan is presently the main net import and export nation for the world. The deflation status might help US to ease the inflation problem but in longer perspective is never a good thing for global economy.
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