Market Wizards

Straight to the point : STI is currently trading at Wave 5 in Elliot wave count. Using Wave 1 as a rough guide to estimate Wave 5 ( assuming Wave 1 = Wave 5 ), Wave 5 target shall be 2,661. Using Fibonacci retracement as a mean to determine key resistance, 2,580 ~ 2,680 are Fibo 50% ~ 61.8% resistance zone for two time frames ( highlighted in yellow ). Additionally, 2,600 is a key psychological resistance cum a chart resistance point traced back to Sept 2008.

Over the past two weeks, STI has gained 275 points without any significant pull back. The index is now overbought in RSI ( 14 ) and CCI ( 5 ). I think some pull back is likely to take place next week. Many people have expected the pull back to be shallow and are probably waiting at 2,424 for entry. I agree 2,424 is likely to be a strong support since the index has taken more than 6 weeks to penetrate this level when it was the resistance point. The only challenge when trading in Wave 5 is that you never know whether it is a short term pull back or a full scale reversal. Unlike if we are in Wave 1 or Wave 3, if we are caught by Wave 2 or Wave 4 corrections we can hold our breath and ride it out until we see Wave 3 or Wave 5. Now that we are in Wave 5, it is more risky as the correction is likely to be deep.



Above is a zoom-in view of Wave 5. If my wave count is correct, we are in 5(iii) now. Any pull back will be 5(iv) and then there is a final leg to complete 5(v) which is around 2,660. This is only my speculation though !

What happen when Wave 5 target is met? My view is that Wave 5 target marks WAVE 1 of a higher degree ( primary wave ). But looking around, almost everyone else ( including brokerage firms & even 'experts' from the US ) are saying end of Wave 5 marks the end of Primary WAVE B bear market rally. That suggest we will be heading toward bear market WAVE C instead of my Bull Market WAVE 2. Why I can't subscribe to their thinking is that if we are in for bear market WAVE C. By the time we reach WAVE C target, STI will probably be 210 !!! I can't accept that !!!