Jasmit has requested for a chart of BHP and CBA, and I suppose an Elliot wave analysis of the same. I would love to do both, but being a treasury manager, my day is already too full. So here is just the chart of BHP for you, Jasmit, and all our fellow Elliot wave fans! The chart also partially answers a question posed by yet another reader, WaveWatcher, who is wondering about how one can say the top of the SNP500 can exceed the point where a fifth wave has ended.
One of the most useful things to spot in a market that is developing is when a wave seems to extending. It becomes easier still if both the first and third waves were of normal length, because then there is a pretty good chance for the fifth wave to extend. You are all the more certain of a fifth wave extension in such cases if the fourth wave was shallow. Anyway, once the fifth wave extension is over, you should NORMALLY expect a double retracement. The first sell off is the first retracement of the fifth wave. It usually comes to about the minor 2ndwave of the extended fifth wave (but sometimes it stops at the minor 4th wave itself). Then we get the second retracement of the prior move, ie we see another “go” at the top, and often as get a ‘throw over” the prior top, or a channel that you could draw using Elliot wave principle. This constitutes the so-called unorthodox top. Here, dear readers, is where you should be extremely careful. The “C” wave that starts after such an irregular “B” wave top will be so devastating that it could go down all the way to the fourth wave of one higher degree, or worse, to the top of the first wave itself. This has happened in BHP Australia, and has happened in SNP500. Indeed, in SNP500, the collapse of the market is a correction of cyclical proportion, because we are not just correcting the last five wave move up from the low of 768 seen in 2002, but we are correcting the excesses of a much bigger rally, the one that started in early 1980s. Ramki
Update on 29 September 2020:
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