Sunday, March 20, 2011

DJ World Index: Through the Elliott Eye!

The world has had an incredible year so far, with misfortune striking many diverse populations, in the form of natural disasters. I believe it is our duty to lend our support, relief and prayers to those affected, to the best of our abilities. 

Are we about to witness a financial disaster as well? Attached below is a chart with a simplistic view of the world index through my Elliott eye. If the labelling is foreign to you, you may want to browse through this basic Elliott Wave Tutorial. If you use a magnifying glass, you may notice a discernible trendline break on the chart. Note that the US markets have a heavy weightage in this index.

The question is: Is the C wave done? or was this 1 of C?
The nature of the decline that is currently unfolding might give us some clues. Assuming the most bearish case, i have drawn a projection of the possible path the world markets could take.

Big Picture

Since markets are fractals, any form of wave labelling requires the big picture count to be accurate. You may want to check out Robert Prechter's free copy of the February Elliott Wave Theorist for the US market picture, if you haven't already done so. (Available until Mar-21)

Asian Markets - baked in the same oven?

Although all world markets have general correlations, not all of them are in the same wave junctures. Some more bullish than others. For the Asian Markets big picture, you may want to check out the Asian-Pacific Financial Forecast service, by the brilliant Mark Galasiewski.

Very Short-Term

In the very short-term, most markets seem to be a few declines away from a short rebound into the next few weeks, which will serve as a back-test.

All the best!