ASX 200 top confirmed at 5,679.50
Since the March 2009 low at 3,120.80 a major zig-zag correction has been unfolding. You might ask, why this is not just the first three waves of a impulsive 5 Wave rally higher? The clue is the C wave. Wave A of the 3,120.80 low to 5,025.10 was a strong impulsive rally and was followed by a simple zig-zag correction in wave B, but wave C higher from the B-wave low at 3,765.90 has been slow moving and not as dynamic as wave A, this is what we would expect for wave C of a zig-zag correction, but not wave 3 in an impulsive 5 wave rally. Wave C has taken almost 3 time as long as wave A to cover the same distance as wave A. The other clue is, that wave C is equal in length to wave A, which one would expect in a zig-zag correction, but not in an impulsive five wave rally.
Now that we have confirmed, that the rally of the 3,120.80 low is only a correction, then let's look at the final part of the C wave rally. Wave v of C has become an ending diagonal (overlapping by wave one and four, which only is allowed for diagonals). The break below the ending diagonal support-line near 5,510 confirms that wave v of C is over and we should now look for a decline to the origin of the ending diagonal at 4,632.30 over the coming weeks.
When dealing with ending diagonals, there is a time-guideline, which can be a guide for us, when we expect the origin of the ending diagonal to be hit. The guideline states, that it would take only half the time to return the origin of the ending diagonal as it did to build the entire formation, which in this case means that the origin at 4,632.30 should be hit within 30 weeks or in early March 2015.
However, longer term I will be looking for a continuation lower towards the bottom of wave B at 3,765.90 and lower towards the March 2009 bottom at 3,120.80.
With the long term picture in place, we have a nice roadmap for the short term moves, that should keep us out of trouble for many months to come.
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