In my Elliott Wave analysis of the Shanghai SE Composite Index posted on 18 July 2011, I had warned investors of the likelihood of testing the 2100 levels. The chart posted on that day had a wave count that is different from what you see today. But if you have been a regular reader of this blog, you know that my approach to the market is one where what matters is the result, and not the labels. We should trade our theory and so long as the rules and guidelines given by Ralph Elliott are not violated, we shouldn’t worry too much.

Now that we have almost reached the said target, it is natural that investors would wonder if it was time to start buying. (And those who have been short to start thinking about taking profits!) Given the fairly aggressive selling we have seen from November of last year, I think the SSE Composite index will go down to at least the 2010 levels. Down there is a place to start taking profits on short positions. But a really attractive buy level would show up lower still, around 1800. If the index reaches that low, we would have seen an extended fifth wave, and such a formation makes my mouth water, because any reversal after completing an extended fifth wave will offer handsome rewards. Take a look at the attached charts and let me know what you think.

Looks like a 3-3-5 pattern actually, and we are in 5 of the final 5 waves down… figuring out 5th waves is really tough, so best to start scaling in long

Hi Ramki

Did you mean go down to the 2008 level bcos we are already below 2010 levels. Am I getting this wrong.

Thanks

J

Hi Joe, the 2010 is not the year 2010, but the level of the index. There will be some support there, but at this point in time, I feel we could break that. Let us see.

Sir, very impressed with your wave count on Shanghai index.

this was the weekly wave count I did on the 28th of Dec 2011.

http://screencast.com/t/9gvRL4Nwh

where 1782 was a very significant S/R in the past. because I labelled it 1 and 2 (in yellow) where you labelled it A and B. think you are right , because wave A is a thee wave move.

whether the current 5th wave on the daily chart will extend or not? we need to zoom in and look at the internal wave structure. this is todays hourly chart: http://screencast.com/t/jCIubjbeJ

where we have 1234 (in yellow color) where the 3rd wave is almost 1.382 of the wave 1. and in the 5th wave, we have sub divided red color 12 and 34, but where the 3 and 4 could well be wave i and wave ii in the smaller degree. so we still not sure whether the 5th will extend. I guess if the incoming drop looks sharp and deep (personality of the 3rd wave) then we can say it is 1212 wave count in the 5th. but if the final drop slow and curve, and we get MACD positive divergence, then 2060 will probably be the bottom.

would you agree with my interpretation Sir?

thanks,

Yan

Dear sir

read your book, excellent one among all elliot wave books…

one question can extended wave 3 travel upto 500% of wave one……

Also need your view on NIFTY. Its long time to have your update on it…..

I think we are in ending diagonal in nifty and right now wave “d” progressing and wave “e” should complete by end of january… i.e. nifty bottoming this january itself…

your comment pls……………

Hi Abhi, Yes, there is no preset limit where extensions should stop. Will post on NIfty soon

Sir, I think todays price action probably gave us a clearer signal.

this is hourly chart on Shanghai index. http://screencast.com/t/IoWBaEFg4qo

we have a extended 3rd wave, within the 3rd wave, the red color wave iii=1.618 of wave i and wave iv =0.382 of wave iii. the final wave v is a ‘expending wedge’, wave v=50% of from beginning of red wave i to the end of red wave iii. wow.

so if the white color wave 4) will end at 38.2% of wave 3) then this bounce should terminate at 2244. and the white wave 3)=1.382 of wave 1) so the 5) th wave should extend, if it does, and project it with 100% of 0–3 from 2244, we get 1824.

Does anyone know ETFs which track SSE?

Ramki, can you please spare some time and provide an update on Silver? I am not sure to go long or short.

Hello Rajeev,

Check out this Forbes article: http://www.forbes.com/sites/greatspeculations/2012/01/05/chinese-stocks-shanghaied-but-still-getting-cheaper/ and you might get some clues.

Hello Sir.

The Shanghai Index has rallied 300points since the 2132 low.

any chance for an update on the future of this index please.

Many Thanks,

Yan