IBEX: Reassessing The Long Term Elliott Wave Pattern
I maintain the idea that IBEX given the internal structure of the decline from the November 2007 is highly vulnerable of a major setback once the corrective advance from the July 2012 runs its course (Probably once Mr Draghi announces a massive QE or the FED is forced to raise interest rates).
So far I have been following the Double Zig Zag count. Today I introduce two additional scenarios.
Lets review the three scenarios.
- Double Zig Zag: From the July 2012 low pric e is unfolding the second wave (B), which should top in the range 11566-12240.Once the wave (B) is in place it should be followed by a "uber bearish" wave (Y) that would most likely fully retrace the advance from the July 2012 low and even establish a lower low. The new bear cycle could be confirmed with a monthly close below the 10 mma which today stands at 10147, although in addition price should breach the trend line support in force since the July 2012 low
- Triangle wave (X): From the March 2009 low price is forming a Triangle wave (X). If this count is correct from the July 2012 low price is unfolding the wave (c) of the assumed Triangle, which must top beneath the January 2010 high. The Triangle will pan out if price maintain the sequence of higher lows-lower highs. The final outcome will be the "uber bearish" wave (Y).
- On June 2012 price completed with a Double Zig Zag the wave (A) of a Flat or Zig Zag, hence the current advance is a wave (B) that could top either in the area of the 0.618 retracement 12204-12241 or at the next resistance level located at 14301. Once the wave (B) is in place it should be followed by an "uber bearish" wave (C) that would most likely fully retrace the advance from the July 2012 low and even establish a lower low. In order to consider viable that a new bear cycle has began price will have to breach the 10 mma and the rising trend line support in force since the July 2012 low.
In the following monthly chart we can observe two distinctive aspects of the rally from the July 2012 low:
- It has been extremely strong. Above all from the July 2013 low with an impressive winning streak of 11 consecutive months without a lower low.
- It could be forming a rising wedge. Even though I don't give too much credibility to the potential bearish outcome of this pattern, it gives us a resistance and a support. Accordingly the trend line resistance this month is located at 11.300 +/- while the support trend line next month is located at 10.735 +/-. Obviously when a long-standing trend line is breached it raises a serious warning that the up trend could be vulnerable of a trend reversal.
- If the lower trend line were breached I will give the benefit of the doubt that there is no major warning of a potential reversal as long as the 5 mma which today stands at 10571 holds.
- If the rising 5 mma is breached a larger pullback would be underway
- If the rising 10 mma which today's stands at 10147 does not hold then the risk of a trend reversal would be high.
- If this is the case the rising trend line from the July 2012 low would most likely come into play and it would be the last support that could prevent a major reversal.
At the same time since the monthly RSI is not displaying a negative divergence the probability that price is approaching a major top is low.
The weekly chart adds more objective valuable information:
- Price has reached a resistance zone, printing a Spinning Top after two consecutive weekly bars above the upper Bollinger Band. While two consecutive eow prints above the Bollinger Band are rare, a third one would be extremely unusual.
- If despite the probability that favours a pullback the Spinning Top is negated, next week the trend line resistance will stand at 11289 +/-.
- If instead next week the rising 3 wma which today stands at 10994 is breached the Spinning Top should have established some type of a top and IBEX would be vulnerable to retest the previous resistance now support located at 10705.
Now lets analyse the pattern from the summer 2012 low.
- If the long term Elliott Wave Pattern is either the Double Zig Zag or the Triangle (X) scenarios then the advance from the July 2012 should be unfolding a Double Zig Zag or a Triple Zig Zag.
a) Double Zig Zag option (Weekly Chart): If this count is correct from a likely triangle completed on March 21 the impulsive wave (Y) is underway.
In the daily chart we can see that from a potential triangle wave (B) the wave (Y) is unfolding an impulsive sequence. If this count is correct we are now in the wave (iv) of (3). The final wave (5) could top in the area of 11500. Once the pattern is completed IBEX should be vulnerable of a meaningful / major decline depending on if the 50 d / 10 mma / 200 dma hold or are breached, since the Double Zig Zag could morph into a Triple Zig Zag.
b) Triple Zig Zag option (Weekly chart): If this count is correct from a likely triangle completed on March 21 a Zig Zag is underway.
In the daily chart we can see that if this count is correct from the April 14 low the last impulsive sequence is underway, we are now in the wave (iv). Once the wave (v) is in place in the area of 11300-11350 the odds would favour a meaningful decline probably towards the range of the 10 mma (10.147) - 200 dma (9953).
- If the long term Elliott Wave Pattern is a Zig Zag then the advance from the July 2012 should be unfolding a Triple Zig Zag similar to the one discussed above.