Global Contagion II

By: Joseph Russo | Mon, May 22, 2006
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"Is the bullish contagion nearing its end, or just pausing to refresh?"

The following is a chart pattern update from our previous 4/16 post...


Given the price action across a broad array of global equity indices, it is difficult for us NOT to consider the probability that extended fifth waves are currently under way.

Monitoring the unfolding of such extensions is quite challenging due to the perplexity and multitude of sub-divisions required to complete the sequence. As always, the larger periods are dominant, and what may count out as a satisfactory sequence of completion on a daily chart may well end up disappearing into the larger time frames subsuming rendition of the pattern in force.

The probable cause of their development may reside under the auspices and repetition of exponentially larger and larger injections of global liquidity at numerous junctures of crisis spanning 10-20 years or more.

Below is an idealized "extended" Intermediate Degree (5) terminal:

The pattern below exemplifies a more realistic representation of how an extended (5) of Intermediate Degree or higher might unfold in real time:

Now it is time to explore a progress update of the Global Contagion in real time.

Chart comparisons are expressed in weekly vs monthly periods to highlight declines off the recent highs.

THAT WAS THEN... 4/12/2006
A Glimpse of the Top from Down Under

Since the 2004 wave (4) print low in 2003, the ASX has gracefully ascended with fewer and fewer pullbacks in five waves of Minor Degree; marching straight toward the top of its trend channel.

THIS IS NOW... 5/19/2006

The previous 4/12 analysis had a chart high of 5197. Since then, the ASX pulled back briefly, then launched what appears to be a final assault into a long-standing price capture window. From peak to trough, the market is down just under 6%. EWT's first downside target is just above 4800. Just another pause similar to the October decline of '05? Time will tell. The chart high for 5/19 is 5352.10; just 47.29 points shy from the mid-range of our optimal distribution window that appeared back in April.

THAT WAS THEN... 4/12/2006
Perpetual Carnival since late 2002

Of interest regarding the Bovespa, is the prospect for the currently topping Intermediate (5) to be terminating only that of Primary "3".

THIS IS NOW... 5/19/2006

THAT WAS THEN .... 4/12/2006

India continues to display a relentless advance- virtually absent of any meaningful corrections since 2005. The fifth wave extending in the BSE appears to be one of Minor Degree. The completion of Minor x5 will mark an extended Intermediate (3) terminal. Note the smaller narrow trend channels drawn from the 2005 lows. Price has climbed near the top of this trend channel and has already begun to descend.

THIS IS NOW... 5/19/2006

What appeared to be a potential top at 11,930 back in the April 12 analysis, turned out to be another fourth wave bottom. Our projected price target window was 12,300 - 14, 789. The 5/19 weekly update shows our previous target window has been entered. Since the current chart high of 12677.11 the BSE has fallen over 13%. Is this just another pause, or perhaps a larger degree trend change?

THAT WAS THEN... 4/12/2006
That GIANT SUCKING SOUND seems to have bred one heck of a Bull Market for Mexico

After kicking and clawing its way through Intermediate (4) and Minor 4, the Bolsa has done nothing but ascend in stellar fashion since the 2002 low marking Minute '2'. Of immediate concern are the two divergences occurring against the '06 all time highs in both the RSI and ROC. Note the two key power up trend lines in light gray and blue. Should they both hold- the top of the trend channel remains very much in play.

THIS IS NOW... 5/19/2006

On 4/12, the Bolsa was struggling to maintain the 20k level. It has since chopped higher to a print high of 21,917 only to sink back to close 5/19 just above 20K. The tightest of up trend lines continues to hold for now.

THAT WAS THEN... 4/12/2006
RED BULL .... A bull like no other!

THIS IS NOW... 5/19/2006

The Chart high for the RTSI is 1795.00, just 42.59 points above our projected high on April 12. All the classic criteria have been met for a terminal of major degree. Trend channels objectives have been achieved, price targets have been achieved, and all of the required sub-divisions can be accounted for. All that remains is a retest or marginal new high after a test of the 1400 level. Should this play out, this chart will go straight into the textbooks. So far, the RTSI has fallen about 19% from its recent highs.

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Joseph Russo

Author: Joseph Russo

Joseph Russo
Chief Editor and Technical Analyst
Elliott Wave Technology

Joseph Russo

Since the bubble, 911, and the 2002 market crash, Elliott Wave Technology's mission remains the delivery of valuable solutions-based services that empower clients to execute successful trading and investment decisions in all market environments.

Joe Russo is an entrepreneurial publisher and market analyst providing digital online media solutions designed to assist traders and investors in prudently and profitably navigating their exposure to the financial markets.

Since the official launch of his Elliott Wave Technology website in 2005, he has established an outstanding record of accomplishment, including but not limited to, ...

  • In 2005, he elicited a major long-term wealth producing nugget of guidance in suggesting strongly that members give serious consideration to apportioning 10%-20% of their net worth toward the physical acquisition of Gold (@ $400.) and Silver (@ $6.00).

  • In 2006, the (MTA) Market Technicians Association featured his article "Scaling Perceptions amid the Global Equity Boom" in their industry newsletter, "Technically Speaking."

  • On May 6 of 2007, five months prior to the market top in 2007, though still bullish at that time, he publicly warned long-term investors not to be fooled again, in "Bullish Like There's No Tomorrow."

  • On March 10 of 2008, with another 48% of downside remaining to the bottom of the great bear market of 2008-2009, in "V-for Vendetta," using the Wilshire 5000 as proxy, he publicly laid out the case for the depth and amplitude of the unfolding bear market, which marked terminal to a rather nice long-run in equity values.

  • Working extensively with EasyLanguage® programmer George Pruitt in 2010 and 2011, the author of "Building Winning Trading Systems with TradeStation," he assisted in the development of several proprietary trading systems.

  • On February 11, 2011, he publicly made available his call for a key bottom in the long bond at 117 '3/32. Within a year and half from his call, the long bond rallied in excess of 30% to new all time highs in July of 2012.

  • For the benefit of members and his general readership, he responded to widespread levels of economic and financial uncertainty in the development of Prudent Measures in 2012.

  • He publicly warned of a major top in Apple on October 26, 2012 in the very early stages of a 40% decline from its all time high.

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