AEX topping process and an alternate view

The AEX is in a topping process. While the Elliott pattern calls for a new slightly higher high (360-365) as described earlier, the AEX appears to be stalling. If we combine this with the cycle count, we can only conclude that something else is going on. Part of ‘predicting’ where the market is moving is to consider all possibilities and then narrow down these paths as more data comes in. In our case we use daily data, so every day new information (price & volume) is added to the puzzle, reducing existing ‘wave counts’ and adding new ones. Today I’ll look at one of these alternates.

Perhaps the index is forming an ABC flat that started in late January. Currently we are in wave B of this flat, which is possibly tracing out a contracting triangle. This scenario fits well with the cycle count.

Cycles are either left-, middle- or right-translated, depending on if the cycle crest is early or late. And the saying goes: ‘The sooner the top, the larger the drop’. The first (white) cycle has a right translated top so the drop to the end of the cycle is moderate. The second (white) cycle has multiple tops, so the end of the cycle (point C) is probably similar the the start. This cycle is also subdivided in two smaller cycles (grey). The 2nd one, topped at wave ‘a’ (yellow). This is early in the cycle so the drop to the end of the cycle will be significant.

Note that this scenario becomes invalid if top a (yellow) at 358.92 is taken out. If it holds, a decline to 315-320 in June is projected. Note that June 15th is expiration and June 22nd is a Bradley date.

If this plays out it will have VERY interesting consequences for the AEX all the way into 2014.