ASX 200 Forecast 2024-Jun-15
Lower to sideways
Summary
Next week
Downside. The ASX 200 will likely decline to around 7620 points early this week before a bounce or rally begins.
Next 4-9 months
Significant rally. The ASX 200 will likely peak somewhere between 8369 and 8835 points later this year or early next year.
2027-2028
A new secular bull market, defined here as a significant multi-decade advance, will commence sometime in 2027 or 2028. Long-term wave structure and price behaviour suggest it will be the greatest bull market in the history of Australian equities.
Disclaimer: at end.
Another abbreviated version as I remain on a road trip.
In the wake
Australia's benchmark share market index, the S&P/ASX 200 (ASX 200), closed at 7861.7 points, losing 135.76 points or 1.72% for the week.
Exhibit 1 illustrates the price movement for the ASX 200 during the past week.
Last week, I wrote:
Looming top. Upside risk is minimal from current levels… F will likely complete maybe this coming Thursday or Friday or early the week after. I suspect the ASX 200 will get close to, but not break, 7900, which leaves circa 39 points of upside from Friday's close.
I correctly forecasted that the upside risk was minimal at best. However, I had anticipated that the market would largely trade sideways until the end of this week before declining. The earlier-than-expected peak requires a slight revision of the forecast.
Forecast
Exhibit 2 reveals the revised interpretation of price behaviour on the daily high-low chart for the ASX 200.1
Price action since March 8th is consistent with a NEoWave Diametric, a Corrective Price Pattern that consists of seven waves, labelled A-B-C-D-E-F-G.
There are two key characteristics of Diametrics: First, they display expansion during the first four waves followed by contraction, or vice versa. Second, five of the seven waves tend to be similar in duration.
Until last week, I had presumed that waves A and D were the two dissimilar waves in duration. With F peaking a few days earlier than anticipated, I have to accept that it is waves C and D that are the two dissimilar waves. Now, I am not entirely comfortable with this as I think A is a little too short in time compared to the other similar waves. But there are no other obvious interpretations of price behaviour that leap off the page at me. And, if we ignore this one (minor) issue, price behaviour since March 8th is a textbook example of a Diametric. As a result, it is the best and only explanation I have at this point in time.
In a Diametric, wave G is likely to resemble wave A in price and/or time or be related by 61.8%. With this in mind, in addition to looking for other gravitational points of interest on the chart, I suspect that the ASX 200 will bottom in price sometime this week around 7628 points. This will make G similar to A, but not quite identical - an exact replica in price gives us a target of 7599 points, which undercuts the May 30th low of 7601.5 points, which it should not do. The second most likely relationship is that G is 61.8% of A, which yields 7699.9 points. The low on Wednesday was 7699.2 points so it is possible that the low of G has already occurred.
Regardless of which of these two short-term scenarios prevails, the price low is unlikely to be the end of G. When the future trend is powerful, it acts on the present so that the unfolding price pattern does not terminate at the low but rather at a later, higher low. The latter and higher the price pattern finishes, the more powerful the future uptrend. So G will likely complete in another one to three weeks’ time, at a higher low.
So, in the most likely scenario, the ASX 200 dips towards 7628 points early this coming week before bouncing/rallying around 150 points or more. One last small decline will then take place to complete the pattern at a higher low.
In the second most likely scenario, the price low of G is in. The ASX 200 bounces another circa 130 points before one last small decline completes the pattern at a higher low.
So long as the ASX 200 behaves in a manner consistent with one of these two scenarios, we can maintain confidence in the likelihood that the Diametric is the correct interpretation of price behaviour.
Disclosure: I will be buying any potential dip to circa 7628 points this coming week on the presumption it is the price low of G.
Exhibit 3 reveals the weekly high-low chart for the ASX 200.
This forecast is unrevised from last week. It will be updated as soon as we have confirmation that [X] has likely completed.
Upon the completion of [X], a major rally labelled [Y] will follow.
In terms of price, [Y] will likely be related to [W] either internally or externally. If they are externally related, the target is 8629 points, derived by taking 61.8% of [W] and adding it to the top of [W]. If they are internally related, the tentative targets are circa 8369 and 8835 points, derived by taking 61.8% and 100% of [W], and adding it to the expected conclusion of [X] at around 7640 points. These calculations are depicted above.
In terms of time, [Y] will likely relate to [W] by around 61.8%, 100%, 161.8% or 200% in time. These calculations are depicted above.
Once [W] commences, the rate of ascent will guide us to which price target/s and time target/s are the most plausible for [Y]. It will likely peak and complete in the shaded dark green region above.
Portfolio Management
While Wave Structure points to the likelihood of much higher prices for the ASX 200 for the remainder of 2024, this rally will likely be concentrated in fewer and fewer stocks as it progresses. It still makes sense to remain fully invested, but only in companies performing well from a price viewpoint.
The office last week.
Disclaimer
This market letter was prepared by Daniel Goulding and represents the views and opinions of the author. It does not constitute investment advice. My work is didactic in nature, serving to increase readers’ awareness of an alternative philosophy of financial markets. I write generally and cannot determine whether an investment is appropriate for your particular needs, individual circumstances or risk profile. You should consult a financial adviser if you require professional assistance with your portfolio. I am not licenced or affiliated with any licensee. Therefore, I am free to speak my mind.
Lexicon
Composite Advance-Decline Line (A-D Line): the cumulative total of the number of advancing issues (stocks that closed higher) less the number of declining issues (stocks that closed lower) each day. The A-D Line is the classic measure of market breadth – a term that describes how many stocks are participating in a market trend. When the majority of stocks are moving higher, this is reflected in a rising A-D Line. A declining A-D Line, on the other hand, indicates that the majority of stocks are moving lower.
Corrective price pattern: A reaction against the prevailing trend of one larger degree. Overlapping is a common feature although it is not a strict prerequisite. Corrections are an outgrowth of indecision or ambiguity with respect to the future. They are labelled alphabetically (A-B-C etc).
Elliott Wave Principle: the idea that market behaviour is self-affine in nature due to recurrent oscillations in public opinion across different but simultaneous timeframes. It posits that price action can be defined, quantified and classified, and used to project the future evolution of price.
Impulsive price pattern: A fast-moving market. Impulse waves produce a significant change in the price level. A distinctive feature is minimal or no overlapping, depicting a strong level of conviction about the outlook. They contain five segments labelled numerically (waves 1-2-3-4-5).
Last Hour Index: the cumulative measure of the net change in a share market index during the last hour of trade. The idea behind this indicator is that large market participants are most active in the last hour of trading when liquidity is at its zenith, as well as being the final opportunity for them to open or close positions ahead of the close of trade.
NEoWave: Neely Extensions of Elliott Wave. The body of knowledge enunciated by Glenn Neely, represents a significant break or extension of the original theory postulated by Ralph Elliott.
Price behaviour: the quantitative assessment of price action. Essentially, the largest, fastest moves are always in the direction of the prevailing psychological trend.
Wave structure: the quantitative relationship between different waves of price action.
Transmission time:
Sydney: 15-June-2024 18:35
Ljubljana: 15-June-2024 10:35
London: 15-June-2024 09:35
New York: 15-June-2024 04:35
A high-low chart plots the period's highs and lows in the order in which they occur.