It was only a week or two ago that we last commented on this index. In the meantime it has gained roughly 900 points and is fast approaching our target which is around 500 points higher yet, about 25800 give or take and not including a possible throw-over. We are paying particular attention to this index as this wedge is a highly accurate predictor of what follows. Furthermore this would complete the entire B-wave so a drop to 16000 is only the beginning! Notice that the RSI is already touching on overbought territory. As it stands the timeframe to reach the peak is about a week. This could be delayed if we are still in the 4th wave which could become more complex and consume a little more time, but that is becoming less likely by the minute.

What would cause such a sizeable move? Who knows but that is the whole point of expecting the unexpected. If you knew, it would become expected and would defeat the reason for your present preparedness as you would no longer be expecting the unexpected. See how EW solves this problem! You do not have a clue and yet you are ready.

Hong Kong is far away and completely outside my “ken” so to speak. Some might say that is true for everything. Anyway for superstitious  or plain dumb reason I have always thought that if anything goes seriously wrong with the World economy, there is a good chance that it starts here in China with HK the most free part.

Notice that the index has NOT made new highs and I find this rather curious as this is not where the Lehman problems were and growth has continued here at a torrid pace. Initially, paradoxically, this index lost more (almost 70%) than the US DOW or S&P.(at about 50%). However, the really interesting thing is the absolute textbook contracting diagonal, the wedge! It needs just one more 1/2 leg up to complete which should target something just above 26000. This is where the “intermission” was on the way down. To get there could take a while or take hardly any time at all. Furthermore I am not sure how much this index is in synch with the rest of the World. But the message is pretty clear and that is that it is time to get out.

The usual then (Nov. 29, 2011) and now harts;

At the time we explained the various paths this index could take and for what EW reasons. In the end, with the benefit of hindsight , we now know that something was complete at the lows from which a rebound took the stock back to an  anticipated level of about 21500. It did so pretty well as indicated, but then transformed into a much lengthier and more complex A-B-C by adding very little to the upside but a lot in time. That should now be over and the next wave down probable already started;

Right now at 22000 this index is sitting more or less in the middle of it’s range for the past six years. For those that believe that EW is a form of witchcraft, I have added a “standard” H&S pattern to the broth, which measures to about 4000, approximately the same level EW would suggest, for instance if C were to equal A someday. In any event the wave 2 is clear as a bell so at the very least we should get one more new low below 16000 and most likely to the trendline at 14000. This is what we pin our hopes on for world growth??