The market so far can be considered as very well behaved. Dow is in the process of completing its Wave 5 of Major Wave A that has dragged into its 16th months. It is very encouraging to notice more divergence in some parameters that indicate that Dow is not far away from its botttom.
The commodity indicator CRB has gone lower than its Nov 08 low of 208, its latest closing is 200. However the Baltic Dry Index BDI is currently at 1986 which is 200% higher than its Dec 08 low of 663. The shipping demand to move raw material is still very strong indicating strong demand for commodity. CRB ultimately has to follow BDI in its uptreand movement.
On-balance volume OBV is still trending upward but has taken a pause in the last 2 days when Dow touched its Nov 08 low of 7552. The big boys are accumulating their targeted stocks.
Dow is currently at sub-sub wave (iii). This sub-sub wave (iii) has so far completed its 1-dot and 2-dot as shown. It is possible that it is currently forming its 3-dot and 4-dot. The next 200 to 300 points down should complete its 5-dot and thus its sub-sub wave (iii).
Hopefully the whole downtrend that started in October 2007 can be completed by middle of March 2009 with Dow holding above 7000. 
If I apply this diagonal triangle idea to the current Dow formation, it gives the following outcome.
For two reasons, I myself is not very convinced at this moment that it is a diagonal triangle; that wave 5 has ended; that its is forming a double bottom reversal pattern; that the market is going to run from here. First reason is that the magnitude of the triangles are too small, the form does not have the "right look". Second reason is that the triangles do not fall within two well defined converging lines as shown in the sketch. I consider this possibility as unlikely. Within the next 3 to 4 days, the moment Dow goes below 7552, this possibility can be thrown out of the window. However, if the Dow really refuses to go below 7552 from now on, the only thing that I can say is "the unlikely has happened, it is a diagonal triangle fifth wave."
On-balance volume OBV is still trending upward but has taken a pause in the last 2 days when Dow touched its Nov 08 low of 7552. The big boys are accumulating their targeted stocks.
In the last 10 years, KL composite index KLCI has followed the Dow very closely as shown below. It appears that KLCI will have to wait until Dow has finished its wave 5 before it can really run.
Dow is currently at sub-sub wave (iii). This sub-sub wave (iii) has so far completed its 1-dot and 2-dot as shown. It is possible that it is currently forming its 3-dot and 4-dot. The next 200 to 300 points down should complete its 5-dot and thus its sub-sub wave (iii).
Hopefully the whole downtrend that started in October 2007 can be completed by middle of March 2009 with Dow holding above 7000.
With the latest development in Dow until yesterday, 18 February, I have observed a possible alternative to the wave-count that I have been talking about. But first let me explain what is a 'Diagonal Triangle'. Elliott Wave Principle described 'Diagonal Triangles' as follow:
"Diagonal triangles occur in fifth wave positions, usually after the preceeding move has gone too far and too fast. They are a special type of fifth wave which indicate exhaustion of the larger movement"
The following sketch shows wave 5 as a diagonal triangle.
If I apply this diagonal triangle idea to the current Dow formation, it gives the following outcome.
For two reasons, I myself is not very convinced at this moment that it is a diagonal triangle; that wave 5 has ended; that its is forming a double bottom reversal pattern; that the market is going to run from here. First reason is that the magnitude of the triangles are too small, the form does not have the "right look". Second reason is that the triangles do not fall within two well defined converging lines as shown in the sketch. I consider this possibility as unlikely. Within the next 3 to 4 days, the moment Dow goes below 7552, this possibility can be thrown out of the window. However, if the Dow really refuses to go below 7552 from now on, the only thing that I can say is "the unlikely has happened, it is a diagonal triangle fifth wave."
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