Elliot Wave or Coppock. A Bear or a bull?

As noted previously, some analysts would see the current Elliot Wave pattern as persuasive evidence for an ongoing Australian bear market.

The chart below shows the ASX200 over an 11-year period with the Elliot Wave A, B, C waves of the bear market labelled in red. Wave A started in November 2007 and Wave B started in March 2009. Wave C which started in March 2015 might be expected to run for some time and distance. The target for the C wave (the end of this bear market) from this chart is probably at least the 3150 level which was the low of the 2008 bear market.

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While the Elliot Wave projection for a bear market is one possible outcome, the Coppock indicator on the chart below shows a very different signal in about June 2016 which suggests a future bull market in Australian equities.

These two longer term technical indicators suggest very different outcomes. Both provide a broad market perspective but which is the more likely scenario?coppock

Over the past 6 months, world markets have shown little volatility and have been generally quite positive during a period where there has been significant political and social instability and unsettling economic events. Given the historically high levels of sovereign debt and low world GDP rates one could expect much more volatility. But the driving force for the equity markets remains the low interest rate environment which gives investors little alternative but to invest in equities as the only outlet for reasonable investment returns.

The contrasting signals given by Elliot Wave and Coppock indicators simply confirm that investors are unwise to try to predict the market outcome. It is more logical to be aware of the apparent current market risks and have realistic stop losses and trailing stops. It is evident that many investors are concerned at the volatility and risks associated with the stock market but to be entirely invested in cash at this time is not an attractive alternative.

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