As seems evident from the chart above, the 2011 high marked the end of an A-B-C zigzag correction from the 2009 lows. We also had a 5 wave decline to confirm that the trend indeed has changed, Now looking at the bounce post the 2011 lows, it seems sluggish and corrective in nature, limited to a parallel channel is typical behavior of counter trend rallies. Looking at that bounce in greater detail, it seems evident that we have terminated the upward correction. The RTS has rallied in its 5th wave of the C wave of it’s A-B-C correction, we can also see, that the guideline of alternation of corrective patterns fit in quite nicely, wave A was simple and swift while wave C was complex and more time consuming. Another point to note is that this market slightly exceeded the wave 4 terminus of the 2011 decline, and we got close to the 61.8 retracement which is a typical target for (2)nd wave rallies. Prices shall soon reverse, in quite a big way, confirmation that the move is underway would be a breach of 1663 on this index which was met as of the price action last week.
As seems evident on this currency pair, the decline in the USD happened in 3 waves which was proven complete as prices broke the wave (b) high, THE USDRUB also rallied in 5 waves which confirms that a significant trend change has indeed occurred, the upcoming wave (3) shall prove to be explosive and stunt the rally from the 2011 low. The strong negative correlation between this currency pair and the RTS suggests that our view on the Russian stock index is probably correct.
Notice the divergence between waves (a) & (c) on the RSI
Things should get quite ugly real soon.
Regards,
Ahmed Farghaly
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