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Argentina Merval Index – Buy the Rumour, Sell the Fact! (Elliott Wave analysis)

by m.tamosauskas| November 24, 2015 | No Comments

01_Merval_151124a

Yesterday’s news that confirmed Argentina’s centre-right wing party had won a slender majority in its latest elections might be the beginning of a long-term positive development for the country having been isolated from international funding since the left-wing party came to power in 2003.

The incumbent President Mauricio Macri had earmarked various changes to the monetary system including a ‘unified exchange rate’ and removing currency controls, bringing down the 20% per cent inflation rate, regaining access to international capital markets and reducing government spending that is currently at 40% GDP. The markets took cheer in his mandate – Argentina’s benchmark Bonar 24 dollar bonds rose 1.55% to 102.69 cents per dollar – corresponding yields fell from 8.61% per cent to 8.37% per cent.

Whilst this offers an optimistic ‘long-view’ outlook for Argentina, a look at the Merval index suggests otherwise – in fact, from an Elliott Wave perspective, it would seem that this is a classic set-up of ‘buy the rumour, sell the fact’.

The entire activity of the Merval index from the September ’14 high of 12847.00 has all the characteristics of a developing expanding flat corrective pattern – see fig #1. The pattern is composed of three main price-swings, labelled a-b-c and assigned in minor degree as intermediate wave (4). Minor wave a. establishes the initial ‘price-extremity’ of the pattern between 12847.00 and 7452.00 whilst waves b. and c. must ultimately trade slightly beyond these levels – see tutorial inset chart. The pattern is also required to subdivide into a 3-3-5 sequence – minor wave a. fulfils this criteria by unfolding into a 3-wave zig zag. Minor wave b. has just done the same, advancing from 7452.00 into Monday’s election high at 15261.00.

The zig zag advance for minor wave b. has also unfolded where minute waves a & c measure equally, by a fib. 100% correlative ratio. This adds to its integrity. Furthermore, it has completed above wave a. close to and within the fib. 38.2% extension level of wave a. – another criteria satisfied.

Monday’s higher high and lower low closing also triggers a technical ‘key-reversal’ sell-signal. If further downside occurs during the next week or so, and reintegration follows below the dual peaks of 12847.00 and 12866.00, then minor wave c. declines will become a high-probability reality with ultimate downside targets to 6883.00+/- during the next several months.

Mauricio Macri has admitted that he is in no position to determine what condition Argentina’s financials are in…‘To know what we are inheriting, we have to be there [in power] – we still don’t really know’.

Category: Commodities, economy, Elliott Wave, Elliott Wave Charts, Elliott Wave Patterns, Elliott Wave Principle, fib-price-ratio, Fibonacci Trading, Financial Forecasting, Fixed Income, WaveTrack International
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WaveTrack International is a financial price forecasting company dedicated to the Elliott Wave principle and work of the R.N. Elliott. Clients include Investment Banks, Pension Funds, Total/Absolute-Return/Hedge Funds, Sovereign Wealth Funds, Corporate and Market-Making/Trading institutions and informed individuals -- & just about anyone who is affected by directional price change.

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