Does Russian market ETF have any good setup? Spoiler: no, it does not

RSX is the symbol of the VanEck Vectors Russia ETF that tracks a market-cap-weighted and -selected index of Russian companies. The total amount of assets is $1.6 bln.

The highest price for RSX was recorded at $59.58 in May 2008. By January 2009 the price dropped to the lowest point of $10.34. I count that impulsive looking decline as wave [ A ] down.

Harmonic Elliott Wave analysis of ETF RSX

Off that bottom in January 2009 we have a clear A-B-C move up. There are two options on how to count that move up. That A-B-C move could be all of the corrective wave [ B ] up or it could have been only wave ( A ) of [ B ] up.

Let’s start with the first scenario where it was all of wave [ B ] up. Then it implies that we should get next an impulsive looking decline in wave [ C ] down subdivided into five waves.

And as you can see on the chart below, we did indeed get a decline subdivided into five waves. That five wave count may look suspicious because of extended wave ( v ) down. Normally wave ( iii ) in five wave fractal is the strongest. But the rule says wave ( iii ) can not be the shortest. That means that if wave ( iii ) is longer than wave ( i ) then sometimes wave ( v ) gets extended. So that count is valid.

Harmonic Elliott Wave analysis of ETF RSX

However, we have another big problem with that [ A ] – [ B ] – [ C ] count. If the A-B-C up structure was all of the wave [ B ] up, then the following five wave decline off the top made in April 2011 would make a new lower low under the low made by the first drop in wave [ A ] bottomed in January 2009. I drew the green line at that lowest low. And as you can easily see, the decline off the top in April 2011 to the bottom in January 2016 failed to make a new lower low. While wave [ A ] bottomed at $10.34 that five wave decline bottomed at $11.81 in February 2016.

That fact strongly invalidates the scenario where waves [ B ] up and [ C ] down have been completed. 

The second valid scenario would be that we are still in wave [ B ] up. The A-B-C move up that topped in April 2011 was wave ( A ) up of [ B ] up. The following decline that bottomed in January 2016 could not be wave ( B ) down of [ B ] up. Because we counted five waves in that decline we should count it as wave A down of ( B ) up. Under that count we should get wave B up of ( B ) up from the low made in January 2016 ( see the chart below ).

That wave B up of ( B ) up will most likely have an ugly (a)-(b)-(c) structure. In general wave B of ( B ) is the least predictable wave with the ugliest possible structure. You should avoid trading it at all costs. The only reasonable scenario would be the case when we have a deep wave ( b ) down into the green target area in order to play the final subwave ( c ) of wave B up. Until then I would be focusing on trading other instruments.