Weekly Technical Analysis24 June 2013

- By Vivek Patil, India's foremost expert in Elliot Wave Analysis 

Sensex reacts exactly from the Neckline, loses 2% to test 80% mark. India's trade deficit widens to 7-moth high due to gold imports. Dollar hits a new high against the rupee. Weak Rupee forces RBI to hold rates at existing levels. Dollar strength causes biggest single day Sensex drop in 21 months last week. Gold hits 33-month low in international markets. Flash flood, land-slide in Uttarakhand cause over 1000 deaths.

Up after RBI Policy, Sensex reacts lower from the Neckline, hits 80% retracement mark

[Technical readings carried forward from previous weeks are shown in italics. Readers can easily identify the new arguments which are written in regular font]

Last week we discussed, “Friday’s bounce came from the lower end of the Red falling channel … recovery is now touching the upper end of the same channel … Sensex created ‘Island’, which can have +ve implication if the action continues to strengthen after RBI Policy … The pressure point on the market is currently the Dollar-Rupee equation. Keep an eye on this … we had suspected Dollar to move positively since last four weeks, and Dollar obliged by moving to a new high against the Rupee … (For Sensex) we had marked the rally during Apr-May as a 5-legged ‘Extracting Triangle’ … Since the Apr-May rally was a label-3 pattern it would get corrected by more than 61.8%, and perhaps to the extent of 80% … In case +ve scenario unfolds, it could create a ‘pull-back’ to the Neckline ...”

Sensex strengthened after the RBI Policy on Monday. However, up 206 pts by Tuesday, it touched the Neckline exactly and reacted lower thereafter. Losing as much as 769 pts by Friday, it touched the 80% retracement level to Apr-May’13 rally exactly at 18615. On a net basis, Index lost 404 pts or 2.1% for the week.

Top Stories of the Week

Except IT, which ended +ve, thanks to 3% gain in Dollar against the Rupee, all other sectors ended in the Red, The Realty, Banks & Metal Index, along with all the Dollar-based Indices, lost 4-5% each.

Indeed, Dollex-30, the Dollar-converted chart of Sensex, has retraced the Apr-May rally completely in faster time. It has now weakened to its Sep’12 lows, as can be seen on Dollex-30 chart below :

During Oct’12, the top on Dollex-30 looked like H&S formation. From one higher-degree perspective, the Oct’12 formation looks like the Left Shoulder of a bigger Head & Shoulders formation, with Jan’13 as its Head.

The top during May’13 looks like the Right Shoulder of the bigger H&S formation, the Neckline of which, is now broken. The Dollar strengthened 3% against the Rupee during the week, and hit a new high of 60.18.

The Dollar-Rupee equation has an inverted relationship with Sensex. While Sensex topped during May’13, the Dollar-Rupee chart bottomed out and broke the resistance line shown in Red. Refer to the Dollar-Rupee chart given below :

The year-long consolidation phase from Jun’12 to May’13 on the Dollar-Rupee chart looks like a 3rd Extension 5th Failure Terminal. The Terminal has been completely retraced in less than 25% time, as required under NEoWave rules.

On one higher degree, the Terminal could be part of an Irregular C-Failure Flat from Jan’12. If true, then as per NEoWave principles, Dollar can achieve 67 by Aug’14. As per NEoWave, after such a Flat, upward projection can be 161.8% of “b” from the end-point of “c”. 

For the Sensex, last week it was stated that post RBI Policy strength could test the Neckline of the H&S formation seen during May’13. As per NEoWave, the structure was explained as 5-legged “Extracting Triangle”, with rallies getting smaller and drops bigger, i.e. e < c < a, and d > b.

As can be checked on the Daily chart of Sensex, the post-policy strength exactly touched the Neckline of the H&S formation. Reacting from the Neckline, Sensex retraced the preceding 3-day rally (d-leg) completely, and that too, in faster time.

It was also argued that since the Extracting Triangle is a label-3 pattern, it could get retraced by more than 61.8%, or 80%. The reaction from the Neckline is now exactly touching the 80% mark.

The 80% retracement level to the 2300-pt Apr-May’13 rally from 18144 to 20444 calculates to 18604, against which, Index hit 18615 on Friday. Whether Sensex holds around this level could prove a structural decider.

Inside the fall beginning from 30th May’13, each up-down segment has so far consumed 3-4 days each. Such a time-similarity is symptomatic of a “Diametric” pattern. 

We may, therefore, assume that the post-May’13 fall is developing as a “Diamond-Shaped” Diametric, which is a 7-legged pattern.

Sensex is currently into its e-leg which is testing 80% retracement level. The e-leg has already consumed 3 days from Tuesday to Friday last week.

Strength and close above Friday’s could open f-leg, which could also consume 3-4 days like other legs of the Diametric.

However, the d-leg of the Diametric did not overlap with the b-leg. Usually it should show an overlap to signify a “corrective” or label-3 structure. This raises doubts if the structure is actually a downward “impulse”, and this possibility would draw an alternate picture for us.

The labels for this alternative impulsive structure are shown in White color. 

Justification for an impulsive interpretation comes from the fact that last Thursday’s action comprised of the biggest single-day loss since 22nd Sep'11. It also broke previous support and retraced the preceding 3-day rally (d-leg) in faster time. Faster retracement of rising segment is a -ve indication structurally.

Sensex had created an “Island” earlier on 14th Jun. Last week’s action broke and closed below the Island , negating its +ve implications. It also broke 200-day EMA with a gap-down action.

If the fall is a 7-legged Diametric, it’s a corrective to the Apr-May’13 rally. It may, therefore, hold around 80% retracement area, or even if moves below the Apr’13 low of 18144 (Nifty 5477), it would take a longer time. 

Remember, we are assuming Diametric development due to time-similarity of its legs, so far. Sensex is currently into its e-leg, and f & g legs are still to form.

However, if post 30th May fall is an “Impulse”, suspected due to absence of overlap between b & d legs, it could be 5 th Extension Impulse with mega-phone shape. The 5th of such an Impulse would be the largest segment, equaling the magnitude from 0-point to 3.

Impulsive structure confirms on break below Apr’13 low of 18144 (Nifty 5477) in faster time than the 31-day time consumed by the Extracting Triangle we marked inside the Apr-May rally, i.e. in the next 15 days.

For the coming week, in order to open the +ve option of f-leg of Diametric moving higher, we need to see follow-up buying and close above previous candle in the next 1-2 days.

If the e-leg fall stretches beyond 4 days, and fails to hold 80%, such a move could invalidate the Diametric assumption and favor the alternative Impulsive scenario.

On one higher degree, the development from Dec’11 onwards ended in 29th Jan’13 as a 3-legged Flat (as per Jan-Topping cycle) OR alternatively, it ended as a 7-legged Diametric on 30th May’13. 

The D of a large Diametric from ‘2008 onwards ended at the top of Jan’13 (or alternatively at the top on May’13). The E of this Diametric has opened from there. 

Thus, the rally from 15th Apr’13 to 30th May’13 (i.e. the Extracting Triangle) was either an Irregular “b” of E OR “g” of D. 

The market, in the meanwhile, continues to be selective. The main indices have been controlled by the ones who can move the heavyweights. We had mentioned swaying prowess of ITC recently, which created a Higher High on Sensex in May’13, but not on broader Indices or Dollar-based Indices.

Indeed, while Sensex traded near to its highest levels, the BSE Small-Cap Index traded near the levels it closed the year ‘2005, i.e. 8-year old levels, which shows the small investor still remains in a tight spot.

The Sensex has reacted lower from the Grid level at 20250 for the 2nd time. The effectiveness of VP’s Grid System was shown on the chart below. Since ‘2008, these Grid levels did prove important turning points for the market.

The alternate structure is shown below, according to which, the post-Apr’13 rally may be a “Bull-Trap” rally marked as “g” of the larger D :

Since legs of Diametric as well as Extracting Triangle formations are exceptions to NEoWave rules, the trading environment could remain challenging. We better trade with the required caution and be selective on trading opportunities.

Under Wave Theory, the standard correctives are Zigzag, Flat and Triangle. Though not mentioned in Glenn Neely’s Book “Mastering Elliott”, a 7-legged Diametric is also considered one complete label-3 corrective. 

A Diametric is a very tradable pattern once identified correctly, like we did from Feb’13 to Apr’13. Its identification symptoms included time-similarity amidst its internal legs, and corrective (label-3) a-wave followed by sub-normal b-wave.

Since Diametric is absent from the book, many seem to ignore its existence. It is basically made-up of two Triangles.

While Contracting Triangle followed by Expanding Triangle would shape-up as Bow-Tie Diametric, Expanding Triangle followed by Contracting Triangle would shape-up as “Diamond-Shaped” Diametric.

Multi-Year long Diametric Formation

It was argued that all multi-fold rallies would be followed by multi-year long consolidations. Sensex, remember, rose 11-fold during ‘1988 to ‘1992, but entered a 11-year consolidation thereafter.

Again, during ‘2003 to ‘2008 it multiplied 7 times. Drawing similarity, it could a 7-year consolidation starting ‘2008. Further, the consolidation, may shape up like a 7-legged Diametric, similar to the consolidation seen from ‘1992 to ‘2003.

The Diametric formation from ‘2008 is also suspected because each of its internal legs, except B, have consumed about 13

months so far. So, the E wave from Jan’13 could also continue for about 13 months, and end somewhere around Feb-Mar’14.

This long-term picture was fist published on 6th Feb’2012, with both D legs highlighted in Purple color rectangles. In the previous instance, the D leg during ‘1996-97 had retraced as much as 97% of its preceding C leg. In the current instance, D retraced 84% of C.

Long-term corrective phase on Dow’s chart also appears to be a probable 7-legged Diametric. Instead of “Bow-Tie Diametric” on Sensex, Dow’s Diametric is shaping up as “Diamond-Shaped Diametric”.

Jan-Mar Topping Cycle

During Dec’12, it was pointed out that major tops occurred during Jan-Mar period in the last 13 years.

More than half the times, the top also occurred during the month of ‘January. Based on this, it was argued that Sensex could hit a major top during Jan’13, and it did.

This cycle may be the result of NAV pop-up exercise in the last month of the Calendar Year. Jan’13 was the 7th such top forming in the month of ‘Jan.

Performance of the Broader Market

The broader market has, generally, under-performed the main Index since the year ‘2008, as can be checked on the chart below.

Indeed, the broader Mid-Cap and Small-Cap Indices have also broken 0-b lines of the upward D leg, shown in Red on the chart. The Small-cap Index even broke its Jun’12 levels, and gave a faster retracement to the “c” part of post-Dec’11 rally.

Indeed, while the Sensex itself retraced 89% of it preceding 13-month fall from Nov’10 to Dec’11, BSE Small-Cap Index retraced only 38.2%, and has, in fact, reacted heavily from this retracement level.

The divergence between Sensex and broader market appears to be Index management activity, as the Sensex is held by the Index heavy-weights, while the broader shows distribution. This whole thing, however, made for a tricky and uncomfortable trading environment.

NEoWave Discussions

Inside the D leg from Dec’11 to Jan’13, we had had assumed a 3-legged a-b-c Flat. The “c” part was a 5-legged Impulse, inside which, 5th leg (beginning Nov’12) was assumed to be a Terminal.

Based on NEoWave requirements, it was argued that Sensex would drop below Nov’12 lows in 50% time of the 48-day long Terminal. Index eventually did drop below Nov’12, but took 48 day or 100% time (instead of 50%).

As an abundant precaution, therefore, following alternate wave-structure was suggested for the D leg from Dec’11, according to which, D is still developing as a 7-legged Bow-Tie Diametric. This structure, however, turns valid only if Jan’13 highs are broken, not otherwise.

In the alternate scenario, “c” ended at Oct’12 high, and it was equal to “a” leg. The “d” was the smallest segment, and “e” (i.e. post-Nov’12 rally) was a “Double Combination” which ended in Jan’13.

The channel enclosing the a-b-c Flat inside the larger D leg from Dec’2011 onwards was shown on the chart below.

The 80% retracement level was considered and marked as a pattern implication for the 13-month long Double Combination move marked as C. Pattern implications, however, cannot be strictly implemented for the legs of Triangle and Diametric, which are exceptions to the general rules.

Inside “c” of D (beginning Jun’12) for Sensex, we were expecting a 5-legged Impulse, because Flat is a 3-3-5 structure. 

As per NEoWave “Extension rule”, one of the directional leg inside an Impulse should get “extended”, i.e. achieve 161.8% ratio to the next largest leg. 

Since 1st and 3rd were “normal”, we could have projected 5th wave Extension. However, such a move would project values slightly above the Nov’10 highs, which would jeopardize the larger assumption of “Bow-Tie” shaped Diametric from ‘2008 onwards.

We, therefore, preferred 5th of “c” not to achieve 161.8% ratio, but terminate below Nov’10 highs, from where a downward E would open. Since E begins the “expanding” phase of the Bow-Tie Diametric, it would break below Dec’11 lows.

The 1st and 3rd inside “c” of D continued for about 4-5 weeks each. We expected 5th to consume a similar time, and end somewhere in the month of Dec’12 or near to it.

As the beginning part of 5th shows violence on upside, we suspected 5th could develop internally as a 1st Extension Impulse or Terminal. Since a “Terminal” always occurs at major turning point, it would be able to generate the necessary downside power for the larger E leg.

NEoWave, remember, allows exceptions to rules at important market turning points or under “unusual” conditions, like end of larger patterns or last wave, such as a Terminal. 

Also, Triangles and Terminals are exceptions to virtually all rules. Since Diametric pattern is made up of Triangles, NEoWave “Exception Rule” is also applicable to these patterns. 

Since we were at an important turning point in Jan’13, and dealing with Terminal and legs of Diametric, perhaps pattern implication rules could not be satisfied to the full extent.

Does it really matter whether the Sensex achieves the pattern implication accurately within the time-price parameters, when the general direction of the secular market has been largely -ve as we suspected since Dec’12 ?

As we argued, the larger bear phase is already visible in the broader market. Since ‘Dec’12 we turned cautious as the rallies were getting smaller (shaping into a Terminal), and also because of the ‘Jan topping cycle (discussed separately).

Sensex, consumed 59 weeks to retrace 84% of its preceding 13-month fall, which also was a 59-week affair, as shown on the chart below :

The rally, accordingly, was considered slower, corrective structure as per NEoWave, and not as part of any fresh rally.

As per NEoWave, most channeled moves enclose a Complex Corrective structure involving “x” wave. Complex Corrective involving 2 correctives, joined by one “x” wave, is called a Double Combination, and carries a pattern implication of not more than about 80%.

Further, as depicted on the chart below, since Nov’10, it has been generally useful to consider 61.8% to 80% retracement area as crucial for terminating moves.

The post-Nov’12 rally is now retraced by 100% on Sensex, but more than 100% on broader indices. The larger picture of Diametric from ‘2008 onwards is, therefore, considered still valid. 

That would mean 13-month long D-leg has ended at Jan’13 highs, and 13-month long E-leg started thereafter. Only a move above Nov’10 / Jan’08 highs can make the larger picture invalid. Please see the monthly chart of Sensex showing the larger Diametric from ‘2008.

BSE Dollex-30 Index

Mwanwhile, since the FII activity turned a prominent factor in the Indian stock market, we examined the development of BSE Dollex-30 Index, which showed a Head & Shoulders formation around Oct’12 on its Daily chart.

Its downsides later achieved the Head-to-Neckline projection on downside, as we expected. Since the projection level also matched with its 200-day EMA, we suspected some pull-back. It did pull back till Jan’13.

During Apr’13, this Index protected its Nov’12 lows, and bounced back. It has now reacted lower from the 80% retracement level to Jan-Apr fall, and has now broken the crucial 200-day EMA once again, and indeed, broken Apr'13 lows as well.

Yearly lows

Sensex has broken ‘2010 low of 15652, and now in ‘2012 is found holding the ‘2011 low of 15136. 

As the past instances would show, once the yearly low gets broken, a minimum of 20% cut from the low has been a usual phenomenon, though gradually. A 20% magnitude reduced from 15652 would calculate to about 12500 for Sensex.

This level has not been touched so far, but should be remembered as a crucial level which matches with the huge gap-up action (refer to the Weekly chart discussing 32-week cycle) seen during the ‘2009.

32-Week time cycle

The development since Mar’09 has followed a 32-week time cycle, as shown on the chart below. 

This was used for raising a possibility that an important low would be formed around 20th Aug’11. Sensex responded by hitting the bottom on 26th Aug.

This cycle had also raised the possibility of an upward/sideways phase that could survive for 32 weeks from Aug’11, and end either on 4th Feb’12 or 31st Mar’12, developing as a ranged movement like the Left Shoulder. The upward phase ended during Feb’12 as per this cycle.

Going by the structural possibilities from this cycle, it was suspected that Sensex could be forming an “e” leg of a possible Extracting Triangle, which would remain smaller than the “c” leg. The “e” leg did remain smaller as suspected.

As we already know, Extracting Triangle is a pattern which shows smaller rallies and bigger drops. Thus in one direction, it shows e < c < a, and in the opposite direction, it shows d > b.

Above 18000, Right Shoulder became bigger that the Left Shoulder, which appeared rejecting the Head & shoulders or “Extracting Triangle” argument. However, the 32-week time cycle may remain valid as a cycle even from here.

The Sensex was seen testing the “Neckline” shown on the chart, which did prove crucial, as Sensex bounced several times from the Neckline.

Another idea would be to mark the entire development as a Diametric, instead of Extracting Triangle, and the same is now marked on the chart. These assumptions indicate an incomplete B, but confirms only on faster drop below the Neckline, which is still awaited.

30% Principle

All major tops are characterized by 30% drop from the top value. This is normal not only inside a bear phase, but is commonly seen even inside a bull phase too. The 30% taken out from the current top value on Sensex (21109) would be less than 14800. 

The total loss so far, from the high of 21109 to 15425, measures around 28% so far. However, on BSE Small-Cap and MidCap Index, the loss from ‘2010 high does measure more than 30%.

Overall, it was argued much earlier, that we would see a topping formation spread over 2-3 month period beginning ‘Oct’10. This played out well as suspected. Indeed, as was observed, 60% of stocks topped out during ‘Oct’10 itself, and many have already shaved off much more than 30%, though Sensex itself shaved off only 28%.

Comparison with Jan'08 top formation

We compared the ‘2010 topping formation to the movement from Oct’07 to Jan’08, a 2.5 month period just before the high of 21206 was hit on Sensex. This was also an extremely volatile period of nearly two months, just before the market actually topped out.

The following chart of ‘2008 period shows two equidistant parallel channels. The Sensex broke above the original channel and achieved an equidistant height at the upper parallel, before reacting lower into a bear phase. 

One may observe the volatile development once it reached closer to the upper parallel. Inside this volatility, the market faced number of sell-offs beginning Oct’07, before it finally topped on 8th Jan’08.

A similarity can be drawn for the ‘2010 top formation with the developments of ‘2008, as shown below.  

2450-point Grid chart for the Sensex

Sensex has been following a Grid of 2450-2500 points since ‘2008. These Grids are shown on the Weekly chart of Sensex below. One can find a bottom or a top getting formed at each of the Grid levels.

Index is now reacting from the Grid level at 20250.

The larger picture

Our markets, remember, has seen multifold rallies previously, each time continuing for about 4 (four) years, after which, it usually enters a multi-year consolidation phase. In other words, “long-term” has always meant 4 years in Indian context.

Remember, Sensex rallied 11-fold from 390 (Mar’88) to 4546 (Apr’92) in four years, after which it consolidated for 11 years from ‘1992 to ‘2003. 

In ‘2008, it completed another 4-year rally from ‘2003, during which Sensex rose 7-fold from 3000 levels to 21000. It may now consolidate for 7 year, beginning ‘2008, preferably forming as a Triangle or Diametric. 

We explained that the 14-month fall from Jan’08 was a Triple Combination “A” leg of a large multi-year consolidation. The corrective phase beginning Mar’09 retraced about 99% of the previous fall from 21206 (Jan’09) to 8867 (Mar’09), (which was labeled as a Triple Combination). The longer time required while rallying is symptomatic of its corrective label of “B”.

The rally from 8047 (actually beginning at 8867) was, therefore, considered as the “B” leg. The next leg downwards would be labeled as “C”. Such a-b-c development since Jan’08 would be considered part of the 2nd wave of what appears as a probable Terminal beginning ‘2003.

Even though we saw the market reaching levels above Jan’08 highs, the multi-year consolidation is expected to shape up like a large decade-long Diametric, looking similar to the consolidation we saw from ‘1992 to ‘2003. Our trading/investment

strategies should be designed accordingly.

The suspected corrective phase beginning Jan’08 would be the 2nd wave within the larger 5th wave. This 5th wave is suspected to be forming as a Terminal due to absence of impulsive behavior in its internal 1st wave. The “Terminal” confirms when the Sensex drops below the 2-4 line of one higher degree.

One may see the Yearly chart in Appendix, which shows the 2-4 line and its values for the next three years. Remember, Terminal development usually violates the 2-4 line.

The Sensex is assumed to be under the influence of a large 8-year cycle ever since its birth. As shown on the chart below, '1984 was the beginning of 8-year long bull-run till '1992. In our Super-Cycle Degree count, shown on ASA Long-Term chart under a separate paragraph, we’ve considered ‘1984 as the beginning point for the most dynamic 3rd wave. 

The next two important turning points occurred exactly 8 years thereafter, in '1992 and '2000. Both these turning points were marked by stock market scams, because of which, the leaders of the rally had extremely difficult time later. For example, ACC, the leading stock of '1992 bull market, remained below its highs till end of '2004. Similarly, the IT stocks, which were leaders of '2000 rally, lost as much as 90% of their top valuations by the year '2003. 

During ‘2008, we were sitting on this very important cycle, which therefore, threw up similar possibilities.

In the previous 8-year cycle top during ‘1992, Sensex lost 57% from 4546 to 1980. In the next cycle top, the cut was almost 58% from 6150 in ‘2000 to 2594 in ‘2001. 

We had, accordingly, targeted sub-10k levels for Sensex price-wise during ‘2008-09, and a minimum of 13 months into bear phase, time-wise. The price-time targets were achieved as Sensex dropped 63% from 21206 to 7697. The yearly channel, shown below, which was used earlier to project 20000 level for the Sensex during ‘2007, was broken when the Index moved below 17200. Break of this long-term channel also weighed in favor of a larger corrective phase following this 8-year cycle.

Appendix : Super-Cycle-degree Wave-scenarios for Sensex

For Super-Cycle-Degree wave-scenario, consider following ASA Long-Term Index. This Index has been created by combining a very old Index compiled by a British advisor (from '1938 to '1945), with RBI Index ('1945 to '1969), F.E Index ('1969 to '1980) and Sensex (thereafter till date).

The wave-count presented shows that the market is into the lower-degree 5th of the SC-degree 3rd or 5th wave.

The detailed wave-count from ‘1984 onwards can be seen on the Monthly chart given below. The 2-4 line shown on the ASA long-term Chart above, and Monthly chart below, would determine if the post ‘1984 Impulse is a Super-cycle-degree 3 rd or 5th.

Super-Cycle-Degree 3rd (or 5th) began since Nov’84. Its internal 3rd was an “extended” leg, which achieved exactly 261.8% ratio to the 1st on log scale. The Sensex is now forming the 5th Wave, and the same could develop as a ”Terminal”, because its lower-degree 1st wave from May’03 onwards developed as a Diametric (which is a “corrective” structure, rather than an “impulse”). Within the non-directional legs, 2nd was exactly 61.8% of 1st value-wise, and 161.8% time-wise. The 4th was 38.2% of 3rd value-wise, and 261.8% time-wise.

While the 4th is shown as a 3-legged a-b-c Flat on the monthly chart above. Alternatively, the 4th is shown as a 7-legged a-b-c-d-e-f-g Bow-Tie Diametric on the Monthly chart below. The chart below also shows 11-year parallel channel from Apr'1992 to May'2003. As shown, if one projects the width of this channel on upper side, such a projection gave 20000 as the “minimum” target. This forecast was achieved.

. 

As mentioned above, the lower-degree 1st from May’2003 to Jan’2008 appears to be a Bow-Tie Diametric, marked as a-b-c-d-e-f-g. It is called "Diametric" because it combines two Triangular patterns, one initially “Contracting” up to the "d" leg, followed by an “Expanding” one. The contraction point is the "d" leg, and the legs on either sides of it tend to be equal. Accordingly, "c" and "e" were equal in "log scale", both showing about 60% gains. Similarly, "g" was equal to "a", both showing about 115% gain.

The Diametric development from ‘2003 to ‘2008 is considered to be the 1st wave of the Impuse. Due to the corrective structure in the 1st leg, the higher-degree 5th could be developing as a Terminal. Since ‘2008, we are into its 2nd wave, which could continue to develop over a period of 7-8 years beginning ‘2008.

As per NEoWave, break of 2-4 line confirms a Terminal development, and If the 5th proves to be a Terminal, the Super-Cycle-degree label of 3rd will have to change to 5th, because only a 5th of a 3rd cannot be a Terminal. Only a 5th of the 5th can be a Terminal. The Super-Cycle-Degree marking for 1st and 2nd as shown on ASA long-term chart, would then change to 3rd and 4th respectively.