the structure of the initial 2% of the selloff presents much ambiguity regarding whether to track the decline as an impulse or a corrective wave. (See High (2/21/20) )
This week's remarkable selloff confirms the high (Chart 1) but leaves us similar ambiguity at a larger degree (Chart 2 Red_impulse and Chart 2 Blue_corrective). In the case of an impulse, a fresh low next week would look better to conclude waev 1-down. If the rebound continues, the sell-off may be wave W-down.
About 2 mths ago I said that the pattern sequence on the US indexes indicated a correction between Jan and March - April period even if the intermediate trend was up.
ReplyDeleteIf that IM trend was up the size of the correction would have been small, no more than the ones we saw on the way up from Dec 2018. Then a strong uptrend would have resumed.
This correction the past week is of such magnitude now that based on normal past obv we have to conclude the probabilities indicate that there is a possibility the peak of this cycle from 2009 low was reached 6 weeks ago and a zig-zag bear trend will be the seq for a long while.
A review of a 30yr chart shows that this is the largest correction since 2008 and I suspect the fastest decline ever in the space of a week in terms of raw pts. That chart also shows it has come after what appears to be 5 waves up from 2009 low (as I noted previously many times).
Corrections of this magnitude do not usually occurs in a mkt when the IM trend is up. They are consistent with, as MTU (Mr Squiggle) says, when wave 1 down starts.
The tech stks have been hit hard as have many of the older industrials in the DJIA. The blowoff in MSFT should have been a warning to all as I commented on recently.
Whether the run up the past 13 mths has been a wave 5, or a B wave on the indexes caused by sector differences in their components, is not that relevant but the odds are the trend has changed. This weeks massive decline was due to the syncronization of the direction of the two sectors (industrial & tech) down.
The odds are it will take a very long time to clear the top in January if std EW and mkt obv patterns apply.
As i also noted before we have min requirements of 5 waves from both the 1982 and 1932 lows from the peak levels seen in the past few months.
We also have the rollover of the 20 year and 90 year cycles.
And this conovirus thing rolling plus political chaos in US & EU. Its a recipe for mkt turmoil.
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