The potential right shoulder EITHER could last a while in order to maintain spacial symmetry of the pattern OR could be very swift - 2 to 3 weeks drop to the neckline - in order to maintain the same time-ratio.
Chart 2 (ES) and Chart 3 (SPX) update our tracking counts.
ST / LT PICTURE
ReplyDeleteIn the ST its not clear whether the decline from Jan is over.
The odds are it isnt.
LT POSITION -
The mkts are either in one of 2 main positions - either this decline (whenever it ends) is part of a short sharp correction in a bull trend that is still intact and will recover and advance for a decade or 2 (Neelys view) as happened in 1987, OR alt final wave 5 high from 1932, 1982/1974 & 2009 was reached in Jan which means a long period of net down trend (or at best case, sideways movement with no recovery of the Jan-Feb 2020 high for very long time).
The heights at which DJIA SPX & NASDAQ are still at rel to even the 2009 low provides scope and validity for the second scenario above that more downside is probable. Many tech stks are still trading at overly high P/E ratios & prices and had blowoff moves in the 6-12 mths before Jan (eg MSFT).
Some older stks who peaked in Jan 2018, like 3M have in this decline broken the 50% or 0.618 levels on their LT chart to go close to the 0.382 retracement, indicating under EW rules bear mkt trend signal (a-b-c corrections stay above 50%, ideally at 0.618).
Even a superficial look at the LT DJIA chart applying std EW rules show the recent decline on it has in price almost corrected the move from 2009 to 2020. But it also shows it would need to decline further down to the 13000 pt level to correct the advance from 1982/1974 low.
We also need to cast out minds back to Feb 1966 when the DJIA peaked when the economy was great and ask then who would have thought it would have traded in a net sideways often negative range unable to get higher for the next 16 years and there would be unknown problems like stagflation ? Are we about to enter a similar paradigm or not ?
Other world indexes are in a similar position.
We must remember there are min req for 5 waves from 1932 & 1982/1974 in place and given the size and speed of the last 2 months we cannot ignore that when assessing the trend. Also an enormous amt of stk and bonds have been issued in the past 20 - 40yrs which owners may want to liquidate if they become concerned.
Investment Funds may also be a problem if unit holders want to withdrawn their funds and they are forced to sell stk & bonds.
Given what I know from past obv about timing and price structure when we look at a LT chart on DJIA or NASDAQ I cannot see how the Jan high can be recovered anytime in the next decade. The only EW aspect that could do so is if the wave from 2009 commenced a supercycle extended wave V from 1932 which is still in progress, with the advance from 2009 to 2020 being its wave 1, and the current decline being wave 2, with more upside in waves 3 - 5 to follow. The odds of that are 50/50. So watch out !
Ten cuidado tu.
ReplyDelete.