September not only delivered red candles in key U.S. stock benchmarks, but also saw index closes below the August lows.
We have a three-wave advance since the March 2020 low, which has potentially concluded at the recent ATH. If so, the subsequent correction of this advance is likely to be faster than the rise. The 3725 area in SPX could represent meaningful support based on the price structure, but would imply a substantial decline from the high in percentage terms.
How about risks to the bearish view? Note that the Dow topped in August, a few weeks earlier than SPX. Note that it is not easy or even possible to count a five-wave decline from the high yet. Therefore it is possible that the current decline is the last leg of a flag-like structure since the August high. That structure would translate into a potential fourth wave (or another x wave) since the Oct 2020 low.
Thanks for the update. Appreciate it.
ReplyDeletehttps://www.elliottwavetrader.net/market-update/How-Does-Wave-4-End-202109307266449.html
ReplyDeleteI received this link from my friend that keeps up with this site. If you can share your insights on this link and count. And why you agree/ disagree on 4th wave suggestion? Again I follow your site and Joe from studyofcycles blog so trying to learn more. Any input is appreciated
IMHO, the degree of a wave is more important than its potential structure. With the right degree, key support and resistance levels can be more effectively identified. In this case, the key question is which wave is the current sell-off correcting?
DeleteMTU, the answer to what wave the mkt is correcting (ref DJIA) at this point given the price movement since 16 Aug and number of small waves is that the bare min is the wave from Nov 2020 to Aug 2020.
DeleteIf so its theoretical target level would be around 31000 pts. But then it has to bounce and then correct the entire 3 wave move and theoretical is around 29000 pts. Possibly a bit higher than those numbers.
But if the entire move is a B wave since 2020 low then its target would be that low around 18000 pts min. If it got there then you have to look at larger waves to see if further fall would take it back to the 2008 low around 6500 pts.
So around 30000 - 29000 pts you would consider going long depending on how fast it got there and the minor wave count.
Correction - meant the wave Nov 2020 to Aug 2021 in paragraph 1.
DeleteMkt Man, That's my estimate at the moment as well - "That structure would translate into a potential fourth wave (or another x wave) since the Oct 2020 low." - We shall see how the market wants to play it.
DeleteMTU - review the patterns on component stks in the DJIA.
DeleteI know for a fact on past pattern probabilities many have run their decade and 5yr size waves out and are heading down or soon will be.
SEE 10yrs charts on -
MMM BA CAT CVX DIS PG GS MCD NKE
Most are at historic high levels having run up 3 sections in the past 10-20 yrs which is a danger sign usually. Others peaked 3 years ago and are having B waves (MMM IBM).
Stks like MCD at $245 a share - does it have net tangible assets sufficient to back such a valuation ? Or are these akin to Radio Corp shares in 1929 at $200 then sunk to $10 ? And also HD at $345 or AMZN at $3750 ?
MTU, report of stagflation returning also raises spectre of 1973-74
Deletehttps://www.marketwatch.com/story/stagflation-is-here-following-months-of-rising-prices-bofa-analysts-say-11633110365?siteid=bigcharts&dist=bigcharts
The key thing to note on the DJIA chart is the lower deg possible compressed 5 waves down from the 16 Aug peak to around 20 Sep (similar on UKX & DAX).
ReplyDeleteAND the same minor 5 waves down on SPX & NASDAQ from early Sept to 20 Sep. Then so far we have seen small 3 wave rally that has failed.
The red monthly bar is also relevant along with LT cycles.
Remember that when an expanding wave seq commences either up or down that wave 1 is usually compressed rel to wave 3. There is a mathematical reason for that I have found and can calculate why.
The next few weeks to end of Nov may be int to obv.
MTU's obv about 3 waves up since Mar 2020 is per what I pointed out previously that this move appears to be a B wave - and when you look at UKX on the LT chart as a guide that is more apparent than other indexes whose price levels have been inflated due to the QE and gambling by the public on stk gains.
I say B wave because the character of the the rallies in this advance the past 18 months is not what you see in a true upward impulse wave (bull trend) where runway moves up are convincing.
The pattern position on many stks that make up the DJIA are also in a likely exhaustion position (I referred to AMZN a few days ago and today it has declined a lot) which ultimately will have an effect on these indexes. MSFT similar to AMZN, and the tech stks are at heights that usually cannot be sustained. Other industrial like BA (Boeing) peaked in 2019 and have like UKX done so far what looks like and a-b-c countertrend from that peak).
I believe the numerical price levels on the DJIA SPX etc are not reliable to use as a guide anymore since those indexes were mixed with tech stks and others whose own cycles are out of tune with the earlier ones.
ReplyDeleteHowever I did note just now a line drawn on DJIA from the Jan & Dec 2014 peak to the Jan 2018 peak gives us the recent highs. And it last mth broke the support line along lows from the 2020 low. Such lines are more relevant than looking for a fib target number to be met.
The main fact is there is since 2020 low a intermediate wave (abc) in Sep-Nov 2020 dividing min req for 5 waves within each time period either side of it to a month ago. Either a wave 4 is forming or main trend reversal. The position of key stks seems to favor the latter.
SPX is 21 fib years since the Sep 2000 high.
NASDAQ similar if you take into account peaks in many stks happened months ago.