ItisCalvin

RIP Bulls - Elliott Wave Analysis

DJCFD:DJI   Dow Jones Industrial Average Index
This has been a wild few weeks of extreme volatility . You can go in it blind or use your skills as a technical analyst and news junkie to determine what price action we may see in the next few days.

The Winners and Losers
We are likely to see more downside in the next weeks with a bottom potentially in 2 weeks. There will be a bounce between now and then so prepare accordingly. The pandemic is repricing everything which is causing wild swings as we readjust around the new median. Many companies are going to be hurting yet there are a few silver knights out there. NYSE:GRUB to keep us fed, NYSE:KR to buy our groceries, NASDAQ:NFLX to entertain us… you get the point. Then there are the losers, NYSE:BA plane manufactures, NASDAQ:UAL airlines, NYSE:SKT malls, AMEX:XLE energy, and NYSE:HGV entertainment.

Wave Analysis
What I am seeing here is that there is a clear 5-wave impulse Elliott wave trying to complete its cycle. The second wave bounced off the 50% level. The third wave has hit the 150% extension. The fifth wave should hit around 18,000 but that will depend on where wave 4 ends at.

Wave 3 has the increased volume you would expect from retail investors finally catching on that the trend is bearish and have been selling…no liquidating whatever they can to buy Charmin Ultra Strong and cans of Bush's Finest Beans. Bitcoin and gold are not safe from this either. When you start seeing gold rocket back up then maybe we can call this recession off.

Anyhow, we are fastly approaching wave 4. I'd expect volume to be lower than average. This swing I'd expect to be strong when it kicks off if it hasn't already as people try to "buy the bottom."

Wave 5 should end around 18,232 if things continue as expected. This will depend, though, on where wave 4 ends.

Final Thoughts
It is important to keep in mind that this is a health-driven market event; the moves are heavily based on people's fears more of the virus itself and the repercussions. Many may have remembered the pain of the 2008 crisis and are selling—in arguably a bad time—to rebuy lower. The stock market has been overvalued for a while so a correction was expected.

A final note is that this is assuming it is an impulse wave. Another count of this could be C wave in a correction pattern in which case it would start a rebound. However, with all the news lately and shutting down entire cities, I am more leaning on this being a 5-wave impulse.
This also is compared to the 1929 crash but in this case, we have more fiscal policies in place to prevent a deep depression. Investors' sentiment has not taken well to this, however.

Stay healthy and happy trading.

Comments

The lower break of the lower trend channel from your V to (i) and (ii) strongly suggest a wave 3 impulse. While its possible, this could be 'C'; in zig-zags the slope of 'C' is usually not as drastic as 'A'.
+1 Reply
ItisCalvin beartooth91
@beartooth91, yup, looking more like a 3-wave impulse.
Reply
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