Many questions remain about where the current market decline will resolve before prices move higher. A few former possibilities can be eliminated and new considerations added. Covid-19 and near-term economic response will impact timing while price estimates are formulated.
In last month's chart I raised the possibility of breaching support at lower trend lines while anticipating a more contained decline. It didn't take long for those support levels to get breached, and along the way invalidated the wave 5 count (removed) and a contained decline. The rapid move below trend from 2011 low to 2018 low, and more importantly from 2009 low to 2018 low, are major breaches. Surpassing the 2018 low at 2346 invalidated the wave 5 count. The major breach is indicative of a correction for the entire move since March 2009, at least.
The current correction will eventually take shape as any of the standard structure (zigzag, flat, triangle). As such, we start with expectation of zigzag and a-b-c illustration. The recent low at 2192 as "a" and bounce upward as "b" at 2637. Wave "c" is pegged to terminate at new lows with a rough estimate at 1985, though lower is possible. A review of declines of similar magnitude (2008, 1987, 2011) all support new lows after the initial rapid decline. The bounce to 2637 was to the area of the breach lines providing a second chance to navigate a downward move.
A decline to an area of 1985 is consistent with sideways action during 2015-2016 (wave 4 of a degree lower) for potential support. Expected magnitude of this decline was 34% (from 3393 high), which has already been surpassed. Possibility of next level at 55% remains. A decline of 55% would take us to the bottom most trend line from 1974 through 2018 at a price level near the peak prior to the Global Financial Crisis at 1500. An overthrow of 34% just feels more appropriate at present. Thus 1985/2000 as target price area, with Covid-19 driving the outcome including lower levels, or not.
This event is major in market history and certainly up there with any decline of our lifetime. Nailing the perfect bottom is a fools errand while tremendous opportunity is ahead. Risk Management, position size, time horizons, long term financial goals all enter the picture to guide forward.
Stay calm, focused, and most importantly Safe and Healthy.
In last month's chart I raised the possibility of breaching support at lower trend lines while anticipating a more contained decline. It didn't take long for those support levels to get breached, and along the way invalidated the wave 5 count (removed) and a contained decline. The rapid move below trend from 2011 low to 2018 low, and more importantly from 2009 low to 2018 low, are major breaches. Surpassing the 2018 low at 2346 invalidated the wave 5 count. The major breach is indicative of a correction for the entire move since March 2009, at least.
The current correction will eventually take shape as any of the standard structure (zigzag, flat, triangle). As such, we start with expectation of zigzag and a-b-c illustration. The recent low at 2192 as "a" and bounce upward as "b" at 2637. Wave "c" is pegged to terminate at new lows with a rough estimate at 1985, though lower is possible. A review of declines of similar magnitude (2008, 1987, 2011) all support new lows after the initial rapid decline. The bounce to 2637 was to the area of the breach lines providing a second chance to navigate a downward move.
A decline to an area of 1985 is consistent with sideways action during 2015-2016 (wave 4 of a degree lower) for potential support. Expected magnitude of this decline was 34% (from 3393 high), which has already been surpassed. Possibility of next level at 55% remains. A decline of 55% would take us to the bottom most trend line from 1974 through 2018 at a price level near the peak prior to the Global Financial Crisis at 1500. An overthrow of 34% just feels more appropriate at present. Thus 1985/2000 as target price area, with Covid-19 driving the outcome including lower levels, or not.
This event is major in market history and certainly up there with any decline of our lifetime. Nailing the perfect bottom is a fools errand while tremendous opportunity is ahead. Risk Management, position size, time horizons, long term financial goals all enter the picture to guide forward.
Stay calm, focused, and most importantly Safe and Healthy.