Elliott Wave: Week of 10/15/2018 - What happened? What next?
What happened last week? End of the bull move since 2016, or bump along the way higher, or warning for what's ahead? Like you, I consistently evaluate what the market is telling us. Also like you I ask, am I wrong? Have I missed something?
Last week I was wrong about the depth of the pullback. For pure EWT assessment, the low at 2710 is worth significant worry, and accelerates my expectations for the end of wave 5. The S&P level of 2717, as a prior intra-day high from April 2018, is the only possible wave 1 peak remaining without breach (and is used in the Fibonacci levels I've shown each week). Further decline below that level means wave 5 has already ended and a new corrective wave "a" has started. If you're keeping score a wave "a" would make me wrong (again), but doesn't change my longer term outlook. I've hinted at my longer term perspective several times, but feel it is time to express it now.
Have I miss something? My primary view is wave 5 has not ended. I've spent time looking at MANY examples (of other wave 5 endings of years/cycles) that support the topping process for today's wave 5 potentially ending at the 3083 Fibonacci level. History is littered with rapid declines, rapid rebounds, and then further declines as examples supporting what I expect. In fact several have the same characteristics as the minor breach at 2717 mentioned above. As another example, take a look at 2014 (also a mid-term election year) and the period from Sept 19th through year-end. Near 10% drop Sept 19th to Oct 15th, then 10% up move within a month (November) followed by higher year end levels. Will we see a repeat? At least we know it happens, and did only 4 short years ago.
Longer term the end of wave 5 in EWT means time for a correction, or worse. This wave 5 is no different, but leaves the question of how (zig-zag? triangle? flat?, etc.). At a high level my expectation is a series of downs/ups that will lead to a significant decline expected at 20% followed by upward recovery (perhaps to new highs, too) and then a crushing decline of 30-35%. It is WAY too early to discuss all of that, but the market is telling us the main event is coming. Right now we're in a topping process with limited upside reward vs downside risk for long term holdings. Trading opportunities continue on both sides, as usual.
What next? In either scenario (today's wave 5 up or wave "a" down) the near term expected move is up. However, for the long term perspective upside reward is limited until the subsequent corrective process completes. I've started to trim long term positions and will continue trimming into an upward rally. Short term I'm long S&P and Nasdaq index positions.
The above is not in any way a recommendation. Consider your own circumstances when investing.
Last week I was wrong about the depth of the pullback. For pure EWT assessment, the low at 2710 is worth significant worry, and accelerates my expectations for the end of wave 5. The S&P level of 2717, as a prior intra-day high from April 2018, is the only possible wave 1 peak remaining without breach (and is used in the Fibonacci levels I've shown each week). Further decline below that level means wave 5 has already ended and a new corrective wave "a" has started. If you're keeping score a wave "a" would make me wrong (again), but doesn't change my longer term outlook. I've hinted at my longer term perspective several times, but feel it is time to express it now.
Have I miss something? My primary view is wave 5 has not ended. I've spent time looking at MANY examples (of other wave 5 endings of years/cycles) that support the topping process for today's wave 5 potentially ending at the 3083 Fibonacci level. History is littered with rapid declines, rapid rebounds, and then further declines as examples supporting what I expect. In fact several have the same characteristics as the minor breach at 2717 mentioned above. As another example, take a look at 2014 (also a mid-term election year) and the period from Sept 19th through year-end. Near 10% drop Sept 19th to Oct 15th, then 10% up move within a month (November) followed by higher year end levels. Will we see a repeat? At least we know it happens, and did only 4 short years ago.
Longer term the end of wave 5 in EWT means time for a correction, or worse. This wave 5 is no different, but leaves the question of how (zig-zag? triangle? flat?, etc.). At a high level my expectation is a series of downs/ups that will lead to a significant decline expected at 20% followed by upward recovery (perhaps to new highs, too) and then a crushing decline of 30-35%. It is WAY too early to discuss all of that, but the market is telling us the main event is coming. Right now we're in a topping process with limited upside reward vs downside risk for long term holdings. Trading opportunities continue on both sides, as usual.
What next? In either scenario (today's wave 5 up or wave "a" down) the near term expected move is up. However, for the long term perspective upside reward is limited until the subsequent corrective process completes. I've started to trim long term positions and will continue trimming into an upward rally. Short term I'm long S&P and Nasdaq index positions.
The above is not in any way a recommendation. Consider your own circumstances when investing.