Elliott Wave: March 2020 - Is the Bull Over? Big Picture View
The arrival of COVID-19 has introduced significant turmoil upon world markets. No question, the speed and depth of decline is a top 10 event in market history as informed by Advance/Decline levels as compared to previous periods in history. My review of similar events reflects their happening during both Bull and Bear markets. It also includes review to identify where within previous wave structure the events occur.
In short, there is no definitive profile and only weak association. However, we work with what we have and plan ahead. Informative periods include 1966, 1978, 1987, 2008/9, 2011, 2015 and 2018. The cluster from 2008-2018 are post-GFC (Global Financial Crisis) which I consider relevant due to investor recency bias for expected behavior and Federal Reserve influence.
I've adjusted previous charts to reflect expected damage from this major world event. That includes the following longer term structure:
1. Wave 1 completed at recent peak.
2. Wave 2 evolving with a,b,c with a bounce (b) followed by re-test of intraday low (c). At present I'm focused on 2650-2750 as reasonable estimate near the lower trend line.
3. YE 2020 target is reduced from near 3950 to 3600.
4. Wave 3 extends within channel to complete near 4000, but pushed out in time. Estimated event damage/recovery moves timing out 9-12 months.
5. Waves 4 and 5 follow and are best estimated as events follow.
Invalidation is always a risk. A break of the lower trend line from 2011-2018 would be a major signal of lower expectations and invalidation of the current estimate. Currently unknown events with COVID-19 will surely influence the shape of trend, whether more or less severe than at present.
In short, there is no definitive profile and only weak association. However, we work with what we have and plan ahead. Informative periods include 1966, 1978, 1987, 2008/9, 2011, 2015 and 2018. The cluster from 2008-2018 are post-GFC (Global Financial Crisis) which I consider relevant due to investor recency bias for expected behavior and Federal Reserve influence.
I've adjusted previous charts to reflect expected damage from this major world event. That includes the following longer term structure:
1. Wave 1 completed at recent peak.
2. Wave 2 evolving with a,b,c with a bounce (b) followed by re-test of intraday low (c). At present I'm focused on 2650-2750 as reasonable estimate near the lower trend line.
3. YE 2020 target is reduced from near 3950 to 3600.
4. Wave 3 extends within channel to complete near 4000, but pushed out in time. Estimated event damage/recovery moves timing out 9-12 months.
5. Waves 4 and 5 follow and are best estimated as events follow.
Invalidation is always a risk. A break of the lower trend line from 2011-2018 would be a major signal of lower expectations and invalidation of the current estimate. Currently unknown events with COVID-19 will surely influence the shape of trend, whether more or less severe than at present.