Year 2000 marked an orthodox peak in the U.S. stock market, and that is more evident in inflation-adjusted terms. That peak was likely the 3rd wave of Grand Supercycle degree. The successive price action until now has been part of the 4th wave correction, which so far consists of developed waves A and B and is pending wave C.
The bearish triangle, being wave B, originates at the low of the year 2009, the end of wave A.
The all-time high of 2137.1 in May 2015 represents the high point (component wave (A)) of triangle wave B.
Since May, wave B began contracting after the August decline to 1833.5 and the pattern is nearing completion. The focal point of the contraction is being reached now. The typical contracting pattern repeats itself within an increasingly narrowing range until such a point that the standing wave disintegrates and is followed by a powerful downward thrust in the form of a wave "C".
The measurement of the full potential of the thrust is theoretically gauged at the origin of wave B at the low of the year 2009. However, based on the length of the measurement taken at that origin point, the depth of the implied downward thrust from present levels would actually annihilate the U.S. stock market, sending it deep into negative territory, which is not a practical outcome.
Nonetheless, other more recent lows in the market index also act as secondary origins for the triangle thrust, for example, the crash low of October 2014. A thrust measurement taken at that point, at least according to the heretofore developed structure of the triangle, still implies a minimum decline (counting from the all-time high, the top of wave B) into the range of 1175-1350.
Comments
ac7777
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While the index is bouncing within this narrowing range, which has at its highest so far reached just about a .382 retracement of the decline since the end of wave 'E' under this wave count, it seems to be a likely candidate for a small 4th wave contracting triangle with potential to generate a final fall down to the 1720-1740 area to complete a first impulsive wave before a 2nd wave relief rally begins. That lower area would correspond to the rising trendline from the lows of 2009 and 2011, where a bounce would be expected just based on that line alone.
ac7777
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Here is an alternate count for the January action, which seems more likely now that the index has broken above 1911. We could take the view that the low at 1810.9 was the end of a first motive wave down from the end of wave (E), and the subsequent corrective rally occurring since then is a second wave in progress. In this view, the second wave contains a triangle 'B' wave which is driving this 'C' wave upward. The post-triangle thrust measurement from the 'B' wave suggests that the 'C' wave will travel up to at least 1966. Note that a .618 retracement of the motive wave is typical of a second wave, and 1966 would be quite near that .618 level of 1978.5 here.
Based on conventional estimates of wave proportions, the above-described scenario would seem to keep the index on track for a 3rd wave decline to the 1530-1600 (perhaps 1576) level (being 1.382-1.618 of wave 1 from end of wave 2) and then, following a .382 retracement of a 4th wave, an eventual 5th wave decline to around 1300-1355.
Another observation is that the curvature of the wave form and the overlapping appearance of the waves (particularly noticeable within the 3rd wave) of this decline since December 29th seem suggestive of a developing ending diagonal structure. I do believe that a 5-wave sequence to the downside is unfolding, as this is both a type 'C' wave and the thrust from the contracting triangle 'B' wave from 2009-2015. However, although an ending diagonal is defined as a 5-wave sequence the waves may not be cleanly countable in the usual way, and 1st and 4th waves may overlap.
ac7777
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It appears now that the final wave (E) of the multi-year bearish contracting triangle wave
'B' (originated in 2009) has completed or nearly so. The action that we are seeing over the past 24 hours is typical market behavior at the end of a contracting triangle: Here, the price has fallen beyond the extreme of the (D) wave and then attempted to regain the loss only to find rejection at the lower trendline of the triangle. I expect now that, perhaps after some repeated testing of the triangle's lower trendline boundary, the index will soon continue rapidly on its downward trajectory within wave 'C' which will be a 5-wave impulsive sequence.
I note that the Chinese stock markets are also making an abrupt decline. I also forecast this second wave of decline a few weeks ago (see my other charts). Those who attribute the U.S. stock market crash to investors' collective reaction to China's crash should consider that both nations' markets have been within Elliott Wave patterns for a considerable time (the U.S. having been in a corrective pattern since 2000), which patterns although distinct from each other, both indicated significant crashes would occur. The synchronicity of the crashes is probably no coincidence, but there is no cause and effect relationship .