The market has been making lower lows and lower highs since the ATH, but what is adding to the uncertainty is the fact that all these waves have been overlapping. Now normally that doesn't happen in Elliot Waves, unless we are seeing a Diagonal pattern (either ending or leading). The other situation when waves overlap is when they are a series of 1-2 waves (nested waves) which means the move in that direction will be stronger than usual.
In the current situation, we've had a series of 4 overlapping wave sequences with Friday's sequence potentially being the 5th one (if we consider the high to low a complete wave and the bounce late day as wave 2/b). Having a 4x (or 5x) nested bear wave, would mean the markets are getting ready for a melt-down of Feb-Mar 2020 proportions. The good news is that there is another option, which would only imply one more wave lower until this correction ends. The VERY rare WXYXZ pattern. The market did throw at us a few WXY pattens along this bull market to keep us guessing, but WXYXZ patterns are ULTRA rare. As in one in a few years. So that is something to keep in mind. However I do think that this time, we might actually be dealing with one. The 4x nested bear wave would imply the markets will implode and drop vertically hundreds of points, which is also pretty rare in December (which is usually bullish).
Next week will be decisive as to which one plays out.
Outlined below is what to watch for:
1. The bear pattern in black. And it is quite simple: it should start accelerating lower and keep going, with any bounces unable to overlap the prior lows.
2. The bull pattern in blue. This would see the market having one more wave lower (either directly or after going a bit higher on Monday). Target should be somewhere in the 4400s SPX. 4450 maybe 4430. After that we should see a bounce that overlaps the recent low at 4508. That would be the 1st sign that the bull pattern is playing out. While confirmation will come once we finally overlap one of the lower highs.
Good luck and trade safe!
In the current situation, we've had a series of 4 overlapping wave sequences with Friday's sequence potentially being the 5th one (if we consider the high to low a complete wave and the bounce late day as wave 2/b). Having a 4x (or 5x) nested bear wave, would mean the markets are getting ready for a melt-down of Feb-Mar 2020 proportions. The good news is that there is another option, which would only imply one more wave lower until this correction ends. The VERY rare WXYXZ pattern. The market did throw at us a few WXY pattens along this bull market to keep us guessing, but WXYXZ patterns are ULTRA rare. As in one in a few years. So that is something to keep in mind. However I do think that this time, we might actually be dealing with one. The 4x nested bear wave would imply the markets will implode and drop vertically hundreds of points, which is also pretty rare in December (which is usually bullish).
Next week will be decisive as to which one plays out.
Outlined below is what to watch for:
1. The bear pattern in black. And it is quite simple: it should start accelerating lower and keep going, with any bounces unable to overlap the prior lows.
2. The bull pattern in blue. This would see the market having one more wave lower (either directly or after going a bit higher on Monday). Target should be somewhere in the 4400s SPX. 4450 maybe 4430. After that we should see a bounce that overlaps the recent low at 4508. That would be the 1st sign that the bull pattern is playing out. While confirmation will come once we finally overlap one of the lower highs.
Good luck and trade safe!
