Elliott Wave Stock Market Forecast - April 27, 2007

Four years ago, I forecast that PRIMARY wave (B) would rally to the 13040 area by 2007-8. We are now clearly within that time window. This week the DJIA rallied 80 points above the 13040 level, but it is not problematic...and here is why. 13040 was calculated based on a series of Fibonacci progressions that have developed since the current SUPERCYCLE began in 1932. From 1932 until 1937, the DJIA increased a Fibonacci 377 percent (actually 382 percent). From 1942 until 1966, the DJIA increased a Fibonacci 987 percent (actually 980 percent). In 1997, the DJIA paused after reaching the 8300 level (a 987 percent increase from the 1982 low of 769), but then 7 months later surpassed it. Since the next progression in the series was an increase of 1597 percent...it became evident (at least to me) that the DJIA was targeted towards 13067 (15.97 x 769.98 plus 769.98). Historically, however, there has been a .6 to 1.1 percent error factor in making these calculations. Since we are now above the 13040 area (the weighted midpoint based on the historical range), the high should be 13145 to 13211. We did, in fact, enter that area today.

The evidence is clear to me that a major wave pattern is ending. The DJIA has rallied nearly 6000 points (over 80 percent) since the 2002-2003 lows. Given where I believe we are in the long term SUPERCYCLE and CYCLE wave counts, the next major wave pattern will retrace most, if not all, of the gains made during the past 5 years. The only uncertainly I can see at this point is whether we are making a top right now or whether the topping process extends and becomes more complex (i.e, a diagonal triangle).

Elliott Wave Stock Market Forecast - March 2, 2007

The decline that I anticipated in my last update finally arrived this week...with a bang! Since the February 20th high, the DJIA has lost almost 700 points...declining (so far) to the initial support area of 12100 that I mentioned one month ago. Interestingly, the date of the DJIA's 12795 intraday high occurred a Fibonacci 13 weeks from my previously cited Fibonacci Cycle week of November 24, 2006.

Now, if my wave count is correct, the correction currently underway will set up the final rally of PRIMARY wave (B). I still expect the DJIA to top out later this year around 13040...however, it is also possible that the final high could be delayed until early next year. Once the high of PRIMARY wave (B) is in place, the entire rally since the 2002 low will be retraced. During that decline, the DJIA will finally break its 33 year old (semilog scale) CYCLE wave trendchannel...and a massive financial panic will likely ensue. Fortunately, you still have time to prepare for it!

Elliott Wave Stock Market Forecast - January 30, 2007

Since the Fibonacci Cycle week of November 24, 2006, the DJIA has crept slowly higher. Just how slow you ask? Well, the DJIA has only gained an average of 3.7 points per day over the 44 days since the November 22nd high. (On the other hand, the NASDAQ 100 is 2.5 percent below its November 24th peak). Market sentiment has been excessively bullish during this entire period (click to see put/call ratio), but the market has not yet exhibited overly bullish volatility.

Since the market has not had a significant correction in six months, Elliott wave analysis has not been very helpful in terms of charting the market's future direction. As the chart above suggests (by the numerous alternate counts), the DJIA's Elliott wave count is not clear. The wave count will become clear ONLY after the next downward correction. At this point, the various alternate wave counts suggest that the next correction should take the DJIA back toward 12100, at least...and possibly below 10683, at most. Given the fact that several market indices have finally broken below trendchannel support (click to see OEX and XMI charts), a serious decline would appear to be imminent.

Elliott Wave Stock Market Forecast - November 17, 2006

Given the various Fibonacci price and time relationships that occured the week of October 27th, I thought it was a good bet that the DJIA had completed wave e of (b) at 12236. I was wrong...and it turned out only to be the end of wave 3 of the pattern. There are so many Fibonacci time and price relationships forming betweeen now and next week, that if the DJIA does not complete wave e of (b) and turn sharply lower after next week, I will have to question my analysis and go back to the drawing board.

As I point out in the chart above, next week is the 89th week from the March 7, 2005 high and 144th week from the February 19, 2004 high. Wave (b) has now lasted about 3 times that of wave (a). In addition to time cycle relationships, there are many price relationships between the waves of INTERMEDIATE wave B. Wave a of (b) is a Fibonacci 76.4 percent of wave c of (b). Waves b and d are virtually equal in size and both are a Fibonacci 61.8 percent of wave c. Wave e appears to be on its way to equalling the size of wave c. If all these relationships are meaningful (and they should be)...and are viewed in conjuction with other technical signals pointing to a top, then a wave (c) decline is imminent...and will retrace all of the gains since the October 2004 lows. If I am wrong, the only alternative I can see is that the DJIA is tracing out a double three pattern for INTERMEDIATE wave B and we would only see a decline equal in proportion to waves b and d of (b).

Elliott Wave Stock Market Forecast - November 2, 2006

Our analysis suggests that wave (b) completed its triangle pattern last week...and a wave (c) decline is now underway. If our analysis is correct, wave (c) should, at a minimum, retrace all of the gains since the October 2004 lows.

According to Elliott, waves within the same pattern usually exhibit price and/or time relationships to each other. As for price, in the present case, wave (b) is about a Fibonacci 2.382x the length of wave (a). As for time, subwaves a and e of the (b) wave triangle each lasted 19 weeks. Elliott Wave Charts and further analysis can be found here.

Elliott Wave Stock Market Forecast - October 3, 2006

We first suggested last June that a new all time high in the DJIA was most likely a "done deal". Today that forecast came to pass...as the DJIA recorded an all time intraday high AND closing high. Others who have repeatedly (since the 2002 lows) warned of a mystical "3rd wave" decline today saw that hollow forecast go up in smoke. Our preferred wave count remains right on target. The DJIA appears to be tracing out the final wave of a (b) wave triangle. Wave e of the triangle, a three wave a-b-c, appears to be tracing out an inverted flat (3-3-5). One more down-up sequence (4-5) or, alternatively, a more complex diagonal triangle formation should complete the pattern. Upon completion, a wave (c) decline should follow and retrace, at a minium, all of the gains since the October 2004 lows.

Elliott Wave Stock Market Forecast - August 30, 2006

In our last update in July, we reiterated our view that the DJIA would exceed its May 2006 high and rally to new all time highs. So far, only the OEX and Major Market Index (XMI) have exceeded their May highs. At today's close, the DJIA was only 3.2 percent from the high it made in Janunary 2000. Our preferred wave count remains unchanged from last month. The DJIA appears to be tracing out the final wave of a (b) wave triangle. Wave e of the triangle, a three wave a-b-c, appears to be tracing out an inverted flat (3-3-5). Once the final phase of the pattern begins, the DJIA should explode to the upside.