As the market is following our simple script we already outlined over a week ago without us having to make any adjustments, and thus appears to be on track to our preferred target (see here), we can start to look at the end came of this correction. Many -as you may know- are comparing the current decline with the 2011 correction. Rightfully so as in fact the past 6 weekly candles have been exactly the same as the 6 weekly candles from Aug. 5, 2011 through Sept. 9. 2011. Others are even going back further in time and -rightfully so- comparing the recent price action with the 1998 and 1987 corrections. However, we found another interesting fractal and that is that the current decline on the DOW on the daily time frame is a fractal of the 2008 crash on the weekly time frame.
The chart below shows the comparison, with the upper chart the current daily price action, and the lower chart the weekly price action from Aug. 2007 through Febr. 2009. Note the left/first blue arrow bar points to the 2015 price high and the 2007 price high. Each subsequent arrow bar then shows identical highs and lows: a nice fractal. Using this analogy we can determine a “you are here” location in time and price. As such we can deduct the market will make a lower low below the late august low. This is in line with last week’s update with a price target of 1855 on the S&P500.
We also know what happened when in March the crash ended: the current bull market to new ATHs started!! So bears should in our opinion become cautious and bulls be ready to buy. Now, a more philosophical question is: why do we see similar patterns? This is because human sentiment follows the same pattern; that’s what Elliot Wave is based upon: waves are driven by sentiment. What ever we do, our (mass)psychology remains the same. Doesn’t matter what time frame. Beautiful.
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