Over more than three weeks the major US markets (S&P500, NASDAQ and the DJIA) have been stuck in a trading range, chopping every trader to bits. Did you short Friday’s low? RIP. Did you long last week’s high. RIP. Etc. So as the market is making up its mind about the next larger directional move, lets check some parameters on the DJIA. See chart below.
Let’s assess the wave labels first. Since we can never be certainty about the wave-label/degree when a move starts we need to label it as wave-1/a, 2/b etc; until the market proofs one or the other. So in this case we can’t know for sure yet if a) The December low was already primary-IV; b) the April high was wave-1/a; c) the June low wave-2/b, etc. So while there’s always some degree of uncertainty in the market’s Elliott wave (EWT) count and wave-labeling initially, we can work with IF/THEN scenarios, which help in trading as they allow for entry and exit levels. That, my dear reader, is one of the powers of Elliott wave.
So the current evidence at hand shows: price remains below its 20d and 50d SMA, with the 20d < 50d SMA. Thus, short- to intermediate-term the trend is down, albeit range bound (grey box). The 200d SMA has held four times as support, a 5th time will likely not do that (buyers exhaustion) and a break below the August trading range targets based on simple symmetry $24,400. Now if we add the smaller degree EWT wave labels in the mix, and assume Friday’s low was minute (grey) wave-a, and today’s high wave-b, then the typical c-wave extension of 1.618x wave-a targets $24,600.
Hence there are two simple patterns pointing to about the same price level, increasing the ODDS price will get there. I capitalized ODDS, because the market could do something entirely different; aka rally 😉 A break above horizontal resistance and therewith the 50d SMA is now needed to turn the ship around for the Bulls. Otherwise the tug-a-war simple continues, which it easily can (dare we say triangle!?). However, with all the technical indicators pointing down and on a sell, combined with the current Bearish price vs SMAs setup, and preferred short-term EWT count, ODDS do favor a downside resolution.
But, where does that $24,400-$24,600 target zone ($24,500 nicely in the middle) leave us from a bigger picture Elliott wave POV?! Well, either that could be (black) major wave-2 of Primary-V, where wave-2 became an irregular flat, or (not labeled yet), that price target zone will be intermediate wave-a of major-c of blue Primary-IV. In this case Primary-IV will then bottom above, or at, or below the December low, depending on IF this larger corrective wave will become a irregular flat (b>a=c), a running flat (c<a<b) or an expanded flat (c>b>a). That we don’t and can’t know yet.
But for now, these are the options the market is providing us and which I continue to track. There are a few other odd-balls out there, but I view them as low odds and not worthy of mentioning as to avoid confusion until the market tells me they are increasing in probability.