GBTC discount in context of SEC litigation and recent events The OTC:GBTC -to- BITSTAMP:BTCUSD discount has probably passed its peak, and the market is seeing the progress in court and the clock ticking towards a court decision as a good thing. I'm bullish on OTC:GBTC for the win, with a swift close of the gap once the court's decision issues. "Win" can have many flavors, however, so the gap may not close completely. Or, we may flip to a premium (shares used to trade for more than the price of equivalent CRYPTOCAP:BTC ).
Here you can see how Grayscale's lawsuit against the SEC scared the market (pushing the discount up), judges' questions at oral arguments scared the SEC, or at least should have (pushing the discount down), and a decision will come down in the coming months (pushing the discount down still further). Reading the tea leaves, Grayscale seems likely to win, but it's unclear what exact instructions the court will give the parties and whether the SEC will respond by allowing the spot ETF or by causing more uncertainty for investors (whom it should be seeking to protect in any event).
Chart shows OTC:GBTC OTC:GBTC discount vs. with dates of key events in Grayscale's litigation against SEC in pursuit of spot COINBASE:BTCUSD ETF. The discount here is calculated as the value difference between owning BTC outright and owning OTC:GBTC trust shares entitled to an equivalent number of bitcoins.
Charted using Trading Alpha's Alpha Trend+
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MAJOR resistance test for the marketsAttempting to identify the end of Intermediate B has been waves of fun and plenty of misses. While there is no prescribed metrics on what the wave’s overall movement and duration should be, historical metrics have been quite reliable (most of the time). That has not been the case during this chase for Intermediate wave B. I have not given up and caved to the belief that the major uptrend has begun yet. We should still move down in an Intermediate wave C which will also close out Primary wave B (corrective downward wave).
Here is my Elliott wave outline of Primary wave B so far. Primary wave A ended with the peak in the first hour of trading on December 1, 2022 (light blue colored-encircled letter A). Primary wave B is comprised of 3 subwaves (Intermediate waves). Intermediate wave A (magenta letter A in parenthesis) ended with a low on December 22, 2022 and has yet to be broken. I currently have placed Intermediate wave B’s endpoint at the high from January 13, although this could still change in the next few trading days. My Elliott Wave, Wave 3 finder, identifies wave 3 and other reversal extremes such as the end of waves 2, 4, and B. This indicator is toward the bottom of my charts. The signals are a magenta background bar when entering a reversal that will see the equity move up soon and a lighter blue background color when the equity has topped and will revert to the downside. The Minor waves reside inside each Intermediate wave and are colored with yellow letters or numbers Minute waves are inside of each Minor wave and they are colored with light green alpha numerals. My wave 3 indicator mainly spots wave 3 of 3 which was the case midday on December 16 and early morning on January 9. This is why I am confident that Intermediate A was placed correctly, and we are still in Intermediate wave B for the moment.
We are finally approaching a major level of resistance which has held strong since January 2022. We have not had a daily bar that has closed above the thick red-dotted line. This will be tested within the next 3 days.
An alternative location if we break through the resistance and keep moving higher is that we are indeed in Primary wave C and should continue upward toward 4400-4600. If this path plays out, Primary wave B would have ended on December 22. Here is a chart of this alternative course and where we may be today:
I do not like this due to the pace of Cycle wave B. Cycle wave B began at the current market low from October. The original expectation was that it would ultimately trend upward until Summer 2023. If this alternative were true, the market top would probably occur within another month, maybe two at the most. While this is not impossible, and potentially practical, the historical relationships between the macro and minor waves do not support this outcome.
IF WE JUST ENDED INTERMEDIATE WAVE B:
The following projection will only be a rough estimate of where Intermediate C down inside of Primary B would take us IF Intermediate wave B indeed ended at the market high on Friday January 13, 2023.
Based on historical waves ending in 2BBC, potential wave durations based on data quartiles are 6, 11, 28, or 41 trading days. Movement extension in relation to Intermediate wave A’s movement are 127.13%, 130.095% and 133.06%. These percentages and levels have not changed since my analysis two weeks ago and are the light blue lines.
The only new difference based on waves ending in BBC are the potential wave durations as well. Most model agreement is with a duration of 10 & 28 days. There is a large tie for second most at 5-8, 11, 12, 14, 15, 19, 24, 31, & 41 days.
For waves ending in BC, most model agreement is at a length of 14 trading days. Second most is at 14 days, third most at 42 days. Fourth most ties at 7, 8, & 10 trading days. Fifth is 5, 19, 28, & 56 days.
Historically wave C can be equal to the length of waves A + B. Intermediate wave A was 15 days long and wave B for the moment is at 14 days. Based on all this data, 28 days may be around the maximum length for Intermediate wave C. This date February 24th. Another potential length is 11 days, which while less than both Intermediate waves A or B, it aligns with the next Fed meeting and rate hike. The only near-term catalysts for market decline occurring immediately would be earnings in which the season just began. The Fed will not meet for a few more weeks and that is too deep into the projected decline to be a cause of the decline. The Fed would most likely signal the bottom if they hold to the market’s current expectation of a 25 or 50 basis point hike.
Bottom line is we should decline at least one more time to retest the December lows before moving upward. The resistance test early this week will show us if that decline will occur.
I will conduct a market re-look after this week plays out.
Update on current top and next bottomFollowing up on last week. Analysis said the short-term top would be 4 days according to most models. Outside chance of 9 or 11 days too. We never convincingly went down yet. The current top would be B's 9th full trading day. This would mean the CPI report may not be positive for the market as applied to the last analysis. We still need a drop of some days. A longer B would make the final C down even longer than the first projection. I don't think we bottom before CPI. This also means we must break below the original end of wave A which was 3764. We could lose 200 points this week I have plotted the Minor waves (yellow letters) inside of Intermediate B as I see them in this moment, however Minor wave C looks short at one day long (if it is indeed over). Based on historical data for waves ending in BBC I plotted the quartile movement extensions for Minor wave C based on the data in Minor wave A. The median historical movement would put the top around 3903.038 and the third quartile would be 3909.768. The current top from January 6 is between those two levels. Additionally, the potential lengths have strong agreement at 4 days, second most is 2 & 3 days, third most is 5 days, and then 1 day.
The majority of models are pointing to another possible high early in the week, but based on the large movement from last Friday, Minor wave C and Intermediate B could be over.
Time to clarify Intermediate wave C and the end of Primary wave B. The original levels are all still valid. My narrow call for a bottom is between 3625-3675. The only new variable to consider is the length of Intermediate wave C.
Based on waves ending in 2BBC, Intermediate wave C could now last 6, 11, 18, or 26 days. Based on waves ending in BBC, the most models agree on a length of 6, 12, or 18 days. Second most is 5 days, and third most is 7-11 days long. Based on a broader dataset for waves ending in BC, most models agree on 5 and 15 days. Second ties at 12 and 18 days. Third is 4, 6 and 9 days. Fourth is 21 and 22 days. Next is 8, 10, 13, 14, 16, and 24 days.
My original projection from last month was a bottom around January 25 which is 12 trading days. January 19 would be 8 days, and January 17 is 6 days. Compared to the volatility we have been experiencing and have the CPI report likely to play some roll in the drop, 12 days seem too long. With 6-8 days found as a favorite in the models, I will plan for seven days long for now.
VERDICT: I am short in the short-term (to January 18), long in the medium-term (Summer 2023), and short in the longer-term (1st quarter 2025). For the bottom pending more data it is possibly around January 18 below 3650.
Bottom before CPI followed by months of greenTesting for perceived location:
SubMillennial wave: 1
Grand SuperCycle wave: 5
SuperCycle wave: 2
Cycle wave: B
Primary wave: B
Intermediate wave: B
Location ID: 152BBB
This is an update on the progress of Primary wave B. My last analysis ( ) projected Intermediate wave A (inside of Primary wave B) to bottom on December 22 which appears to be the case for now. Minor waves 3 and 4 inside of Intermediate A did appear to hit their marks as well. Minute wave 3 in Minor wave 3 was confirmed on an hourly chart by using my Elliott Wave 3 Finder ( ). This would appear to confirm the location of Minor wave 3 and further confirm Intermediate wave A is over, even though the bottom was not as deep as projected.
The prior analysis also projected Intermediate wave B to top around 3925 by January 5. Due to Intermediate wave A not dropping as far, wave B may not reach this top. The following are the projections for the end of Intermediate wave B based on the assumed conclusion of Intermediate wave A. Intermediate wave A lasted 15 trading days, moved 278.13 for a rise over run of 18.542 points per day. The left most set of lines are for determining Intermediate wave B endpoints.
Based on waves ending in 2BBB, the length of Intermediate wave B may only be 3 to 4 days (which we are beyond at this point). The most current top was 4 days after the end of wave A which theoretically means Intermediate B could be over. In my opinion this movement would be quick and historical data for waves ending in 2BBB is very limited so let’s explore the other datasets first. The quartiles for movement retracement are at 39.28%, 56.545% and 73.81%. This would point to tops at 3896.48, 3954.49, and 4012.50 (the light blue lines on the chart).
Based on waves ending in BBB, the strongest model agreement for length is at 3 and 4 days again, with additional indications of 5 and 9 days long as well. The maximum lengths are generally only 60% of wave A’s move, while most are no higher than 33%. This would likely cap the length of wave A at 9 days, with a more likely cap at 5 days. Movement retracement quartiles are at 29.76%, 52.325%, and 68.64%. These are the yellow lines on the chart.
The largest dataset, and less specific, is for waves ending in BB. In order of strongest model agreement intermediate wave B could last 4 or 3 days. The third most agreement is a tie amongst 5, 8, 15, and 30 days. Fourth most agreement is at 9 and 11 trading days. Movement retracement quartiles are near the previous levels with the 3rd quartile being the outlier at 86.58% (the white level on the chart).
All datasets tend to point to a length around 3-4 days which has not only passed our current position but the current top was achieved on day 4. The level may have been lower than the quartiles from the models, however, it is in line with some of the historical movement. We will likely wait and see what happens next.
Based on what would have been expected of Intermediate wave B, we will now assume Intermediate B has completed and begin to forecast Intermediate wave C. The plots for Minor waves A and B and end point for Intermediate wave B are plotted on the chart. This also means this first week of 2023 should move below the high from December 29, 2022 for a few weeks.
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Current location:
SubMillennial wave: 1
Grand SuperCycle wave: 5
SuperCycle wave: 2
Cycle wave: B
Primary wave: B
Intermediate wave: C
Location ID: 152BBC
The data for Intermediate wave A has not changed from above which was 15 trading days long, drop of 278.13 points for rise over run of 18.542. With the assessed conclusion of Intermediate wave B, it lasted 4 trading days, rose 35.81 points for a rise over run of 8.953 points/day. Intermediate wave B retraced wave A’s length by only 26.67% and retraced it’s movement by 12.88%. The centermost lines in the chart above outline the potential endpoints for Intermediate wave C.
Based on waves ending in 2BBC, Intermediate C could last 6, 8, 11, or 12 trading days. No one value stands out. The movement extension quartiles are very compact at 127.13%, 130.095%, 133.06%. These levels are light blue above.
Based on waves ending in BBC, the most model agreement has Intermediate wave C ending at 8 trading days. Secondary agreement is at 5 and 12 days. Many points all tie for third most agreement. The movement extension quartiles are 104.14%, 121.565%, 127.47%. The new levels are the yellow lines above.
Based on waves ending in BC, the most model agreement has Intermediate wave C ending at 2, 4, 8, 12, and 15 days. The second most agreement is at 5 trading days long. Third most agreement is at 16 days. The movement extension quartiles are at 108.66%, 133.315%, 147.17%. These levels are the white lines in the middle section above.
Based on all of these considerations it looks like we are in for a down week to begin 2023. I have placed the end of Intermediate wave C (which is also the end of Primary wave B around 3663 on January 11, 2023. That means we could drop a little less than 200 points over the next week and a half. All things considered with the market’s volatility over the past year, this will be slow and likely full of indecisive trading. The rightmost set of retracement lines outline the overall retracement of Primary wave B in relation to Primary wave A. This target bottom would place the overall retracement around 70% of Primary wave A’s gain of 600+ points.
What could be the catalyst for this final bottom? I have us rising strong until the summer of 2023 with highs above 4400-4600 range. January 10th and 11th will be quiet on the economic news front, however, the latest CPI read will be January 12th. This could be the catalyst. There are likely 2 ways to consider this number and things to remember. Inflation really accelerated one year ago. Inflation is likely high, but when considering where we were one year ago it should drop significantly. Therefore, the algorithmic trading computers will likely see a low print as a high win for the Fed and its monetary policies of the prior year. Although this is hiding a major issue, people will not care to look at the actual cause. A low print will start the moonshot the market is soon to face.
I will have plenty of time in the coming months to explain why the market top in mid-2023 will be followed by a likely 40-50% drop in the market, but who cares. Enjoy the quick gains and be ready to play it safe later.
Estimated Path To Next SummerFull analysis to follow with specific near-term levels. Prior Intermediate 5 did not move as expected so that likely puts us inside of Primary wave B heading down. Early estimates have us in
Primary B
Intermediate A
Minor 3
Minute 2
This means wave 3 of 3 is next with the inflation report tomorrow morning. Early signs per this would have November inflation hotter than expected. Fed also determines next rate hike on Wednesday. Looks like first near-term bottom could be prior to Christmas followed by highs after New Year while most of January points down. The January bottom should hold for quite some time as we should rally after the late January low until the early summer. The final downturn is still slated to begin in early to mid summer for northern hemisphere folks. Early estimates still place the final bottom around 2200-2400 by March 2025.
Will we ride wave 5 up for 4 days?Similar to last night, the market appears to have hit its cue for a more convincing bottom today. Using the 3918 bottom as the end of Intermediate wave 4 until proven otherwise, we will begin to look at the end of Intermediate wave 5 and Primary wave A inside of this Cycle B.
Based on waves ending in 2BA5, the models agree the most that wave 5 could last 10 days, with the second most agreement at 1, 3, 14, and 32 trading days in length. The quartiles for movement extension off Intermediate wave 3 are 114.64%, 159.625% (median), and 204.63%. These are the blue levels on the chart above and they respectively correlate with 4159.42, 4340.42, 4521.50.
Based on historical waves ending in BA5, the models agree the most on wave 5 lasting 4 days, then 10 days, while the next tie at 1, 2, 3, 11, and 18 days. The quartiles for movement extensions are at 114.64%, 116.69%, 155.66% which brings the values closer to my original forecasts around 4200. Respectively the news levels are 4167.66 and 4324.46 while being the yellow lines above.
Lastly, the valuable while less precise data is based on waves ending in A5. Models agree with 2 days first, then 3 days, 10 days, 4 days, 19 days, and a solid tie at 1, 5, 9 and 11 trading days for potential lengths. The quartiles are slightly less while the third quartile repeats at 155.66%. First quartile is 112.36% (4150.24) and the median extension is only 119.84% (4180.34).
Most of the targets fall below 4200 which keeps the top within 250 points of today’s low. Even 250 points in 5 days or less is a tall feat and unlikely as the next inflation report waits around the corner. Trendline resistance is decreasing quickly and is all below the prior Intermediate wave 3 top. This could insinuate three scenarios. 1) Where I marked the end of Intermediate wave 3 could be the end of Intermediate wave 5 and we are only heading lower from here. 2) The trendline proves a solid resistance and we do not take out the prior high at 4100.51. 3) We briefly break above the trendline resistance forming a bull trap and hitting other levels of resistance between 4150-4250.
If the first case is true, the declines should continue tomorrow, and we will not head toward 4100 this week. The second case could hold true if we slowly move upward without conviction. The third case would likely require larger movements over the next two days to even have a chance at holding true. Regardless we shall see which one occurs.
My initial call of Intermediate wave 5 lasting 5 days does not appear to be an option from the models, even though 3 days for Intermediate wave 4 was not a strong choice I stuck with it. The models had strength at 2 and 3 days in length, but we need to at least get above 4100 which is nearly 160 points from today’s close. That would equate to a 100% retracement of Intermediate wave 3 which is rare. There is a strong pocket of data placing the top between 4150-4180 which is where I will target. Three days is not enough time, so I think it takes at least 4. Four days will be sometime next Monday, which still puts the top before the pre-market release on Tuesday of the latest inflation reading. If the days and levels hold true, we are looking for an average daily gain of 52-60 points per day. We likely wont get those gains each day so some would have to leap beyond that. If these gains do not begin tomorrow we are either delayed or the inflation report WILL NOT be the downward catalyst. Let us see what tomorrow brings!
Elliott Wave indicates another hot inflation reportWe believe we have finished Intermediate wave 3 after an extended Minor 5 and are somewhere into Intermediate wave 4 which should bottom soon. The full wave identity is 152BA4. Based on waves ending in 2BA4. Intermediate 4 will likely last no more than 3 trading days which would end tomorrow. The quartile movement retracements are at 20.04%, 26.20%, and 32.36%. We surpassed the 26.05% level today which was 3995.07. The 32.36% is the third quartile and that would place the bottom around 3970.31. These values are light blue.
Based on waves ending in BA4, most model agreement stands at a length of 1-2 days while 3 days remains likely. Regarding the retracement levels, the first quartile and median are repeated values while the third quartile is at 48.55% for a potential retracement. This would place the bottom around 39.05.20. These values are yellow on the chart
Finally, historic waves ending in only A4 provides many more datapoints, however they may be less concise from the precision provided in the prior two paragraphs. Strongest model agreement places the length at 2 days, followed by 1 day, then 6, 3, 10, and 4 days. Regarding the retracements, quartile values repeat again for the first two while the third quartile is near the 61.8% Fib (low at 3851.85)
Based on these datapoints, the models are leaning to a length of two total days for Intermediate 4 which would mean the bottom has already occurred at the time of writing. I am still leaning on a possibility of 3 days meaning we could see a new low early tomorrow before a likely rise into Intermediate wave 5 for which I will consider tops later.
Early thoughts has Intermediate wave 5 lasting around 5 trading days before we begin the next downturn. Early thoughts to the top should be slightly above current resistance setting up a bull trap and snap back down. These five trading days not including tomorrow (if we achieve a new low for Intermediate wave 4) would begin on Wednesday and end around early next week. This aligns with the Inflation report on Tuesday. If this is the catalyst, inflation likely rose higher than expected and Fed backtracks on cooling down in December which would re-spiral the market for the next month or two.
Week starts down and up after elections?If we are in Cycle B, and if it began on October 13, then we are likely in Intermediate wave 2 right now. Intermediate wave 1 would have lasted 13 days and gained 420.21. Right now I have the market in Cycle wave B, Primary A, Intermediate 2, Minor C, Minute 3.
A down day on Monday would likely confirm this position. Also, if we are in wave 3 there would likely be a gap down at the open.
I have projected the end of Intermediate 2 based on the Intermediate wave 1 data in combination with historical relationships. I have also projected the end of Intermediate 2 Minor C based on Minor waves A and B. Levels forecasting the bottom of intermediate 2 are on the right while the left levels are forecasts for Minor wave C
Right now the bottom may occur either late on Tuesday or early Wednesday (the election is the likely catalyst and bottom). The bottom will likely occur above 3625 but below 3700. I will re-analyze if we do not drop all the way or there is any other deviation outside of reason.
Time to forecast the quick run upIn addition to wave theory I have developed a line theory of sorts. I draw lines based on only two points to judge support, resistance, or potential trends. I personally do not call things a trend until 3 occurrences are observed so marking these lines based on two points are not a trend. I draw the following:
Red lines = Beginning of wave 1 to top of wave 2 generally contains entire impulsive wave.
Green lines = End of wave 3 of 1 to end of wave 5 of 1 generally gets end of wave 5 of 3.
Yellow lines = Beginning of corrective wave (A1) to end of wave C3 generally gets end of corrective wave (C5).
Blue lines = End of Micro 2 to end of Macro 2 or 4 confirms end to macro impulse.
White lines = End of wave 2 to end of wave 4, break beyond confirms impulse is over.
I have remained in the camp of still being in Intermediate wave 5 down for at least a few more weeks, but some of the Line Theory above along with Elliott Wave Theory has me thinking otherwise. There are two main reasons I believe Cycle wave A has likely ended.
1 - Some Elliott Wave (EW) theorists hold that Wave 4 cannot go into the same realm of Wave 1 which has now occurred as of Friday. Intermediate wave 1 ended with a bottom of 3886.75. While this level remained a solid resistance, it was broken on Friday and Intermediate wave 4 is now above it. While this is a principal or rule of EW theory to some, I have seen these broken multiple times in my studies that otherwise kept waves intact and I do not give strong consideration on its own.
2 - Two major breaks with my light blue lines. Minor 2 inside of Intermediate 1 to Intermediate 2 was broke on October 25. This would confirm the current impulse has ended. Second, the light blue lines from a micro 2 to a macro 2 or macro 4 are always downward when that is the direction of the trend Minor 2 inside of Intermediate 3 to the current position (assuming end of Intermediate 4) is nearly flat while barely downward in the moment. This is stemming from the Minor 2 top at 3907.07 to the current top of 3905.42. Monday will likely tip this line upward.
Here is the chart of my old theory with the two violations. If we are still in Cycle A and Intermediate wave 4, we have retraced 65.93% of Intermediate wave 3’s movement which puts this into the final quartile based on historical data.
New Theory - Cycle B
The only two things I do not like about this theory is that Intermediate wave 5 inside of Primary 5 would have been quite short at only 6 days. Granted this tied the all-time minimum length so its not impossible. Secondly, my early top estimates are around 4600, however, our recent gains have us moving so fast that we could hit that mark well ahead of schedule. Granted we will swing up in Primary wave A, down in B and then back up to our final top during wave C.
I plotted out the full length of the bear market back on July 4th ( ). At that time I forecasted the length to be around 813 from start to finish which would place the bottom around March 2025. I also plotted the bottom in October this year and next major top in the summer of 2023. On August 20th, I broke down what a bear market over 813 trading days would look like based on historical wave lengths and relationships ( ). Cycle wave A is was estimated to last around 25% of the length of Supercycle wave 2. This would place Cycle wave A ending around October 18th. As of now, the bottom was October 13th, which is only 3 trading days earlier than estimated. This implies the bear market bottom remains on track for around March 2025 for now. If we are in Cycle wave B now, this would mean the market is in Sub-Millennial wave 1, Grand SuperCycle 5, SuperCycle 2, Cycle wave B and most likely Primary A, Intermediate 1, Minor wave 4. The full short reference to this point is 152BA14. Total stats for Cycle wave A had it begin at 4818.62 on January 4, 2022. It ended 195 trading days later at 3491.58. By October 13, 2022, the market had dropped 1327.04 from top to bottom which was a loss of 27.54%.
Projection for Cycle wave B: Gain 1108.42 points over 190 days.
LENGTH: Based on waves ending in 152B, the models weakly forecast the full length of Cycle B to last 29, 39, 65, 143 or 223 days in length. 142 days is near early summer estimates around May 10, 2023 while 223 days lines up with the late summer 2023 estimate near September 5. Based on waves ending in 52B, the same lengths are possible with the addition of 117, 146, and 165 days. The most model agreement is 195 days which would tie the length of Cycle A and end around July 26, 2023. Lastly, waves ending in 2B provide strongest model agreement at 98 days (March 23, 2023) followed by 195 days again. Waves ending in 52B tend to comprise 21-27% of the wave they reside inside. If the overall larger wave is around 810 days (new target based on Cycle wave A length), 21% could make Cycle wave B 170 days long while 27% is 218 days. Even though waves ending in 152B rarely last the same length or longer than the wave A that precedes them, I will place the estimate at 190 days for now.
GAIN: Based on waves ending in 152B, the first quartile of movement retracement of wave A is at 51.30% while the median retracement is 71.43% and third quartile is 72.07%. Wave B has retraced 113.17% of wave A before which would present new all-time highs for the index if that occurred here. Waves ending in 52B have a first quartile retracement of 67.02%, median at 81.39% and third quartile of 94.28%. Lastly, waves ending in 2B have a reduced first quartile at 58.61%, median at 76.51% and third quartile of 88.81%.
FORECAST: For now, I am projecting a top around 4600 by mid to late July 2023. This would be a gain of 1,108.42 points, or 31.75% off the bottom, in nearly 190 days. Based on these projections I am plotting Primary wave A and wave B at the following locations.
PRIMARY WAVE A tends to contribute 12.5 – 61.93% to the length of the overall wave it resides inside. With an overall projection at 190 days, this could make Primary wave A 22 – 117 days long. The first quartile is 23.77%, median is 35.19%, and third quartile is 52.91%. That equates to day lengths of 45, 67, and 100 respectively. Wave As in generally account for around 25% of the waves the reside in. We will bump the estimated length to around 50 days which aligns with the final trading day before Christmas. The movement tends to contribute 24-156% of the overall move with the first quartile at 49.86%, median at 73.33% and third quartile at 89.84%. These find levels could place the next market top in 2022 at 3756.60 (already past), 4044.29, 4304.38, 4487.44, and 5223.26. At the breakneck pace the market has travelled in two weeks, a top around 4375-4430 is most likely.
PRIMARY WAVE B tends to contribute 8 - 50% to the length of the overall wave it resides inside. The potential lengths based on the minimum, quartiles, and maximum would be 15, 24, 41, 60 and 95 days long. Additional datapoints can provide more numbers when considering the historical relationships between waves A and B. Wave A tends to be at least twice the length of wave B pitting the potential median length of this wave B near 22 days long. When considering the first quartile relationship wave B could be longer at 66 days. There is a Federal Reserve meeting at the beginning of February which would be approximately 25 days into wave B and another in late March at 59 days into wave B. We will plot the bottom of B at the latter meeting for now as the Federal Reserve should be able to see some inflation improvement from the 2022 rate hikes and the legislative agenda of a new Congress. Wave B’s movement is likely to make up 18-45% of the larger wave which would take it to roughly today’s trading prices. Coincidently, in March 2023 this would be around the market’s current resistance line. The line that began at the beginning of the bear market with the second point at the end Primary wave 2 is roughly the same as the line from the end of Primary wave 2 and Primary wave 4. These have been resistance lines for the market thus far, but once we break above them, they are likely to become new support levels. This would see wave B lose about 600 points or 13% over 59 days in the first quarter of 2023.
These dates and levels will change as more data comes in from Primary wave A and line theory is plotted as well.
The final set of projections will be the intermediate waves inside of Primary wave A.
Wave 1 could last 5-10-13 days based on the quartiles and it is currently at 11 days. I project it to currently be in the final leg of Minor wave 5 with the Federal Reserve likely being the top and end of Intermediate wave 1 at 14 days long. The quartiles could deliver Intermediate wave 1 gains of 280-336-677 points. So far we have gained 413.84 which is above the median and we are not done yet. 677 points is possible placing the top around 4168 which is another 200 points up over 3 days. However, my line theory could place the top around 4030 which is just over 100 points from Friday’s close. Early guess is folks believe the Fed is taking a breather while my analysis is telling me they are about to do something unexpected set to temporarily shock markets.
Wave 2 could last 1-4-5-8-17 days based on minimum-quartiles-maximum. The ratio of wave 1 length to wave 2 narrows the field to 2-5-11 days long. I will plot it around 5-6 days for now. The market could be looking at a drop of 172-220-358 based on the quartiles for movement inside of the larger wave while movement based on 1:2 ratios points at quartiles of 295-367-452. I will plot around a 330 drop for now. This places the bottom the day after election day. The market will likely rejoice if there is guaranteed gridlock in Washington. This is a perfect place to begin an expansive wave 3 rally.
The data gets looser the more estimated variables deeper we get so I won’t get too specific yet. Based on contribution to larger wave, wave 3 could last 8-14-19-22-27 days. Based on relationship to wave 1 it could last 7-16-23-35 days and based on it relationship to wave 2 it could last 9-33 days. I will plot it around 17 days for now. CPI release would be 23 days deep so that is something to consider as well. The gain could take us up near 4300.
Wave 4 could see a drop down toward 4100 over 5 days before wave 5 finishes out Primary A before Christmas.
Ultimately the run up will not be close to sustainable which will finally force everything down where it belongs. The billionaires stating the economy is not in a good position will be correct soon, but lets enjoy the run up while we can.
Looks like two weeks left of the bear market nowThe end is coming in focus. We have re-adjusted some key points and placed the next estimates on the chart. The biggest question was the placement of Minor 1 (yellow), once Minor 2 jumped. We are breaking down the future on the hourly chart to make it easier to follow along.
We are in Minor wave 3, a day later than originally expected. The index dropped after the inflation report as expected, but the nearly 200 point rise was surprising. We called the low on the morning of the inflation report the end of Minor 1 and the top occurred early Friday to end Minor 2. We are now in Minor 3.
Based on waves ending in 553, models have highest agreement on a length of 1, 2, and 4 days long. Second highest agreement at 5 days and then it drops to 3 and 7 days. Movement extensions based on waves ending in 553 have 1st quartile movement at 124.33%, median at 158.475%, and 3rd quartile at 1.7654%. These levels are plotted with the light blue lines on the chart.
Based on waves ending in 53, models have highest agreement on 4 days, second highest on 5 days, then 7 days, 3 days, and 1 day rounding out the top 5 potential lengths. Movement extensions on the same data has the quartiles at 147.99%, 167.45%, and 201.7%.
I am looking for a target of about 5 trading days. My models do not count the day Minor 2 ended (Friday October 14) as day 1. This means day 5 would be this coming Friday. Five trading days consist of 32.5 trading hours, and I will round this wave out to around 35 trading hours. Six of those hours has finished and occurred on Friday.
Minor wave 3 is composed of 5 Minute waves. Minute wave 1 tends to account for 21% of the overall length of the wave it resides in, Minute wave 2 is around 11%, 3 is 40%, 4 is 9%, and 5 is 25%. Based on these values and an estimated total for Minor wave 3 to be near 35 trading hours, I am projecting Minute wave 1 to last around 7 hours, meaning we may bottom within the first 2 hours on Monday October 17. We would then rise over the next 4 trading hours. I rounded this out to align near the end of trading on Monday, meaning we could top and end Minute wave 2 late tomorrow. Minute wave 3 could last 14 hours. This means the market will likely drop on Tuesday and Wednesday (accounting for around 13 hours). Thursday could begin Minute wave 4 up for around 3 hours. This means we may start Thursday on an upward trajectory but top midday and begin the final wave 5 decline. I have wave 5 running through the close on Friday. These dates, times and projected levels are outlined on the chart above.
I have also adjusted the end points and levels for Minor waves 4 and 5. Minor wave will be the bottom of the market for 2022.
We will see how it pans out but I think the bear market is nearly over….for now. We have done well forecasting these past few months and will see what the future holds. The biggest indicator to our system would be the indeed short-term bottom occurring around the end of this month and a massive reversal to follow. Let us know what you think
Up and Down For 3 more weeksThis chart lays out the estimated Minor waves in Intermediate 5 as mentioned in my weekend analysis. These estimates place:
The bottom of Minor 1 around 3601.23 today for a total wave 1 loss around 205.68;
The top of Minor 2 around 3740.37 on October 12th for a gain around 139.77;
The bottom of Minor 3 around 3474.12 on October 18th for a loss around 266.25;
The top of Minor 4 around 3555.33 on October 20th for a gain around 81.21;
The final bottom for Minor 5, Intermediate 5, Primary 5, and Cycle A around 3340.36 on October 26th for a loss around 214.97.
These estimates nearly align with all levels from the other day but there is some give in take in them. We will see how close these levels as well as everything mentioned in the weekend analysis occur.
This Bear Market Is Almost Over But... This chart contains the overall planned levels for the bottom. The details are below. Primary wave 5 levels are annotated on the left of the lines and Intermediate wave 5 levels on the right. The blue lines are based on the most specific wave position data and the yellows are slightly less specific. The other lines are common Fibonacci and algorithmic trading levels. The significance of 198 trading days was highlighted in my prior analyses which can be found in my TradingView profile.
It looks like we are in the final leg of this Bear Market. I currently have us in Sub-Millennial wave 1, Grand Supercycle wave 5, Supercycle wave 2, Cycle wave A, Primary wave 5, Intermediate wave 5 and Minor wave 1 or wave 2. Through Intermediate wave 5, I name this wave 152A55, and refer to it as a wave ending in 2A55, A55, or 55. Intermediate wave 5 and Minor wave 1 likely began within the last hour of trading on October 5th. Minute waves 1 and 2 likely concluded on October 6 while wave 3 finished with the low in the first hour of trading on Friday. Minute 4 was the top shortly after that. The current debate is where did or will Minute wave 5 and Minor wave 1 end? The majority of Friday was Minute 5 and if it concluded it is displayed here.
There is a chance we are still in the late stages of Minute wave 5 and Minor wave 1. I don’t exactly like this because Minute wave 5 is quite long, however, it is not constrained by length requirements this time. My wave 3 indicator has fired at two locations in the chart below. The first tends to identify waves 3 of 3 and the final may find the end of a wave 3.
The theory of us remaining in Minor wave 1 should prodcue a new low beneath 3620 on Monday and a large up day on Tuesday. The theory we are in Minor wave 2 would have us up pretty much all day on Monday and Tuesday.
No matter what, this analysis is meant to layout the final movements of Cycle wave A, Primary wave 5 and Intermediate wave 5.
BEAR MARKET BOTTOM (CYCLE WAVE A) BASED ON PRIMARY WAVE 5 PROJECTIONS
As of Friday’s close, Primary wave 5 is 37 days long. Primary wave 1 was 35, 2 was 23, 3 was 56, and 4 was 40. Studying waves ending in 2A5, there is not much model agreement on Primary wave 5’s length. The most now is 8 models on 40 days, 4 models on 56 days, and 3 models on 37 days. With the inflation report, earnings and the Fed ahead, 37 and 40 days does not sound likely. The move extension percentages by quartile based on waves ending in 2A5 is 112.36% for the first quartile, 1.3509% for the median and 2.0451% for the third quartile. These are plotted on the main chart at the top with blue lines and the values are on the left.
Waves ending in A5 have quartile move extensions of 112.36% again, 122.26%, and 163.93%. These levels are plotted on the chart above with annotations on the left and yellow lines. My models have more agreement on length. Most agreement has 12 models pointing to a length of 40 days, 10 models at 37 days, 8 models at 56 and 60 days, with 7 models at 46 days. Day 46 would be October 20th and this could be close to the bottom.
BEAR MARKET BOTTOM (CYCLE WAVE A) BASED ON INTERMEDIATE WAVE 5 PROJECTIONS
Now that we have got through Intermediate waves 1-3 and most likely 4, my models use this data to further project were Intermediate wave 5 should end. I can then take this day as well as the Primary wave 5 data in attempts to refine the potential bottom.
Intermediate wave 1 lasted 14 days, 2 was 4 days, 3 was also 14, and wave 4 was 2 days as of now. Our initial wag (wild a** guess) was for Intermediate 5 to last around 15 days. Since wave 1 generally makes up 20% of the larger wave it is in we figured wave 1 would be 3 days, 2 would be 2, 3 would be 4, 4 would be 1-2, and 5 would be around 3. This would roughly place the bottom of 1 on October 10th, top of 2 on October 12th, bottom of 3 (after a significant drop from the inflation report) on October 18th, top of 4 on October 19th or 20th, and the final bottom around October 25th. The models for day length based on waves ending in A55 have the most agreement for a total length of 3, 4, and 8 days. The second most agreement is 9 days, and then a third place tie for 10, 17, 18, 21, and 32 days long. Less than 8 days in my opinion is too quick, however, time will tell. The quartile move extension for waves ending in A55 are 106.1%, 133.14% and 167.15%. The levels are on the main chart with annotations on the right with blue lines.
Lastly is the larger and more broad dataset for waves ending in 55. The most model agreement is between 2-4 days total (55-58 models point here). The next area of agreement has 29 models at 5 days, 28 at 6 days, 27 at 10 days, 21 at 7 and 14 days, 18 at 8 days, 14 at 12 days, 12 at 11 days, and 10 at 20 days. The move extensions are 112.52% for the first quartile, 126.93% for the median and 148.58% for the third quartile. These levels are annotated on the right of the main chart above and with yellow lines.
Based on all of this data and projections, there are some points of agreement for the Primary and Intermediate levels on the chart. I originally projected the bottom between 3200-3450 which still appears to remain viable. I am currently estimating the bottom before November 3rd and most likely closer to October 21-25. I don’t see us breaking below 3300 this time (most likely set to occur in 2024). I conservatively like the bottom below 3440 and likely below 3400. I think the major catalyst will be the inflation report on the 13th which currently coincides with the beginning of Minor wave 3 inside of Intermediate wave 5. We will likely go down on Monday, up on Tuesday and top on Wednesday of this coming week. The inflation report will impact the early earnings reporters as well. A “bad” inflation report will likely cause the earnings projections to be lowered. The Fed will likely not come out until their meeting in the first week of November. I don’t think their decision will roil the markets and that will likely be the reason for the major gains we are forecasting over the next 7-10 months. The Fed did not want to impact the 2020 election and were dovish when they needed to be hawkish. If another global event occurs between now and then the Fed may also be dovish as they were when the Ukraine war began. No matter what, we see large gains (Cycle wave B - up) on the horizon and slower Fed policy but this bill will come due late next year and things will be gravely worse for the market (Cycle wave C – down) at the end of 2023 and all of2024.
Realty Income Corp Set To Move Up Prior To Inflation ReportBased on historical movement, the trough could occur anywhere in the larger red box. The final targets are in the green boxes. The pending top should occur within the larger green box as has been the historical case. Half of all movement has ended in the smaller green box. In this instance, the signal indicated BUY on September 23, 2022 with a closing price of 61.81.
If this instance is successful, that means the stock should rise to at least 63.129999999999995 which is the bottom of the larger green box. Three-quarters of all successful signals have the stock rise 4.728% from the signal closing price. This percentage is the bottom of the smaller green box. Half of all successful signals have the stock rise 6.7065% which is the end point of the black dotted arrow. One-quarter of all successful signals have the stock rise 8.6685% from the signal closing price which is the top of the smaller green box. The maximum rise on record would see a move to the top of the larger green box. These are the same concepts for the levels in the red boxes as well.
The ends/vertical sides of the boxes are determined in a similar fashion. The peak of the rise can occur as soon as the next trading bar after signal close, while the max rise occurs within the limit of study at 35 trading bars after the signal. A 1% rise must occur over the next 35 trading bars in order to be considered a success. Three-quarters of successful movement occur after at least 15.5 trading bars; half occur within 28.0 trading bars, and one-quarter require at least 33.5 trading bars.
The black dotted arrow represents median historical movement. Medians are a good metric, but they are just one of many I use when forecasting future movement.
As always, the stock could decline the very next bar after the signal without looking back (therefore the red boxes would not come into play) or the stock may never decline (and the green boxes may never come into play).
Almost done with Intermediate 3 down
Thinking we may have ended Minor wave 4 (yellow numbers) today with a strong jump. Expecting the GDP report to confirm for everyone we are in a recession tomorrow. The yellow lines are the historical quartiles for waves ending in 535, while the light blue lines are the same for waves ending in 35. The slightly longer lines are extensions of Intermediate wave 3 from wave 1.
I tend to favor the more specific data so I am considering the 535 data slightly more than the 35 data. We are looking at strong data for this fifth wave to last 2-4 days. If we do not go higher than today’s high, tomorrow would be day 1. Our original projection for Intermediate wave 3 had it ending on October 4. That would mean this wave could last for 4 days. I think Monday is most likely but we will count the waves down as we go. From a day’s perspective, waves 1 and 3 were equal in length. From an hourly perspective, wave 1 was 30 trading hours while wave 3 was only 27. This could put a maximum length of wave 5 at no more than 27 trading hours which is October 4th at 1430 eastern time (meaning until 1530). I think getting done before this is easily doable.
The levels to watch for Intermediate wave 3 based on Intermediate wave 1 are between 3477.78 and 3595.96. The levels to watch for Minor wave 5 based on Minor wave 3 are between 3483.30 and 3585.24. These Minor wave levels likely help narrow our target zone for the bottom to be less than 3585 and greater than 3525. I would plan an exit around 3550 or see how we move along the way.
Blueprint for remainder of bear marketWe are unveiling our finals paths based on the completion of waves 1 and 2 inside of our suspected final downturn for 2022. We believe we are in Sub-Millennial wave 1, Grand Supercycle wave 5, Supercycle wave 2, Cycle wave A, Primary wave 5, Intermediate wave 3, Minor wave 3, and believe we may have completed Minute wave 4 at the close on Friday. Our next steps would be to complete the final Minute wave 5 drop which will simultaneously end Minor wave 3 sometime early next week. We consider our current position as a wave labeled 152A5335, which will be referred to as a wave ending in 5335 or 335. We expect this wave to be completed Monday or Tuesday at the latest. This does mean we should not only go lower than the Friday close, but we will also likely take out the June low.
DETERMINING END OF MINOR WAVE 3
We expect an extension greater than 172.04% to occur for the Minor wave 3 bottom based on Minor wave 1. This would put the low beneath 3633.78. Furthermore, we expect Minute wave 5 to extend 122.05-134.03% beyond Minute wave 3 which puts the bottom between 3598-3616. This would mean we drop around 80-95 points from the Friday close which is around 2.5%. If this holds true Monday and part of Tuesday will likely continue the major drop in the index. The historical minimal move extension for waves ending in 335 is 89.35% which means Minute wave 5 must drop below 3662.62. The first quartile move is at 3616.11 and the median move would place the bottom at 3599.07. Historical moves are not necessarily accurate but most times they provide a good ballpark figure for wave movements. These levels are left most lines on the chart below.
The right most lines are the historical extensions for waves ending in 533. These are the projected movement extensions for Minor 3 based on the completed movement of Minor wave 1. The yellow lines represent the historical first quartile movement (133.48%), the median (160.79%) and the third quartile (221.60%). The blue lines are the same but for waves ending in 33 (so based on many more data points, slightly less specific to our current situation). Minor wave 3 appears to be on the higher end of retracements according to the right most lines and our forecast of the bottom around 3600.
Minor wave 4’s position is a complete guess right now and we will have a better idea once Minor wave 3 ends. Minor wave 2 moved up about 70 points over 24 trading hours. The movement was slow and not exactly at steep climb. Through most of our research wave 2 OR wave 4 is a quick and sharp move, while the other is slower and not as steep. Right now we would classify wave 2 as the slower one, which opens the door for Minor wave 4 to be quicker than 24 trading hours and a steeper gain. This could see a gain greater than 70 points in a much quicker timeframe ergo a 1-2 rally.
Intermediate wave 3 (purple/pink/fuchsia) is placed roughly where we believe it will fall timewise, while the movement will be clarified once Minor wave 3 is completed.
WHERE AND WHEN WILL PRIMARY WAVE 5 AND CYCLE WAVE A END?
We try to plot out our waves and adjust once each wave completes. We firmly believe Intermediate waves 1 and 2 are complete and wave 3 is nearing completion. Wave 1 was 14 days long according to our wave count and wave 2 was 4 days long. We estimated from the beginning of Intermediate wave 3 that is would be 16 days long which still appears to look valid. We are projecting Intermediate wave 4 to be slower and not as quick as Intermediate wave 2 because wave 2 appeared to meet the criteria for quick and steep movement. Lastly, we are estimating Intermediate wave 5 will be around the lengths of waves 1 and 3 so we are projecting 15 trading days.
We begin to look for real world events to explain our estimates AFTER we have plotted our estimates. In the current case. We strongly believed Intermediate wave 3 would be shaped by a bad inflation report, a week of pre-Fed speculation and then a more pronounced decline after the Fed rate decision. These appeared to hit the mark and these forecasts are viewable in our TradingView profile forever. As far as why will Intermediate wave 3 end around October 4 is a slight mystery. It is possible the JOLTS report shows some fewer jobs openings which would begin to meet some of the Fed’s dovish criteria. Nonetheless, we expect upward movement for Intermediate wave 4.
Why does Intermediate wave 4 end? After we plotted this estimate we later learned this top aligns with the next inflation numbers. We project Wave 4 to end on October 12 and the inflation report arrives before the market opens on October 13. A bad report (or the perception of one) would likely tailspin the final Intermediate wave 5 down. This downtrend will likely occur all the way to the Fed rate decision which is slated for November 2. Coincidently enough, our Intermediate wave 5 projection places the market bottom on November 2. Our explanation is that the Fed reduces the rate hike to a potential 0.5% or maintains a 0.75% in order to not “interfere” with the elections which happen the next week. This was a similar consideration the Fed made before the November 2020 elections.
We are forecasting the start of a major rally after the Fed decision simply based on Elliott Wave Theory. Stay tuned for more!
Next 3 days will hurt unless ...I am marking the end of wave 2 with today's high post-Fed. Wave 2 retraced Wave 1's movement near 24% which was greater than the first quartile.
My models are pointing at wave 3 to now last 3-6 days. The historical quartile extensions are listed with waves ending in 533 being yellow and waves ending in 33 being light blue. My bottom for now is likely between 3600-3636. We should take out the June lows in this wave. Still looking at a final bottom in late October below 3400. Wave 3 should do a bulk of this work so going below 3600 may need to occur in order to get below 3400 later next month.
Fed will meet right before election day and will likely attempt to not rock the election boat; they may only raise .50 or .75 at that time. I still project the final bottom around election day and then we fly much higher toward next summer. Another possible catalyst for upward movement could be an end to fighting in Ukraine. Inflation is not going to get better with continued inaction, so a positive black swan is also possible.
Adjusted Wave 2 based on Friday's lowThis chart is adjusted for the bottom on Friday. My target top has also slide to around 3988 at most. We will see how the week plays out. It will likely be slow until the Fed with plenty of speculation. If Elliott Wave Theory holds up, the Fed rate decision and/or the press conference will begin the major 350+ point drop.
Here is a zoomed in chart of the microwaves plotted inside of Minor wave 1 (yellow)
Next Top Is...Minor wave 1 may have finished today, slight chance of it finishing if a new low occurs shortly after the open tomorrow. For now, Minor wave 1 was 3 days. Wave 2 will likely be similar in length. Historical relationships point to a possible top around 4000.
There is not much news until the Fed so we could meander upward for a few days while we wait. I do expect Minor wave 3 to be a very sharp drop in the order of 300+ points over 3-6 days which would be fueled by a larger than expected Fed hike and/or hawkish comments afterward.
Minor wave 1 has been eventful so far, we shall see what happens next.
Time To See If Elliott Wave Can Predict This RecessionIf we are beginning wave 3, I have us in Sub-Millenial wave 1, Grand Supercycle wave 5, Supercycle wave 2, Cycle wave A, Primary wave 5, Intermediate wave 3. I alphanumerically refer to this wave as 152A53
Intermediate wave 2 met all of its targeted movement and it bounced perfectly off of the median wave 1 retracement. With all goals met, the major drops are scheduled next. It all begins with the inflation numbers pre-market tomorrow and then followed by a week of speculation on what the Fed will do.
I have both of these events occurring in Intermediate wave 3 and each event is a catalyst for the pending 700 points, Elliott Wave Theory is hinting at dropping over the next month. If this movement does not occur, my wave count is wrong or EW is complete $#*&^#%$.
I have highlighted potential extension points based on historical movement for waves ending in 53 and A53.
For waves ending in 53:
75% of the time (the first quartile of data) wave 1's movement is surpassed by 147.99%
50% of the time (the median) wave 1's movement is surpassed by 166.31%
25% of the time (the third quartile) wave 1's movement is surpass by 209.7%
all of these levels are indicated by the yellow extension lines
For waves ending in A53:
Quartile 1 is 161.34% (near the "perfect ratio")
Median is 193.26%
Quartile 3 is 267.24%
all of these levels are indicated by the light blue extension lines.
My target bottom is somewhere around 3595, but we will see how intense the selling is. This could also look like capitulation selling, but I think that will actually occur in 2024. I will continue to re-evaluate as we work our way through this.
A Geometric Forecast Tool???Wave 1 and Wave 3 appear to have settled in trend channels. Will wave 5 do the same? If so, Primary wave 4 should end within the next 3 days.
Update For This WeekI tried to study the drop on July 22nd to determine if there were 13 waves for a corrective Minor wave 4 or if there were 21 waves for the first wave 1 in Primary wave 5 down. I saw the former more than the latter. If this is true, my previous forecasts are only off by 3 days and the levels to which they finish will remain with the exception of the wave 4 to wave 5 duration calculations.
If the markings on this chart are true, the market should leap up tomorrow. Consumer confidence numbers come out 30 minutes into the session, however, the data is delayed as it does not depict current consumer conditions. A jubilation of this reading could get us up to and above the current recent high of 4012. This would mean the final top would likely arrive before the Fed announcement on Wednesday at 2 pm eastern time.
This chart would be wrong and the complete prior forecast is valid if we drop below 3940 and then 3902. Tomorrow should tell us where we are heading this week. We should ultimately begin moving down toward 3400 by Friday.
LENNAR appears overboughtBased on historical movement, the peak could occur anywhere in the larger red box. The final targets are in the green boxes. The pending bottom should occur within the larger green box as has been the historical case. Half of all movement has ended in the smaller green box. In this instance, the signal indicated SELL on July 21, 2022 with a closing price of 82.08.
If this instance is successful, that means the stock should decline to at least 81.65 which is the top of the larger green box. Three-quarters of all successful signals have the stock decline 2.218% from the signal closing price. This percentage is the top of the smaller green box. Half of all successful signals have the stock decline 4.588% which is the end point of the black dotted arrow. One-quarter of all successful signals have the stock decline 7.85% from the signal closing price which is the bottom of the smaller green box. The maximum decline on record would see a move to the bottom of the larger green box. These are the same concepts for the levels in the red boxes as well.
The ends/vertical sides of the boxes are determined in a similar fashion. The trough of the decline can occur as soon as the next trading bar after signal close, while the max decline occurs within the limit of study at 40 trading bars after the signal. A 0.5% decline must occur over the next 40 trading bars in order to be considered a success. Three-quarters of successful movement occur after at least 11 trading bars; half occur within 23 trading bars, and one-quarter require at least 35 trading bars.
The black dotted arrow represents median historical movement. Medians are a good metric, but they are just one of many I use when forecasting future movement.
As always, the stock could decline the very next bar after the signal without looking back (therefore the red boxes would not come into play) or the stock may never decline (and the green boxes may never come into play).
Final Market Drop For Now Looks Like...We are potentially in the early stages of Primary wave 5 in overall Cycle A of SuperCycle 2. SuperCycle 2 began shortly after the beginning of January this year as we are yet to revisit a new all-time high for the S&P 500 index. The wave number nomenclature for this wave being analyzed is 152A5. I may reference the end of this structure (2A5 or A5) when comparing against historical data.
I will try to forward forecast the end of Cycle A which will coincide with the end of Primary wave 5. I will do this by studying the relationships of each Primary wave we have encountered and compare it to the historical relationships between each wave and wave 5. After a rough timeline to completion is established, I will then work backwards and attempt to plot the endpoints for each of the 5 Intermediate waves inside of Primary wave 5. This blueprint will be tweaked as we move through Primary wave 5. (NOTE: If we are still in Primary wave 4, I will re-accomplish these steps once wave 4 appears to have concluded. We are likely still in wave 4 if a high above 4012 is achieved this week, however, Friday July 29, 2022 is likely the last day in this wave.)
WAVELENGTH BASED ON STRUCTURE ENDING (A5 / 2A5)
Based on all waves ending in 2A5, the strongest model agreement suggests this current wave will last 23 trading days. The second strongest agreement is at 46 days and third strongest at 19 days. Primary wave 1 lasted 35 days, wave 2 was 23 days, wave 3 was 56 days, and as of now wave 4 is 23 days. Waves ending in 2A5 tend to makeup 14.29-16-25% of the larger waves they reside inside with the first value being the 1st quartile, second is the median, and last is 3rd quartile based on all available data. Based on the duration of Primary waves 1 through 4 and application of the 14.29-25% values, Primary 5 could last 23, 26, or 46 days. Waves ending in A5 slightly expand this range with a 15.38-19.18-29.03% quartile breakdown. Replicating this analysis per the last portion, Primary 5 could last 25, 32, or 56 days. Primary waves ending in 2A5 makeup 15.56% - 36.95% of the wave in which they reside. This would add lengths of 25 and 80 days. Primary wave 5 has moved beyond the length of Primary wave 3 on only 2 of 28 occasions. This means the overall length will likely be less than 56 trading days.
There are other studied areas and ratios, however the standard deviations in the data does not point to much consistency. The ratio between the duration of Primary wave 4 to Primary wave 5 sits in a relatively small window. Wave 4’s duration in trading days to wave 5 has a median ratio of 0.4358. This means wave 4’s duration of 23 days divided by 0.4358 could see Primary wave 5 lasting 53 days. Quartile 1’s ratio is 0.2517 and quartile 3 is 0.6507. The first quartile would have the length at 91 days while the third quartile would be 35 days.
For reference, 23 days would end August 24; 25—August 26; 26—August 29; 32—September 7; 35—September 12; 46—September 27; 56—October 11; 80—November 14; 91—November 30. Most of these days point to a potential bottom by mid-September, however, Primary wave 5 may end as late as November. Calculating the duration of the waves has proven one of the more difficult tasks undertaken during Elliott Wave forecasting, but we are getting better.
Realistically we may drop until the next Federal Reserve meeting in September where inflation may appear under more control than it has been. That meeting is scheduled for September 21.
WAVE MOVEMENT FORECASTING
Wave 5 tends to extend beyond the end of wave 3’s value. These extensions are considered as percentages of wave 3’s movement. If Primary wave 5 drops to the end of Primary wave 3 at 3636.87, then 100% of wave 3’s movement would have been achieved. Waves ending in 2A5 have extensions with the quartile breakdowns of 112.36%-135.09%-204.51%. Waves ending in A5 have a quartile breakdown of 112.36-122.26-163.93%. Primary wave 5s have a quartile breakdown of 105.86-120.12-153.08%. Lastly, Primary wave 5s ending in A5 extend 112.36%, 114.06%, 116.69%, and 203.9% beyond Primary wave 3. Most of these levels have been plotted on the chart above.
Another datapoint for forecasting movement is how much wave 5 makes up of the overall wave in which it resides. Waves ending in A5 makeup 36.90%-49.71%-74.18% in the quartile breakdown. Waves ending in 2A5 makeup 30.60%-56.75%-86.46%. Primary wave 5’s tend to makeup 26.305-41.04-51.51% in the quartile breakdown. Primary waves ending in 2A5 specifically makeup 21.37%, 23.51%, 36.09% and 75.12%.
Assuming Wave 5 moves beyond the end of Primary wave 3, wave 5’s movement should account for greater than 32% of the overall wave. If Primary wave 5 makes up greater than 70%, the market bottom would be below 2112. This level is well beyond the rare drop level of 2636 which would be a 200% extension of Primary wave 3. Movement below 2636 is likely out of the realm of possible for this Primary wave 5. This would mean wave 5 will likely account for 32%-63% of Cycle wave A’s movement. The bottom of Cycle wave A Primary wave 5 should occur within the highlighted box in the chart above.
