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Dow Jones Heading To 33,845-33,620 Before Meaningful Bottom

By Dr. Arnout ter Schure Stock MarketsSep 17, 2021 02:36PM ET
www.investing.com/analysis/dow-jones-heading-to-3384533620-before-meaningful-bottom-200602295
Dow Jones Heading To 33,845-33,620 Before Meaningful Bottom
By Dr. Arnout ter Schure   |  Sep 17, 2021 02:36PM ET
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Despite the United States Federal Reserve injecting $120 billion of Quantitative Easing (QE) into the financial markets monthly, the Dow Jones Industrial Average has not made any progress since early May. See figure 1 below. This “stalling” tells me the Elliott Waves (EWP) are still unfolding because otherwise, the index should have risen accordingly, assuming the FED’s QE program is what only drives the markets, and it is not. Investor sentiment plays a huge role, and the EWP tracks this mass sentiment, which moves in a relatively predictable manner. Allow me to explain below.

Figure 1. Dow Jones Industrial Average daily chart with detailed EWP count and technical indicators

Dow Jones Daily Chart.
Dow Jones Daily Chart.

The DJIA should now be in a subdividing c-wave lower to complete a complex correction.

Since the May 10 top at $35,092, the DJIA has essentially moved sideways, whereas its advance to the marginally higher high on Aug. 16 at $35,631 was in an overlapping fashion. This pattern tells me that since the May high, the index has most likely been in what is called, in EWP-terms, and irregular flat 4th wave. Such a pattern consists of, in this case, three waves down for (green) wave-a, three waves back up for (green) wave-b, and the five waves down for (green) wave-c. This pattern has several variations depending on how high the b-wave travels and how low the c-wave goes. For example, in a regular flat, a=b=c, whereas in an irregular flat, b>a=c. Let’s apply this pattern to the index. See Figure 1 above.

The mid-June low appears to consist of three (grey) minute waves since the May high. The subsequent rally to the recent all-time high was also three (grey) minute waves due to the mid-July low. Even the rally off that low to the August high consisted of three (orange, micro) waves. Since Aug. 16, the index has been declining in what counts well as an initial (grey) minute wave-i, followed by wave-ii. Now, wave-iii is most likely unfolding and appears to be nicely subdividing with a last (orange) micro-5 wave down to ideally $33,970-34,205, which is the 1.382 to 1.618x Fibonacci-extension of wave-i, measured from wave-ii—a typical 3rd wave target zone. From there, I expect a wave-iv bounce back to around current levels, followed by the last wave-v down to ideally 33,845-33,620, which is the 1.764 to 2.000x Fibonacci-extension of wave-i, measured from wave-ii—a typical 5th wave target zone.

Besides, at the 33811 level the index completes an excellent (green) c=a relationship (green dotted arrows). Note the grey dotted arrows, which are the path I anticipated for my major markets trading members since late August. It exemplifies the wave-iii, iv, v pattern as described here. So far, this has transpired and I, therefore, see no reason to change my point of view.

Thus, although the whipsawing between 34,520 and 34,945 over the last week may cause some short-term confusion, a break down below 34,520 targets around 34,095, based on simple symmetry (dotted black arrows in Figure 1). The breakdown aligns well with the ideal wave-iii target zone of 33,970-34,205. The index will have to close above its 50-day simple moving average (d SMA) from around current levels to suggest that the EWP pattern described here is wrong. Please note “the traffic light”: the price is below the 10-day, 20-day and 50-day SMA and only above the 200-day SMA. Thus, the light is 3/4th red, and caution is advised to the long side until it turns back to green.

Dow Jones Heading To 33,845-33,620 Before Meaningful Bottom
 

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Dow Jones Heading To 33,845-33,620 Before Meaningful Bottom

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Comments (10)
Andrew Bevan
Andrew Bevan Sep 20, 2021 4:07PM ET
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9/20 - Wow, that was exciting! And so accurate! Well done!  Remains to be seen whether that was it and the rebound continues. Stay tuned!
Kelly James
Kelly James Sep 18, 2021 2:23PM ET
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hi there how are you doing today
Barry van Asten
Barry van Asten Sep 18, 2021 12:01PM ET
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If you say run, I’ll run with you. But, I say hide—- DiJA and Bitcoin gap from Oct. 2020 needs to be filled. Cups filled with ice and we do this everynight, I don’t check the price all I do is swipe-
William Bailey
William Bailey Sep 18, 2021 11:26AM ET
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Its criminal that the Fed prints credit for the wealthy on the backs of the poor and middle class
jason xx
jason xx Sep 18, 2021 8:08AM ET
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Does this pretty much go for the spx as well?
Dr. Arnout ter Schure
Dr. Arnout ter Schure Sep 18, 2021 8:08AM ET
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jason xx
jason xx Sep 18, 2021 8:08AM ET
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Thank you I will read those tomorrow morning first thing. Appreciate it
Richard Ellis
Richard Ellis Sep 18, 2021 8:08AM ET
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Dr. Arnout ter Schure  Put the Fibonacci retracement on the SPX yesterday afternoon to see were it would end at the end of the day. Needless to say it was bouncing at the 61.8 for the past few days but has broke through that level. Going Down?
Franc Fil
Franc Fil Sep 18, 2021 1:07AM ET
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Dow 6800
Ajay Uppal
Ajay Uppal Sep 18, 2021 12:56AM ET
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Taper or No taper, party seems to be getting over with Lehman like crisis in Evergrande..
Edward Chong
Edward Chong Sep 18, 2021 12:56AM ET
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evergrande is already contain. i think u read too much.
Kool Aid
Kool Aid Sep 17, 2021 4:34PM ET
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Thanks doc!
Bill Pulak
Bill Pulak Sep 17, 2021 3:45PM ET
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Guesses abound
Dr. Arnout ter Schure
Dr. Arnout ter Schure Sep 17, 2021 3:45PM ET
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In a probabilistic, stochastic environment, such as the financial markets, one cannot demand certainty. all one can do is make educated guesses: anticipate, monitor, adjust.
jason xx
jason xx Sep 17, 2021 3:45PM ET
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Dr. Arnout ter Schure  I appreciate your analysis as I am a student of chart and indicator reading. One assumes everyone knows this does not work on guarantees and absolutes without needing it pointed out. I guess it makes people feel better when they don't understand it but its always an educated guess or uneducated maybe if you just shoot from the hip? Newsflash to Bill Pulak nobody can tell the future.
Leon Kelly
Leon Kelly Sep 17, 2021 2:52PM ET
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Hey Dr! Agreed.. I think we have a technical bounce up to 34,690 fib on monday and then the drop. The last few trading days have created a descending triangle but right now The dow and spy are oversold on the bands. I think they save the drop for Fed intrest rate decision on Wed...
Anyi Don
Anyi Don Sep 17, 2021 2:52PM ET
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what for
jason xx
jason xx Sep 17, 2021 2:52PM ET
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There is no interest rate decision on wednesday? The worst they can do is announce a tapering timeline and they most likely wont do that until November.
Andrew Bevan
Andrew Bevan Sep 17, 2021 2:52PM ET
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From when the bounce started, there also needs to be allocated the correct time factor, so one day is marginal in an oversold market. A day or two further would more typically fill the margin.
Andrew Bevan
Andrew Bevan Sep 17, 2021 2:52PM ET
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I'm busy this weekend, but it looks as if the SP500 bounced at about 4440, which was roughly on the .618-retracement mark. But the market came lower since, but which could put us in the middle of a running or irregular correction. Something similar of sentiments referring to the DJIA.
 
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