COVID-19 2nd bear wave? (DJI wave analysis)
Fundamentals:
If we consider permanent damage to the economy caused by COVID-19, we should expect a decline in corporate profits, therefore a fundamental devaluation of stocks and a great deal of uncertainty
Now the market optimistically bets on fast recovery. Nobody wants to be overboard a rising stock market.
This conditions remind me an Elliott Wave B definition. When the markets swiftly recovers from initial big sell off, and everyone is confident that the worst storm is left behind. Price drifts close to previous top or even slightly exceeds it, but then a dramatic sell off occurs.
Technical analysis:
Wave B (red) looks pretty sluggish. Rather a 3-wave pattern than an active impulse wave. It has driven stock market (DJI) only 10.7% above the top which was set in January 2018. I've discovered that wave (B) is equal to 161.8% of wave (A).
A green wave (b) is an assumed result of investors being overoptimistic.
Although recent volumes and STDEV confirm the downward bias/momentum, it's not certain that an assumed wave (b) is finished and soon decline in stocks is inevitable.
Forecast:
If assumption is right, we should expect a strong decline in stock prices sooner or later.
DJI is anticipated to reach 16225-16679 area.
If we consider permanent damage to the economy caused by COVID-19, we should expect a decline in corporate profits, therefore a fundamental devaluation of stocks and a great deal of uncertainty
Now the market optimistically bets on fast recovery. Nobody wants to be overboard a rising stock market.
This conditions remind me an Elliott Wave B definition. When the markets swiftly recovers from initial big sell off, and everyone is confident that the worst storm is left behind. Price drifts close to previous top or even slightly exceeds it, but then a dramatic sell off occurs.
Technical analysis:
Wave B (red) looks pretty sluggish. Rather a 3-wave pattern than an active impulse wave. It has driven stock market (DJI) only 10.7% above the top which was set in January 2018. I've discovered that wave (B) is equal to 161.8% of wave (A).
A green wave (b) is an assumed result of investors being overoptimistic.
Forecast:
If assumption is right, we should expect a strong decline in stock prices sooner or later.
DJI is anticipated to reach 16225-16679 area.
aggressive sell off was triggered when DJI came close to this level.