July 4, 2021

Happy Independence Day!

Since the ongoing market commentaries (see below) insist that the market has further to rise, let me take the opposite view.  As reported on Friday, the DJIA has reached its target of 34800.00.  That was the round number.  The actual target is the top of Wave [a] at 34849.30.  This completes an Expanded Flat correction, where [b] is deeper than [a] with Wave [c] bouncing back to the top of Wave [a].

I had announced that the Wave pattern was complete on Friday.  Here are a couple of rules that will help.  While the Wave pattern has all the elements necessary, it may still expand simply to reach the top of Wave [a].  The final top of an Expanded Flat correction does not have to be precise, suggesting Friday’s high may already be enough.

The bailout number is 34876.00 beyond which the third Wave of [c] becomes the smallest, which violates one of the few Elliott Wave Rules and opens the door for a new all-time high in the DJIA (which is what virtually everyone is predicting).

Why am I sticking to my guns?  First, we know where this pattern fails (34876.00).  Second, Wave [iv] of 5 is a triangle, which indicates “one and done.”  A Triangle in that position announces that the final Wave higher before a trend change follows.  That is why the DJIA has not been able to make new all-time highs, while the SPX and NDX had no Triangles and therefore could expand further to new highs.

The DJIA consists of the largest and most liquid stocks in the world.  Large international investors and institutions invest there.  This suggests there is liquidation among the largest and best known companies by the largest players.  It also means that retail investors may be holding the bag at this point.

Tomorrow is a market holiday, but overseas investors will still have access to the DJIA through overseas markets and futures.  The pattern could easily be finished in the futures market while we celebrate.  Tuesday’s market might be dancing to a different tune.

RealInvestmentAdvice comments, “Market Rallies To All-Time Highs

With the 4th of July weekend upon us, this week’s newsletter will be slightly shorter than usual. Such will ensure you “pitmasters” can get to work doing what you do best.

As we discussed last week, the market not only got off the mat and rallied back to new highs. That action continued through this week.

Q2 Peak Reporting 07-02-21, As Good As It Gets. Will Q2 Mark Peak Reporting? 07-02-21

The technical backdrop is not great. With the market back to 2-standard deviations above the 50-dma, conviction weak, and investors extremely bullish, the market remains set up for additional weakness.

However, we are in the first two weeks of July which tends to be bullishly biased. After increasing our equity exposure previously, we will give the market the benefit of seasonality for now.” 


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