Sunday, June 28, 2020

Dow (25,015) - can 25,000 level hold?

Dow dropped 2.84% or 730 points to close at 25,015 on Friday.

Once the Dow goes below the 25,000 level, the magnitude is too big to be anything else except the wave iii of (i) of the wave C of super wave VIII.

If the magnitude of wave C is to be the same as that of wave A, a 38.4% drop, then wave C is likely to end around 17,000 level, another 8,000 point to go to end the super wave VIII.

At 17,000, the magnitude of super wave VIII is about -42%, that is the same as the magnitude of super wave IV of -42%. However the super wave IV has a much longer duration of 16 years.

If the duration and magnitude of super wave VIII were to be the same as that for the super wave VI of -54% over 17 months, then super wave VIII is likely to end somewhere around middle of 2021 at around 13,600 level for a similar -54% correction.

What about that fundamentally hard-to-believe mega wave (3) of super wave VII scenario?

Well, at Friday closing level of 25,015, Dow has only 15 points to go to drop below the 25,000 level. But due to whatever reason, if Dow is able to stay above the 25,000 level, the wave count for mega wave (3) still can hold.

The magnitude of pullback for mega wave (2) of VII of 38.4% is about the same as that for mega wave (2) of V of 36% and (4) of V of 35.6%.

But at this moment with Covid-19 pandemic is getting worst in the U.S. and in some other major countries like Brazil, Russia, India and the UK, With GDP projections going lower and lower, with unemployment rates going higher and higher, this mega wave (3) scenario appeared to be more like an academic exercise on paper.

From here on Dow may either punch through the 25,000 level and go all the way lower and lower or it may choose to fluctuate around the 25,000 for a while waiting for the end of tug-of-war between Codvid-19, negative GDP and unemployment on one side and economic stimulus programs, excessive money printing and vaccine development on the other side. Or can it go all the way up from here due to US presidential election and excessive liquidity in the market?


1 comment:

Anonymous said...

Have you done an analysis on Gold ? Presumably it should have a negative correlation with the price of Dow Jones ? Hence can act as a validation tool against your wave counts.