Dow - A mega view

Before March 2009, Wall Street was talking about a bear market that ultimately could match that of the Great Depression. One possible wave count based on Elliott Wave Principle, as shown above, has 2007 October market peak as wave 5 of the mega wave (III).

If the bear market that started in October 2007 is the mega wave (IV), it has to be comparable to that of the Great Depression mega wave (II). By Elliott's Rule of Alternation that states that "no two sequential corrections of the same magnitude will ever be the same type. Foe example, if wave 2 is a simple correction then wave 4 is most likely complex." See illustration below.

Since the Great Depression mega wave (II) is a simple wave, the current wave, if it is mega wave (IV), chances is very high that (IV) will be a complex wave. Let's look at all the major consolidation in details.

To date, the Oct 07 bear is no way near that of (II) in both magnitude (% drop) and duration if it has to be (IV), more drop over a longer duration is required to make it looks like (IV). A complex A-B-C-D-E triangles will have to form for it to be (IV). Still a long way to go. For the 'head and shoulders' to form, it will need another 2 to 3 years to complete the right shoulder. The left shoulder took 4 years and the head took 6.5 years to form.

Based on magnitude (% Drop), the Oct 07 bear (53%) is closer to wave 2 (49%) and wave 4 (38% with longer duration) than to Major wave (II). But the duration of 17 months is far less than the 62 months and 104 months of wave 2 & 4. Even to be wave 6 it still has to come down for a double dips with a longer duration.

At this moment it can be Mega wave (IV) or wave 6 of the mega (III).