Dow(27,173) - Major wave 2 correction

Dow rebounded 358 points (+1.34%) on Friday. This rebound is likely to be the mini wave 4 rebound of the wave A of its major wave 2. After the completion of this major wave 2 within the next two months before end of December, the next major wave 3 run-up is very crucial in deciding whether the run-up since March this year is part of the mega wave (3) bull run;

OR it is part of the wave B of the super wave VIII correction.
 

It all depends on whether in early 2021 the next major wave 3 run up can punch through Dow's record high of 29,568.

Dow (27,657) - Heading for a higher degree correction

 Dow dropped 244 points on Friday, this may appear to be a non event drop of only 0.88%, but from its Wednesday's intra-day high of 28,364 to its Friday's intra-day low of 27,487, the drop is about 3.1% which is significant enough to knock out two of my three options mentioned on 9 September.

Now I am left with the option of a higher degree 14.5% major wave 2 pullback to the wave (iv) level of 24,971.

The next major wave 3 up trend is very crucial. A major wave 3 of a mega wave (3) movement is expected to be very dynamic accompanied by very high volume, an unmistakable bull run. But if the run-up has non of the above mentioned characteristic and it failed to break its previous record high of 27,568, be prepared for a more than 50% super wave VIII correction.

Under this condition, the previous record high level of 27,568 marked the end of super wave VII. The subsequent 38.4% correction is the wave A of super wave VIII. The non event major wave 3 run-up that is unable to break the 27,568 level is the wave 3 of B of VIII.

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FBMKLCI (1,504) - Starting of wave (iii)?

Since there is no change to the three scenarios for Dow that I mentioned in my previous posting, I will not talk about the Dow in this posting.

KLCI after touching a low of 1,474 om Thursday, it has been moving higher steadily until Friday's closing of 1,504, gaining 30 points from its low. Friday's candlestick is a bullish engulfing pattern with high volume. There is a possible wave count showing the low on Thursday is the end of the wave c of wave (ii), unless wave c of (ii) has 9 waves instead of 5.

Assuming wave c of (ii) has only 5 waves, from the 1-year chart, if wave (ii) has ended on Thursday, then Friday's candlestick is the first candlestick of the wave (iii).

From its March's low of 1,219, KLCI gained 29% for its wave (i). In a normal 5-wave uptrend, the third wave is the longest wave, the current wave (iii) is expected to gain at least 29% unless the current uptrend since March is a 9-wave uptrend.

With 29% gain, the wave (iii) is expected to reach at least the 1,922 level within the next few months. 

From the 25-year chart the wave (ii) looks small but possible unless its wave c has 9 waves instead of 5. Within the next few days we will know whether it is 5 waves or 9 waves. Looking at the wave form of the wave (ii), my guess is 5 waves and wave (iii) has just started. The next few days of ups will confirm the direction.

Dow (27,940) - Three likely scenario

Dow rebounded 1.6% or 439 points on Wednesday. If Dow can continue to move higher in the next few days but unable to go higher than the 30,000 level, then very likely scenario 1 is the case.

But if Dow is able to go higher than 30,000 and when the magnitude of wave (v) is greater than that of the wave (iii) of +21%, and since the third wave of any five waves run-up cannot be the shortest, major wave 1 is likely to have nine waves. That will lead to scenario 2.

The third scenario is when Dow continues to move lower after the current rebound. Dow is forming its major wave 2. 

Dow (27,500) - What degree of correction?

Dow dropped another 632 points (-2.25%) on Tuesday after a long weekend. With this drop I can rule out the two more bullish options and I am left with two other remaining options that I mentioned over the weekend.

The more optimistic sub-wave iv pullback is about to end. Another minor wave iv rebound and another drop to 27,400 level will complete the sub-wave iv.

A higher degree correction is the 14% to 15% major wave 2 correction. In the current down trend, Dow is forming the wave A of its major wave 2.

I expect the major wave 2 to stop around the 25,000 level.

Dow (28,133) - What's Next?

Dow dropped another 159 points or -0.56% on Friday after its 808 points (-2.77%) drop on Thursday. 

From the 30-minute interval 3-day chart, one can see that during Friday trading session Dow dropped to an intraday low of 27,664 for a 628 points or -2.2% drop to complete a 3-wave wave a before rebounded to 28,320 to complete a 3-wave wave b. 

With this 3-wave-down wave a followed by another 3-wave-up rebound wave b instead of  a 5-wave down followed by a 3-wave rebound, the option of a 14% major wave 2 correction that I mentioned on Thursday can be safely ruled out temporarily.

If Dow were to go lower on Monday, it is likely that Dow is trying to complete its wave c as well as sub-wave iv before its next sub-wave v run-up.

If the next sub-wave v run-up is unable to go higher than 30,000 level, the end of sub-wave v will also be the end of wave (v) and the major wave 1. The subsequent major wave 2 is expected to pullback to the wave (iv) level for a 17% correction.

But if the next sub-wave v is able to go above 30,000 level, then the magnitude of the wave (v) will be bigger than the magnitude of wave (iii), then the major wave 1 is likely to have 9-wave as the wave (iii) of a 5-wave run-up cannot be the shortest wave.

If Dow can move higher next Monday before moving south again in the following day, the next possibility is to have a 7-wave wave b rebound before the wave c takes place.

The most optimistic scenario is an unlikely but technically possible for Dow to have a 'two-day-affair' sharp correction and the worst is over. Under this scenario, after the sharp pullback in the last two days, Dow, Nasdaq and S&P500 will continue to run higher again with more record breaking highs.

For this unlikely (at this moment) ultra bullish scenario, the last two days correction is the mini wave 6 of sub-wave iii which is going to have 9 mini waves.

Dow (28,292) - Dow plunged 808 points

Dow plunged 808 points or 2.8% on Thursday, it is either major wave 1 has ended and Dow is going for a 14% pullback for its major wave 2 correction.

Or, if it is only a one-day affair and Dow can start to move up from here, then the plunge is only the mini wave 4 of the sub-wave iii.

It is better be cautious by assuming that this is a 14% correction until this is proven wrong within the next few trading sessions.

FBMKLCI (1,515) - Correction about to end

KLCI dropped another 22 points or 1.44% today. The mini wave 5 developed into 5 sub-waves of i-ii-iii-iv-v. Hopefully this is the end of the wave c of (ii). The worst possibility is a 9-wave c of 1-2-3-4-5-6-7-8-9.

Gold (US$1,936/oz)

Gold continues with its mini wave 4 correction with an a-b-c-d-e formation.

After completing its mini wave 4, gold will move up again to complete the mini wave 5 as well as the sub-wave vii of its wave (iii).

Looking at the 40-year chart for gold, it is going for a long bull run partly due to the runaway inflation due to excessive money printing and partly due to the falling USD.

USD is falling

The decline for the USD accelerated in recent months due to record high coronavirus cases in the US, unlimited QE by the US Federal Reserve, near zero interest rate and the anticipated growth differentials between the US and the rest of the world. Another reason is the concerns that some oil-producing nations will no longer demand payment in USD.

The chief investment officer of currency manager A.G. Bisset believes the USD will plunge 36% against the Euro over the next year or so.

USD has been dropping against the Malaysian Ringgit in the last 3 months. Its current level of USD/MYR at 4.142 on the first day of September punched through its lower supporting trend line. At the current rate of falling, I expect the USD/MYR to go below 4.00 before end of this year.

USD/MYR is currently on its major wave 3 of C. Hopefully by the end of wave C, the ringgit can reach Rm2.50 to 1 USD.