Bullish Until Q4

Short-term, the U.S. stock market has been very difficult to call given that on many occasions over the last couple months, it has looked as if it was ready to go into a correction, but then churned to new highs once again. I now think that, if any drop occurs over the next couple months, it would only be about 5% in magnitude, matching the drop prior to the election last year.

Here is my current Elliott Wave count and projection for the NASDAQ-100 (NDX):

NDX Apr 9, 2017 Elliott Wave

Within Primary Wave 5 (labelled in blue) it looks like we have an extended third wave of intermediate degree (labelled in white).

My current target for a bull market top is Nov – Dec of this year. This comes from an instance of George Lindsay’s Counts from the Middle Section that I have been following on the Dow for two years now.

djia middle section april 9 2017

In this case, it is an Ascending Middle Section. Here is a link to an image of an idealized schematic of the pattern from another site: http://carlfutia.blogspot.com/2009/01/2009-stock-market-forecast.html

My chart above explains how the time proportions work. Depending on whether I put the 2nd point A (AA) in Jan or Feb 2016, the projected top is November or December of this year.

After this bull market tops out, I do not currently expect an epic bear market like 2007-09. I am still bullish on the economy for the near future. Thus, I expect that the next bear market in stocks will be a sideways period lasting two or three years, with a 20 – 30% drop occurring at some point in the process, possibly associated with a mild recession at the end of this decade.