New highs (but for how long?) 7/25/2021

Both the NDX and the Dow made new highs on July 23. Above are my Elliott Wave counts of both indices from the March 2020 low. They give the same basic narrative, although the Dow is messier.

I think that both indices are near the top of an Intermediate Wave III, which will likely be followed by a drop of 8-12% on the Dow and 12-16% on the NDX.

I have no way to know when or where the top will occur. I don’t know whether to interpret the startling drop on July 19 as a bearish signal that the market is susceptible to news (suggesting that a bigger decline could be imminent), or whether the fast recovery is a bullish sign that buyers are in control and will remain so for some time.

If the latter is true, then the recent rally to new highs on the Dow could be an upward Wave III breakout within the rally from the June 18 low, as shown below:

Update (7/20/2021)

During Tuesday’s session, the NDX stalled at 61.8% Fibonacci retracement of the July 13-20 drop. I interpret this as a bearish signal that likely means the index will drop below the July 20 low. My downside target remains 14,224, which is 38.2% Fibonacci retracement of the rally from May 12 – July 13.

Well, Well, Well (7/20/2021 Pre-Market)

I did not expect Monday’s big drop in the U.S. stock market. On July 16, the Dow’s attempt to break out above its May 10 top failed spectacularly.

It very much looks like an ongoing corrective pattern is underway, especially given that the rally from June 18 – July 16 appears to be three waves.

I will post an updated Elliott Wave count for the Dow after I see how things shake out. But in the meantime, I think the NASDAQ-100 (NDX) is still in Elliott form. Below is a chart of the NDX from the March 2020 low to the present:

I have the NDX in a fourth wave within an extended fifth wave. I am anticipating a 38.2% Fibonacci retracement of the rally from May 12 – July 14. That gives a downside target of 14,224.

In the meantime, however, the NDX appeared to find support near 23.6% Fibonacci retracement:

I suspect the stabilization around 23.6% means that a rally will take off from here before the downtrend resumes.

Update (7/12/2021)

Above is a chart of the Dow Industrials with my short-term Elliott Wave count. From the low on June 18, I think we have a Minor Wave I rally to July 2, a corresponding Wave II drop to July 8 (which had a classic ABC zigzag pattern), then a Wave III rally.

The rapid surge above the July 2 top is a strong signal that this really is a Wave III, and I would expect it to at least equal Wave I on a point basis, which projects a rally to at least 35,695.

Below is my long-term count for the Dow:

I think the Dow is still in Primary Wave I of the bull market, and this wave is likely to top out by the end of the year.

Meanwhile, here is my long-term count for the NASDAQ-100:

You may recall I previously thought the NDX completed its first two Primary waves by September 2020. However, with the Dow now finding an Elliott rhythm, I have revised the wave count to make the NDX jive with the Dow, albeit with the NDX’s Primary I ending a couple months later.

An Elliott Wave Look at the Dow (6/30/2021)

Above is a chart of the Dow Jones Industrials Average from the March 2020 low through the present. The Dow is starting to make sense again from an Elliott Wave standpoint, after seeming to lose its rhythm in October.

On the Dow, I think we are still in the first Primary degree wave of the bull market. Intermediate Wave I was from March 23, 2020 to June 8, 2020. Intermediate II was a brief but sharp drop from June 8 to June 15, 2020. Since then, the Dow has been in an extended Intermediate III. Within Intermediate III, it looks like four subwaves are complete.

The Dow shows a classic three-wave drop from May 10 to June 18, 2021 [ the (3)-(4) drop on the chart]. If the Dow proceeds to new highs, I will start using the Dow, instead of the NDX, as my primary index to track the bull market.