The Stock Market’s Wave Structure

Traders Blog | Monday 2 August 2010
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The US stock market has faced more up-and-down swings over the last few months than a Cirque de Soleil flying trapezist. Case in point: On June 30 the Dow Jones Industrial Average closed out Q2 of 2010 with its longest losing streak since October 2008 AND worst pre-July 4th week in percentage terms (down 5%) since Charles Dow founded the index in 1896.
Then in July, the market swooped back up in a 1000-point rally to two-month highs.
Yet, in time when clarity is most important, the mainstream experts have dropped it like it’s hot. “Analysts seem to be taking a wait-and-see” stance to stocks, explains a recent CNN Money report. The hope is, in six to 18 months, the fog of uncertainty surrounding the biggest fundamental markers — earnings, economic data, and Eurozone woes — will lift and reveal the trends ahead.
Fortunately, “market fundamentals” aren’t the only indicator an average investor can look at.
For example, on page 2 of the July 2010 Elliott Wave Financial Forecast, EWI’s team of technical analysis experts reveal how the Elliott current wave structure in the Dow Jones Industrial Average is a lot like another wave pattern that emerged in recent stock market history. Here, the following chart puts the likeness into visual perspective:
In the top column, the featured wave pattern preceded a powerful turn that saw a 30%-plus change in the S&P 500′s value in less than four months; the bottom chart shows you the current wave setup. What are the odds of such a scenario playing out again?

Find out today via a risk-free Financial Forecast Service subscription.

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