DJIA 2009-2017 Bull Market Review

When the big markets are pointing up and the talking heads are also pointing the markets in the same direction, then this is when I’m already building the next pattern heading down. I’m not that concerned in how much higher this market can go, as I’m building a potential picture in how low it can go.

How low this market can go, all depends on where our original wave two starting point was, and how popular 5th wave extensions really are. With stocks 5th waves do extend, but many times it will be one of the last 5th waves in a run. It is wave 3 that has to be the longest wave.

The last 5th wave extension happen from the 1987 crash bottom to the 2000 peak. From the 1987 crash bottom, the markets exploded with a wild sequence of 5 waves in Minute degree, which translates into just one move in Minor degree.

It took me until about 2013 to finally look at the bull market from a 5th wave perspective. Not as an impulse, but as a diagonal wave structure.  Diagonals, are just zigzags connected together with flats or triangles in a 4th wave position, which the EWP does not explain very well.  In the book they label an ending diagonal like an impulse, but in reality they are zigzags linked together. To separate the normal impulse waves from diagonal impulse waves, I use a specific wave counting method that is also shown in the book, which most experts seemed to ignore.

When I see analysts turning diagonal wave patterns into impulse wave patterns, then they are ignoring all the zigzags that are linked together in waves 1, 3, and 5. 

On the chart above, I show 4 horizontal lines, that had significant meaning on the way up, which on the flip side can provide some major turning price levels on the way down.

We have been told over and over about markets, retracing back to the previous 4th wave of one lesser degree. When all wave analysts are walking to a different drummer, then who had late 2002 as a previous 4th wave?  The 2009 bottom 4th wave went much deeper than the late 2002 bottom, so the previous 4th wave is more of a guideline, than any strict rule. In short, I never use the previous 4th wave bottom like a rule, but I use it as a very strong guideline. 

 Now we are faced with a potential move that is two degrees higher than anything that the late 2002 bottom produced,  and one degree higher than the 2009 bottom. Many experts will look for new record lows, with DJIA forecasts to 5000, 3000 or even 1000, becoming very popular  again.

One thing is certain, by the time the markets get to the next major low, fear mongering by the experts and the mainstream will be front page news. When that day arrives, fear will keep investors out of the markets and at best you will be holding a token position just before the Roaring 2020’s get started again.  

 

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