Overall, I'm expecting something like an Elliot Wave 3 leg down pattern, where the middle down leg is about 1.618 the length of the first down leg. An Elliot Wave is shown above.
We already got the 1st leg down and we're working on the 1st retracement up leg (Wave 2 in Elliot Wave parlance). As shown in my last post in this thread, Wave 2 has already made a retracement between 50% and 61.8%, so its about time to start Wave 3, which is the 2nd wave down. If things go as I expect, this drop will be the biggest but not the last. Here's that chart again.
If you asked me what would cause this case to be wrong and the market has made its low and we make new highs before we make new lows, I'd say its the artificial dramatic inflation of the money supply by the Federal Reserve.
US Dollar denominated assets, such as the stock market, may increase in price to reflect the diminished and diminishing value of the Dollar (See my pizza post). But if that happens we're probably on our way to hyperinflation, which will kill investor confidence, which will drop the stock market later, after the new highs. Either way, the stock market is a very risky place to trust with your money for a very long time.
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