Stocks to Test or Exceed the February/2020 High?

Elliott Wave Status For Stocks:


WAVE COUNTS

1. Wave A up from the March low ended at the April high.
2. Wave B down ended at the Thursday May 14th low and wave C up began.
3. Wave C is in progress.

WAVE OUTLOOK

1. Wave C may test or exceed the Feb/2020 high in the coming weeks or months.
2. The March low is anticipated to be the low of the year for stocks.

WAVE STRUCTURE

1. A test of the Feb/2020 high would imply that a large triangle or flat correction is forming from the Feb/2020 high and not a zigzag as described in the previous two blog stock updates. 
2. Stocks would need to stall near here and then turn down if forming a large zigzag. This does not appear likely at this time. If it does occur, the March/2020 low would be taken out within the next few months

Stock Market Update

The strong move up mentioned on March 1st retraced about 40% of the prior move down instead of the 70% mentioned. It was also mentioned that a strong move down below the prior 2/28 low may invalidate the outlook. That happened one week later however much of the prior commentary concerning the wave X favored count and thereafter is still valid even with the severe decline that followed the March 4th closing high.

The drop below the beginning of wave X of December/2018 does not invalidate any of the three possibilities given for the current correction pattern. This current pattern can still be a zigzag, flat or triangle and it could last up to several months or until sometime in 2021. The March 23rd low may be the price low of the correction but if not, I would be looking for the 2020 low by mid-year.

The wave one count that was referred to last time as another possibility is no longer valid since the December/2018 low was taken out.

Lastly, the severity of this recent decline gives rise to a new count. Since the December/2018 low was taken out, it could indicate that the entire wave one move up from the March/2009 low to the 2018 high is complete and the market is now in a wave two. In a worst case scenario wave two's can retrace up to 80% of wave one but usually it is less then that. With this count, I think the low would be sometime in 2021. The December/2018 to February/2020 up move counts best as a wave X and not as a five wave structure so this count seems unlikely.

Bitcoin

Less bullish count(appears to be most likely outlook): 

Current up wave: wave B of a possible flat or triangle (Feb/2020 high to Mar/2020 low is wave A)
Projection arrow on chart - green (see chart below) 


More bullish count(appears to be less likely outlook): 

Current up wave: wave 3 from the Mar/2020 low (Jun/2019 high to Mar/2020 low is wave 2)
Projection arrow on chart - yellow (see chart below) 


A strong move below the March low will invalidate both of these counts.

Bitcoin weekly chart with current projection arrows shown.

Looking for Possible Strong 3-6 Week Move Up Starting Soon

The decline may be over or within the next few trading days. Friday's low may be the price low for the correction. This late February decline was indicated as a possibility in the last blog update although I did not foresee a severe drop. Looking for possible strong 3-6 week move up that could retrace up to 70-90% of the correction. 

Due to the severity of the decline wave 3 is no longer a valid count unless the current decline is wave C of a large flat from the April/2019 peak. The prior favored wave X count is now the best count once again for the move up from the December/2018 low to the February peak. A wave X is a middle wave between two corrective waves. The current correction wave can be a zigzag, flat or triangle so it remains to be seen which of these patterns will unfold in the upcoming months. I would say that the current move down is most likely the first part of wave A of one of those three patterns. That would indicate a new low below the current low in the next few weeks/months after the antIcipated 3-6 week rebound rally. It can't be ruled out that the current low is the end of wave A(and therefore a possible price low) for any of the above mentioned three corrective patterns. A strong move below Friday's low this coming week may negate this outlook.

The wave one count(of a possible diagonal) suggested previously as a third possibility for the December/2018 to February/2020 peak is still a valid count and would make the current correction the first segment of wave two which is usually a zigzag type corrective wave. 

S&P500 chart showing ghost feed projection(candlesticks & white line) to mid April(click to enlarge)

Wave 3 Count for Stocks Now is Best Count - A Top by End of Year?

The wave 3 count mentioned in the last post was given as a more probable count if stocks continued higher into mid January. That happened along with a decline that was also forecast into the end of January. There still could be a retest of that recent January 31st low by late this month. 

The wave count and cyclical/technical indicators show that the rising market could continue until late 2020 or early 2021 as waves 3, 4 and 5 complete.

The wave X count is still a smaller possibility. If so it would portend a decline from near current levels that could last a few months perhaps into mid-year. A third possibility is that the entire move up from the late 2018 low is a large wave 1. With that count I would be looking for the wave 1 to end within the next several weeks by late March followed by smaller waves 2, 3, 4 and 5. 

Stock Decline Looks Imminent

Many of the indicators are lining up for stocks to make at least a multi-week top sometime between now and mid-January. If so, I will label the move up from the December/2018 low as an X wave as I mentioned a couple of times before. 

There is a smaller chance that stocks are now in a wave 3 from the October/2019 low which would also be ending at any time although the decline would be not as severe with a test of the December low more likely. The wave 3 count could also be more likely then the wave X count to bring a high more toward the end of the timeframe from now to mid-January.   

Even if the wave X count is correct, I don't think there will be a huge price decline from here and would not be surprised to see higher highs later in 2020. The worst case may be a retest of the June/2019 low.

S&P500 Daily Chart (click to enlarge)