Potential Long Term Five Waves Up on Bitcoin (Updated 1/18/2021)

 

See monthly chart of Bitcoin below showing a potential five waves up. It has met the minimal requirements for the 5th wave however the 5th wave could go as high as the upper trendline which is currently over 200000. Wave 3 was longer then wave 1 so wave 5 does not need to be shorter then wave 3 and it could also be extended according to the rules. Whatever the wave 5 top is, it should be complete by the 2nd half of 2021 if not sooner.

Once the 5th wave is in, it will be followed by a multi-year and potentially deep bear market that could go near or below the wave 2 low in January/2015 around 153 in a worst case scenario. 

Update:

If considering the wave lengths on a percent basis, wave 1 is the longest wave. With wave 3 being shorter then wave 1, that would mean that wave 5 must be shorter then wave 3. Wave 3 was 11960% long so wave 3 must be shorter. The calculated maximum length for wave 5 is 1,189,380 if measured from September/2020 or 475310 if measured from the March/2020 low. 

The upper trendline is now around 250000 and will rise to be close to 500000 in early 2022 so that may be an argument for the 475000 max target. If that maximum price is achieved it could be as late as the first half of 2022 before wave 5 is complete.

Calculations:

120.6 x 9862.19(Sep/2020 low) = 1,189,380

120.6 x 3941.21(Mar/2020 low) = 475,310

(the wave 3 length of 11960% equates to a multiplying factor of 120.6)   

Chart Update:

Additional pricing data has been found and is shown in the 2nd chart below. This additional data does not change the wave counts. The 1st chart is a monthly chart and the 2nd one is a quarterly chart.

Stock Market Top is in Site (Updated 12/27/20: Chart Added)

Wave Commentary For Stocks:

(For chart update see bottom of this post)

Review

• The last post in May suggested that the February/2020 top would be tested or exceeded. That high was exceeded in August and the market is continuing to go higher as of this writing.
• It was suggested previously that the B Wave of a flat or triangle was in progress from the March low. That has been updated - see below.
• It was anticipated that the March low would be the low of the year. That was correct. 

Wave Counts and Structure

• The market as shown by the S&P500, may be forming a diagonal five wave structure from the March/2020 low. That appears now to be a better count rather then the B wave of a flat or triangle as described previously. They have not been ruled out however.     
• If a diagonal five wave structure is the correct count, it is not clear if it would be a leading or an ending diagonal, however I am leaning toward the more bullish view at this time. A leading diagonal would be much more bullish then an ending diagonal which in a worst case scenerio could be the end of the entire move up from March/2009.

Wave and Cyclical Outlook

• I have spotted a longer term sub cycle that has a peak in the early Spring. It has a tendency to bring tops so that syncs well with this outlook. 
• There are no more bullish cycles this year so if a top is made around March it could be the high for the year.

Weekly chart of S&P500 showing projected wave count as described 
in above commentary. Wave 5 top is projected around March/2021 as shown.
(click to enlarge)

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)