Final Bull Market Top

 It appears the Stock Market has completed the Grand Supercycle Bull Market. The prior bullish stance of this blog back in early 2022 proved correct as equity prices advanced to new all-time highs. The deflationary forces that have been building for decades should now take hold and result in the largest bear market in centuries. Ultimately, the March 2009 lows will be taken out, and likely the 1982 low. 

The Final Significant Correction of the Bull Market

It has been posited on this blog since early 2018 that the Bull Market would continue until 2022, simply utilizing the power of the Fibonacci Sequence in determining the likely duration. When equity prices continued past the 8-year mark, 13 was the next number of years in the sequence, and that year has arrived. I am not taking credit for this call yet, because 2022 has only just begun. With the extent and duration of stock market speculation, leverage, and historically high valuations, it would seem this should be it- the Grand Supercycle Bull Market, spanning more than two centuries, should top this year. It is now up to the market to prove this assertion correct. If this analysis really is correct and equities are beginning a multi-decade bear market, the bull market reversal and initial decline off the top should be unlike anything market observers have seen before. Records will be broken in downside breadth, gauges of fear and rate of change in the sheer swift nature of the initial bear market kickoff. In the meanwhile, the bull market is still ongoing and below I present an analysis of the current wave (4) correction.

Intermediate Wave (4) is now underway, in what is anticipated to be the final correction of significance in the Bull Market that began in March 2009. In Elliott Wave Analysis, there are a number of different structures corrections can take. Considering that wave (2) was a flat correction, wave (4) is likely to either be a triangle, zigzag or combination correction. A simple triangle appears to have been ruled out due to the new highs registered in January, and the subsequent decline below the December lows, ruling out a possible running triangle. It would appear the two most likely outcomes are another expanded flat, or a combination for wave (4). Given Elliott's guideline of alternation, and the fact that wave (2) was a flat, wave (4) should be a combination correction. Below is a double-three composed of a flat followed by a triangle. This would serve to frustrate the majority of market pundits as market direction will become unclear. When the correction is over, Wave (5), the final impulse wave of the Grand Supercycle Bull Market, would then commence and take equity values to new all-time highs.   

Elliott Outlined the tendency of impulse waves to form a channel connecting the ends of waves 1 and 3, running parallel to a line connecting the ends of waves 2 and 4. At the recent low on January 24, price briefly undercut the lower trendline, only to stage one of the biggest intraday upside reversals on record. The market clearly recognized this support zone. I would therefore be remiss if I ignored the possibility of the entire wave (4) correction completing at this low, or possibly a higher low in a truncated wave 5 of C of (4). Under this scenario, the market would test the lows, perhaps respecting the lower trendline before reversing upwards and impulsing straight to new highs in wave (5). 

Elliott Wave Bull Market Projection

 U.S. Equity prices have continued to remain strong, as the expected ongoing correction scenario posted in January did not materialize. The long term bull market, however, remains intact as expected into 2022.  Below is the favored Elliott Wave Count and projection for the remainder of the bull market. Although Intermediate Wave (2) was shallow, wave (4) is expected to be sharp to set the market up for the final top.

 

Long term price targets are derived from the previous bull markets of Cycle wave V of Supercycle Wave (III) and Cycle wave I of Supercycle Wave (V).

Crude Oil's Secular Bear Market

 Back in March 2020, amidst a crashing stock market and outright fear amongst speculators, the primary concern was deflationary pressures as the global economy went into recession. Oil prices went negative in April 2020, and many pundits were speculating oil would "never recover". While not published here, I was expecting a recovery in oil and that has now occurred. Now, all the talk is of inflation concerns. Just as occurred last spring the markets are once again poised to fool the greatest number, and reverse back into a deflationary trend. Below I present a long term Elliott Wave Picture in Crude Oil Prices. From the July 2008 Bull Market top, oil declined over 95% to a low in April 2020, and staged a throw-over of the lower trendline connecting the 2008 and 2016 lows. From that low oil has staged an impressive rally back to the 2018 wave (4) highs, as well as the 50% price retracement from the 2008-2020 decline, a common stopping point for price in Elliott Wave Analysis. Also of note is it has been a Fibonacci 13 years since the 2008 peak. It is fitting that the timing of the cycle wave V high and the cycle wave b high are separated by a Fibonacci number of years. 

Given my longer term deflationary thesis in equities and global markets, I do not see oil beginning a new secular bull market. It now appears oil has completed its bear market rally from the 2020 lows, and is apt to continue it's secular bear market. The above notwithstanding, oil could hold up relatively well until the anticipated peak in equities in 2022. Updates will be posted periodically.

A Potential Bear Market Fractal

It is anticipated the final peak for Supercycle Wave (V) and thus the Grand Supercycle Bull Market will occur in 2022. While it has long been widely held amongst Elliott Wave Practioners that Supercycle Cycle Wave (IV) ended in 1932, and a Cycle Wave I Bull Market occurred  from 1932-1937, I present an alternative in which the entire period from 1929-1949 was a barrier triangle. If correct, this interpretation would explain the failure of the bull market to top in 2000 or 2007, as that period from 2000-2009 would be labeled as an expanded flat correction for Cycle Wave IV, with Cycle Wave V, Supercycle Wave (V), and Grand Supercycle Wave III terminating in 2022.

The projected timing is derived from time ratios of the durations of wave a of (IV) relative to the durations of wave b-c-d-e of Supercycle Wave (IV) as a basis for determining the duration of ensuing waves (b), (c), (d), and (e) of Grand Supercycle Wave IV

Under this scenario, wave (a) would last a Fibonacci 8 years, wave (b) would last a Fibonacci 13 years, wave (c) would last a Fibonacci 13+1 years, wave (d) would last a Fibonacci 13-2 years, and wave (e) would last a Fibonacci 8+1 years. Even assuming a margin of plus or minus 2 years for Fibonacci Durations, the internal wave duration discrepancy from a Fibonacci number of years of the entire structure balances out. Finally, the entire Grand Supercycle bear market would last a Fibonacci 55 years from 2022-2077. 

An Ongoing Correction

Happy New Year. The Intermediate Wave (2) Correction that began on September 2, 2020, despite new all-time highs in the stock market, is still ongoing and has taken the form of an expanded flat. The lack of an impulsive wave structure from the October low supports this interpretation. 

All expectations are for the market to trace out 5 minute waves down into the intermediate wave (2) low sometime in the first quarter. Should the duration of Intermediate Wave (2) equal Intermediate wave (1), timing symmetry points to a low on February 15, 2021. Additionally, on a closing basis, wave c of (2) would be equal to 161.8% of wave a of (2) at 26,401.46. Previous price targets surrounded the 50% and 61.8% retracement range between 22,600- 22,800. While this is still feasible based on Elliott Wave guidelines, it is less likely due to the expanded flat structure of the correction. Nevertheless developments will be monitored closely. Minor wave c is apt to be sharp, in keeping with typical c waves of flat corrections. 

When Intermediate wave (2) completes, Intermediate wave (3) should carry the stock market to new all-time highs. As previously stated, a final top for the bull market is not expected until 2022. 

Intermediate Wave (2) Correction Underway

The Stock Market traced out an extended first wave into the end of April. This has had the effect of extending the entire Intermediate Wave (1) rally since the Primary wave 4 low on March 23, 2020. Intermediate Wave (2) is now due, and should retrace between 50% and 61.8% of the entire rally, as illustrated on the chart below. A 61.8% retracement would also line up with the previous minor wave 2 low, which is a feasible target given that minor wave 5 was relatively short in price. Hence, expect the Dow Jones Industrial Average to find support between 22,600 and 22,800 on a closing price basis. In terms of time, a 50% time retracement of Intermediate wave (1) up from March 23 falls on November 23, 2020.

Of note is the fact that minor wave 3 is shorter in price than minor wave 1, and minor wave 5 is shorter than minor wave 3. It is therefore reasonable to assume this will also be the case for Intermediate waves (3) and (5). This is consistent with the assertion that momentum will wane for quite some time into the final top of the bull market in 2022.