Wave four in the DJIA has ended, and we are now into wave five downwards. Rising stocks have found their tops, and this rise in the market has been accompanied by an aknowledgement that signs of weakness are still there. This is characteristic of a fourth wave in a bear market. So far, the analysts are right.
Where a follower of Elliott wave differs from this article from Reuters is in the expectations of this declining fifth wave which has begun. "Analysts do not expect the benchmark S&P 500 to breach its 12 year closing low of 676.53 reached in March, but chart patterns suggest that in the next several weeks the broader market could pull back to at least April levels". Quite simply, I think they're wrong. The declining fifth wave MUST reach lower than the end of the previous decline of wave three. This means we will definitely see a new low. However, wave one down of this first wave within C was short. If first waves are short, and third waves are long, fifth waves tend to mirror the first. We can expect a downwards trend for the next few months to a new low below 676.53, by a reasonable margin. Analysis using the 'head and shoulders' pattern suggesting a low of only to 827 is not going far enough for an Elliott Wave analysis.
The continued optimism that is evident in the media suggests that we are well into a decline that will last months.
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