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Stock Market Short-Term Forecast

Stocks are close to finishing an interesting pattern, a sideways triangle from the October 27th top. Sideways triangles are pauses, meaning the direction of prices before the triangle is the direction prices will take when the pattern is complete. Stocks fell in five waves from May 2nd, 2011 to October 4th, 2011. Five wave moves are impulsive and occur in the direction of the one degree larger trend. We call that wave 1-down. They rallied from October 4th through October 27th. That rally was correcting the five wave decline from May 2nd. The big question is, was that all there was to wave 2-up? Or, is there another rally leg coming? The appearance of the sideways triangle from October 27th through this weekend, November 11th, suggests the distinct possibility that wave 2-up is not over. Triangles are typically wave b's or wave fours in Elliott Wave mapping. The presence of this triangle now has to be a wave b, it cannot be a wave four. If it is a wave b, it has to be the middle wave of an a-up, b-down, c-up move for corrective wave 2-up. Wave twos typically have three subwaves. If this is the case, then a strong wave c-up must be next after this triangle finishes, a strong rally that could last 4 to 6 weeks, into year end 2011.

We show charts of this triangle pattern for the Dow Industrials and S&P 500 below. Both patterns are close to finishing. They both need one more declining wave to finish. They could be finished by Tuesday of this coming week.

SPX

Dow Jones Industrial Average

But interestingly, at this time, there are two other equally possible scenarios over the next few weeks with very different price paths than these triangles suggest. We sit at a very interesting bifurcation point this weekend. These triangles would be invalidated if a sharp decline came early this week, falling below the bottom boundary of these possible triangles. We outline and chart these other two scenarios in our weekend report to subscribers at www.technicalindicatorindex.com this weekend. We believe all three scenarios have equal probability. While markets are unclear short term, by the end of this week, price action should eliminate two of the three scenarios and tell us where stocks are headed for the remainder of 2011.

Do not be satisfied hearing what the market did; learn how to predict what the market is going to do. Join us at www.technicalindicatorindex.com as we study the language of the markets. Markets tell where they are headed. Technical Analysis is the science where we learn and apply the language of the markets.

 


We cover a host of indicators and patterns, and present charts for most major markets in our International and U.S. Market reports, available to subscribers at www.technicalindicatorindex.com

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"Jesus said to them, "I am the bread of life; he who comes to Me
shall not hunger, and he who believes in Me shall never thirst.
For I have come down from heaven,
For this is the will of My Father, that everyone who beholds
the Son and believes in Him, may have eternal life;
and I Myself will raise him up on the last day."

John 6: 35, 38, 40

 

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