|DJIA is currently correcting in a Wave 4 down, having completed Wave 3 up in 2000. Wave 4 should last longer than any of the previous corrections. My minimum projection for a low is September 7, 2004, followed by February 13, 2006, with the last likely date being July 3, 2007. These dates are calculated using the Fibonacci ratios of 38%, 50%, and 61.8% of the length of the last Wave 5 move, which by my count, started from the 1987 low and ended at the 2000 high. The DJIA support levels for these Fibonacci ratios are: 7945, 6744, and 5502.|
|The DJIA is currently trading above my first target and has yet to reach my first minimum projection date of September 7, 2004. Since 2004 is a Presidential election year, statistically a positive year for the DJIA, it is unlikely to register a major low during this time. I therefore place the major bear market low in February 2006, based on a 38% retracement in time of the 18-year old Bull market swing from 1982 to 2000. The low should be around 6744.|
Markets often retrace 50% of the previous swing in 38% of the time. Using the 50% timing retracement calculated from the 1987 crash rather than 1982, would give a low in June 2006. Note the proximity of the timing calculated from these two major pivot points. The end of the bear market is likely to occur between February and June of 2006.
|Figure 1: Monthly chart for the DJIA.|
|Graphic provided by: AdvancedGET.|
|Going back to my original wave count, the low achieved in October 2002 was the first leg of the ABC correction (Wave 4 down), which lasted 142 weeks. The current up-move is the "B" leg, which is likely to top out in the third quarter of 2004 with targets of 8937, 9474, and 10012. The "C" leg down will then terminate in the first half of 2006. |
I've assumed the last Bull market started in January 1975 with the DJIA trading at 572. The support levels for a correction would have been 7502, 6161, and 4842, calculated from the 1975 low to the 2000 high, using Fibonacci ratios. If January 2000 was the top of Wave 5 of Elliott Wave 5 up, then the end of the correction should occur no sooner than June 12, 2009. The next probable date is May 11, 2012, with the last date being April 3, 2015.
|Looking back, the Wave 1 high was posted in the early 1980s and the correction lasted 56 weeks. If you believe that August 1987 was the top of Wave 3, then the retracement only lasted eight weeks. The correction from the 2000 Wave 5 high lasted 142 weeks. In Elliott Wave Theory, there should be a correlation in time as well as values related to Fibonacci ratios. Therefore it is highly unlikely that the 1987 retracement, which was a "simple" correction, per the Rule of Alternation played out in time ratios, and was only a minor correction. |
The DJIA has supports at 7581, 6265, and 4970 calculated from the low of 1982, which was an Elliott Wave 2 down, to the high of 2000. This 18-year period is called a SAROS Cycle, which is when eclipses repeat their cycles as a result of a recurrence of the relative positions of the sun and moon.
The current swing of the "a" leg of the B Wave up, started at the October 2002 low and has lasted 50 weeks so far. The DJIA hesitated at the 50% retracement from the January 2000 high to the October 2002 low. A correction is imminent and will be the "b" leg down of the B Wave up, and should find support between 8819 to 8735, 8551 to 8441, and 8283 to 8148. These retracement levels were calculated using the lows of October 2002 and the current March 2003 high. The next trough should complete either in mid-October or late December 2003. A lower low or a higher low in December will confirm the actual pivot date.
|Provided the imminent correction does not take out the October 2002 low, the next swing up will be the "c" Wave of the B Wave up and should top out in the third quarter of 2004.|
The C Wave down to follow is due to terminate around February 2006, with a target between 6744 to 6265, or a worst case scenario in the 5502 to 4970 range, by which time the P/E ratios will be considerably lower and similar to values at previous bear market lows. This will be the end of Elliott Wave 4 down.
Once the C Wave of Elliott Wave 4 down has completed, the next four to five years should trend up into the Benner / Fibonacci Cycle High. This has a due date of 2010, which will be the first leg of the next long-term bull market.
As a final note, a close below 8148 will probably challenge the October 2002 low and place the above Elliott Wave scenario in jeopardy.
|Company:||DeWitt Morgan Asset Management|
|Address:||12 Castle Walk, Erasmus Kloof|
|Pretoria, South Africa,|
|Phone # for sales:||+27 12 484 2000|
Traders' Resource Links
|DeWitt Morgan Asset Management has not added any product or service information to TRADERS' RESOURCE.|
Click here for more information about our publications!