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ELLIOTT WAVE

The Dow Jones Industrial Index's Bear Market Low

10/03/03 01:48:26 PM
by Maureen Williams

Based on my Elliott Wave count, it is highly unlikely that the Dow Jones Industrial Index has completed its bear market.

Security:   DJIA
Position:   N/A

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.


Maureen Williams

Maureen Williams is a Stockbroker registered with the South African Institute of Stockbrokers and has been a Professional Technical Analyst for thirteen years. Maureen has a particular interest in the Cycles of the markets and is an Executive member of the Technical Analyst's Society of South Africa. Maureen also contributes Technical Analysis of South African Equities on "Reuters" pages daily.

Company: DeWitt Morgan Asset Management
Address: 12 Castle Walk, Erasmus Kloof
Pretoria, South Africa,
Phone # for sales: +27 12 484 2000
Website: www.dwm.co.za
E-mail address: analysis1@global.co.za

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Comments

Date: 10/07/03Rank: 1Comment: Absolutely inconsistent and superficial. Mrs. Williams do not actually masters the use of ADVANCED GET thus drawing cconclusions absolutely superficials. No XREF is persent, no change of Counting, No Oscillatore 5/35 or 10/17 and 1.40 retracement is taken in consideration. Those articles are really dangerosu and detriemtal for the readers. Fabrizio Jorio Fili SOFIPAR DEUX S.A.
Date: 10/07/03Rank: 5Comment: 
Date: 10/07/03Rank: Comment: You do not have bottoms of even interim nature with record positiv sentiment and record high valuations. The Elliott count is possible but yields a very low probability.
Date: 10/08/03Rank: 5Comment: 
Date: 10/08/03Rank: 3Comment: 
Date: 10/15/03Rank: Comment: I am confused. Most Elliott Wave theorist contend that the 2000 high to the October 2002 low correction was an A wave. You lable this as an ABC correction on your chart. Shouldn t an A-wave consist of 5 waves? Whereas a B wave up should consist of 3 waves (a, b, c). Since the October 2002 low it appears that we have seen 3 waves, W1 ending 12/02/02, W2 ending 03/12/03, and W3 ending 09/19/03. If everything since 10/02 is an a-wave, shouldn t it consist of 5 waves? Or, have we already seen waves a,b, c of the so called phony B wave up. Intuitively, I feel that this B wave up will last well into 2004 as you say. However, I don t understand how you get there. You also say that the B wave could end at about 10,012 before the C-wave takes over. We are currently at about 9800, a run-up of 2600 since 19/02. If the a-wave and c wave of the B-wave up are equal, doesn t that infer that the imminent b-wave down would have to be about 2400 points, which would be a test of the March 03 low?
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