The following monthly Dow Jones Industrial Average (DJI) chart courtesy of Trading View is an update to the monthly DJI chart illustrated in the 08/22/20 post “Forecast – Bull Market Termination Date – 2021”
The time forecast is based upon the Fibonacci sequence which is ( 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, to infinity). RN Elliott was the first to discover that markets movements can sometimes be measure by the Fibonacci sequence. For example, the 1929 to 1932 bear market was 34 months, the 1932 to 1937 bull market was 5 years.
Fibonacci sequence targets forecast market turns, not tops, or bottoms. Market movements into the target determine subsequent reversals. The DJI has rallied into the forecast year and implies a peak and probably a major top.
This Fibonacci sequence targets a top sometime in 2021, to narrow the focus we need to use other methodologies. There are three possible time zones within 2021 where a major top could occur.
The first is early January which was discussed in the 12/29/20 post “History of January Stock Market Tops”.
The next zone is March which marks a Fibonacci 144 months since the secular bull market began in March 2009.
The last zone is late April to Early May. There have been five seasonal April/May peaks during the secular bull market 2009 to 2020.
Momentum evidence from the recent surge of NYSE – new 52 – week highs favor a peak in March or late April/early May.
There’s also a very long-term Fibonacci price target for the DJI. The 12/06/20 post “Strongest Rally of the Bull Market” discussed the Fibonacci price relationship between the S&P 500 (SPX) 2009 to 2010 rally with the SPX rally from 2020 to 2021.
The same concept can be used with the DJI on a much larger time scale. The DJI rally from its 1932 bottom at 40.60 to its top in 1937 at 195.60 growth rate was a multiple of 3.8177. Using this multiple from the DJI 2009 bottom 6,470.00 targets DJI 31,170.52. The 01/07/21 DJI high was 31,193.40 a difference of only 22.88 points or 22.88/31,193.40 = .000733.
Could a major DJI top already be in place? Its possible however the wave pattern over the last few weeks is unclear – this usually means the pattern is incomplete. In this case it implies more upside action.
Could the DJI bull movement from the 2009 bottom be Cycle wave “V” of the giant bull move up from the 1932 bottom? Highly unlikely, wave structure and proportions of the 1932 to 2021 movement does not look like a five-wave pattern. Additionally, Robert Prechter’s book “Beautiful Pictures” illustrated dozens of Fibonacci price and time relationship of the 1932 to 2000 DJI mega bull market. These relationships are powerful evidence the 1932 to 2000 movement was probably a five- wave structure.
Therefore, the secular bull market from 2009 could be Cycle wave “I” of a developing five-wave Elliott pattern. This mega bull move could continue for anther 20 or 30 years. It also implies a bear market lasting 3 to 5 years could begin in 2021.
An alternate wave count is that the secular bull market from 2009 is Super Cycle wave (V) of a gigantic Elliott five wave pattern that began in the first full year of the current US constitution – that’s the year 1790. If this count is correct it implies a bear market in US stock that could last for several decades.