Entering the Bearish Season

The US stock market is seasonally bullish from November into late April/early May. From 2009 to 2020 the S&P 500 (SPX) recorded five intermediate peaks in the late April/early May time zone.  The SPX 2021 high was on 05/07/21. The  Dow Jones Industrial Average  peak was 05/10/21. The subsequent smooth and steady decline appears to be an Elliott five wave impulse pattern. If so, this is probably the  first wave  of a larger developing downtrend.

The one-hour SPX chart courtesy of Trading View illustrates the recent price action.

It appears an Elliott wave – Double Zigzag corrective pattern may have completed at the 05/21/21 SPX high.  Fibonacci evidence supports this theory. Note the first Zigzag is nearly equal to the second Zigzag – a common occurrence in Single and Double Zigzags.

 If this count is correct, it implies a move down to at least the 4060 area.  A  break below the bottom of Minuette wave ( i ) opens the door for a powerful decline.  

Late May to October is seasonally bearish for US stocks, if this holds true the Double Zigzag pattern could be the first rally within a developing bear market.

Traders are holding short 125% non-leveraged SPX related funds.  Continue holding short.

Published by Mark Rivest

Independent investment advisor, trader, and writer. Articles have appeared on Technical Analysis of Stocks and Commodities , Traders.com Advantage, Futuresmag.com, and Finance Magnates.

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