From the bottom made on 10/13/22 to 01/13/23 the Dow Jones Industrial Average (DJI) retraced about 71% of its January to October 2022 bear move. The DJI upside performance was far stronger than the S&P 500 (SPX) and the Nasdaq Composite (IXIC). Then from 01/13/23 to 02/08/23 the DJI underperformed both the SPX and IXIC. This short – term relative weakness could be the key to discovering what could be a major DJI top and perhaps a global stock market peak.
The daily DJI chart courtesy of Trading View illustrates its most likely Elliott Wave pattern since its all-time high in January 2022.
Several blogs on this website noted the possibility that the October 2022 bottoms for the DJI and SPX may have been Primary wave “4” lows for a Cycle degree Elliott motive pattern that began in March 2009. This is still a strong possibility especially for DJI.
The relative DJI weakness since 01/13/23 reveals that it may have formed or is still forming an Elliott wave – Horizontal Triangle.
Horizontal Triangles are net sideways corrective patterns that appear in the fourth wave position of Elliott motive patterns and in the middle part– wave “B” of corrective patterns. They are composed of five sub waves and after completion there’s usually a trust in the primary trend that exceeds the Horizontal Triangle point of origin. In this case it would be a move above the January 2022 high.
In some cases, the “E” wave can subdivide into a smaller Horizontal Triangle forming a nine-wave pattern. This could be happening with this presumed Horizontal Triangle with the end point of Intermediate wave ( E ) completing today 02/08/23.
The one weakness with the Horizontal Triangle theory is that intermediate wave ( C ) is shorter in time length than the presumed Intermediate wave ( D ). There is precedent for this phenomenon which occurred with the SPX a few years ago. If this current DJI – Horizonal Triangle is the correct wave count, a future blog will illustrate the prior SPX – Horizontal Triangle.
If the DJI – Horizontal Triangle count is correct, the index may soon begin a steady rally that could exceed the January 2022 top in March or April 2023.
Four Dimension Trading 