Professor’s Comments Wave Count 9/24/21

Posted by OMS  at September 24th, 2021

The past three days of rally in the Dow were too strong for it to be labeled as a sub-wave 4 of Wave 1 down.  Also, by rising to 34,879 the retracement overlapped the territory of sub-wave 1 down. This CAN NOT happen in a corrective sub-wave 4, so the rally MUST now be labeled as corrective Wave 2 up. 

Retracement wave 2s in a Bear Market are usually near vertical, powerful affairs that can retrace a good portion of the Wave 1 decline.  This is what has happened during the past three days. The reason I’m posting these quick Comments today is to warn students that because the wave count has changed, the next wave down will likely be a dramatic decline …. a Wave 3 down. This wave could drop the Dow well below last Monday’s low of 33,610 very quickly.

The wave count on the S&P and NASDAQ has also changed. Both indexed had similar rallies during the past three days, and now also appear to be in retracement Wave 2 up.  It’s always difficult to predict where a retracement Wave 2 will end or high it will go.  But given the a-b-c nature of the current wave, the principle of alternation suggests the rally should end sooner than later. If Wave 2 extends to slightly higher levels, Wave 3 down (the crash wave), could be delayed until early October. Otherwise, if yesterday’s high was the completion of Wave 2 up, the next few days could see a down-up move that could be the preliminary waves of Wave 3 down. Please be careful with your trading now. Expect lots of volatility. 

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Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
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