Professor’s Comments – Yesterday’s Decline 12/16/2022

Posted by OMS  at December 16th, 2022

In yesterday’s trading, all the major indexes broke and closed below the ‘lines in the sand’ I was using to confirm the start of Major Wave 3 down.  In doing so, they eliminated all remaining Bullish alternatives from an Elliott Wave perspective.  Wave 3’s are impulse waves, and as such are usually the most dramatic.  It’s possible that this particular Wave 3 down will be worse than the 5 January 2022 Wave 1 crash that lasted through 17 June.  That wave lost 7,291 Dow points.  

So now that Wave 3 down has been confirmed, we need to start looking at a few downside targets.

For starters, Wave 3 down should eventually test and then fall below the 17 June low of 29, 653.  However, the decline won’t be straight down, so we need to look at a few intermediate targets along the way.  The first target on the Dow results from a Head & Shoulders pattern that started from the mid-November lows.  This pattern projects a target near the 32,296 -32,330 level.  It’s also possible that the Dow could fall to the early November low of 31,727 during this decline.   So, for now, I’m going to use the range between 31,700 and 32,330 as my target.  The target I’m currently using for the S&P is near the 2,800 level.  Yesterday the SPX closed at 3,896, so my target is more than a thousand S&P points lower.

I’ll have more to say about the targets. Both short and longer-term this weekend. Meanwhile, batten down the hatches and prepare for some rough seas.  I continue to hold inverse index ETFs in my regular trading accounts and my IRAs. and will look to add to these positions on any rally.

The Doctor’s Trade on TZA generated a Green Arrow yesterday, so, I’m back in the trade at just under 32 (average).

That’s what I’m doing,

h

BTW, yesterday was another multiple cigar day for me. I hope that you had another nice day too.

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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