Sunday, August 21, 2016

Stock Market Structure

Stock Market and Bond market action suggests that both markets are consolidating. Once this consolidation is complete in the stock market, we should see a rally. 

We discussed about the potential of sideways market action and formation of a head and shoulders pattern on Aug 8th. As of Aug 21, market has traced out the right shoulder. 

Aug 8, 2016

Aug 21, 2016
Now that the right shoulder is almost complete, next step is to analyze the market structure to identify next steps. 

From an Elliott Wave perspective, market is currently in the last wave of the up-move. When we say last wave, it by no means mean that this will end the bull market. Instead, it just means that the current rally phase will give way to relatively large decline.

Recent market consolidation has helped in reducing market participants' optimism over the past few weeks, as evident from recent surveys. This will help in the next short-term rally phase. However, since the market is nearing the end of the larger rally phase which started with Brexit vote, we will see a resurgence of optimism and sharper decline.

In the above chart, a box is placed to show potential price and time range of market top based on Fibonacci relationship and IPM market timing analysis.

Overall market trend remains up. Even if the market declines, it will lead to higher prices till the time Market Classification Model is in Bull territory for the stock market.


A proprietary algorithm that classifies market conditions i.e. Bull market or Bear market. Currently, this model is suggesting a longer-term up-trend for the US Stock Market. In fact, this model is close to triggering another new Bull trigger.

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