The markets have been in a rough and tumble recent period here with a 3.5% decline last week along with a further drop to the 1982 lows so far on Monday. What is likely ahead?
–Dave Banister- Chief Strategist- www.themarkettrendforecast.com
The SP 500 probably just completed the initial wave down of an ABC Correction from the 2079 highs. We are counting this correction as a “Wave 2” of a full 5 wave sequence up from 1820 lows in October. Essentially, Oil is the reason being used by the media for the correction but that is just the convenient headline excuse of the day. Instead, what we will likely see is a Santa rally “B” wave ahead and then another leg down in January to complete this larger ABC move.
Elliott Wave theory is very hard to use to accurately forecast movements ahead of time, but we try our best to project, analyze, and then adjust as needed. Our best estimate is the 38% fibonacci retracement of the 259 point rally completed at 1982 today. A “B Wave” rally up from here is normal and a C wave down to the 1920 area would complete a 61% retracement of that Wave 1 259 point rally.
Following the completion of a standard ABC Correction we should have a Wave 3 Bullish wave in early 2015 that will challenge the highs of 2079 and likely overtake them. We do not like to get too far ahead of ourselves with the forecasts but we expect the excuse for that rally will be low energy prices and a strong consumer going into 2015. Some of the obvious rally names for January will be energy stocks, but will need to be carefully selected. Gold needs to get past 1241 on a closing basis before we get too bullish on those names, but we have them on watch as well.
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