My Methodology: Tracking 10-year Bull Market
Looking at the current bull market that began in March 2009, we can map out the path using Elliott Wave Theory, and guess a likely trajectory for the remainder of the move up.
To provide context, Elliott Wave Theory, in essence, claims that the market moves in 5-waves up, then 3-waves down. There is a rigorous number of rules as well as math involved to justify a count, but the fundamental idea is the 5-3 structures.
Each 5-wave move is part of a larger degree 5-wave move, and it also has smaller degree 5-wave moves within it. It’s fractal, which is very important, and something we witness on the hourly chart as well as a monthly chart.
The chart is a close up of the prior chart that is focusing on the bull market that started in March of 2009. In the larger context, we are looking at a close up of the final 5th wave in red, and within this wave we have several degrees of waves, which constitute this move.
On a smaller degree, the blue count is meant to express the 5-wave move that started in March of 2009. Within that blue count, you have the green count, and then below that in the red count.
The Current Correction
Regarding this correction, I consider this to be a buying opportunity, as long as we hold 2950.
Zooming in even closer, we can see the structure of the current correction within its bigger context. The 3rd wave of the red count topped out exactly at the 161.8% extension, which is a text book 3rd wave. That being said, we can expect the current 4th wave to target the usual range, which is around the 123.6% and 78.6% extensions between 3220 – 3070.
I am personally buying in this pullback in the 3220-3070 range with some funds reserved if we hit the 2950 level.
Below 2950, and we could be in for a much larger correction. Each of our individual positions have relatively tight stops that coincide with this level of SPX. Of course, my high conviction investments purchased with low cost basis will not be sold (BABA, MSFT, ROKU, NVDA, etc). This only applies to stocks that I’m still trying to find a breakout on (ZM, AYX, DDOG, etc). I will re-enter anything I stop out of to make back those incremental losses when the trend resumes.
As of now, the more likely scenario is the 3220-3070 range. I’ll update you if this changes.