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Although picking short term moves is not a walk in the park at the moment, the medium term Elliott outlook is less difficult and in fact shaping up to be a classic Elliott set up.
Let’s look at the DOW:
click to enlarge
Now we know that what can start out as a textbook set up – can change as new days of data are added. And we should assume that the scenario will not unfold exactly as it appears because we know the makret ‘fools most of the people most of the time… Yes even Elliott practitioners. If Elliott was so predictable, yes all of you would be joining my bandwagon.
Nevertheless I believe Elliott has a useful level of probability of outcome and that is good enough for me. Starting with the premsie the scenario won’t unfurl exactly as shown saves us from depending on the exact outcome – with all it’s attendant emotions.
Elliott does allow for the possibility of a number of outcomes. This is why you can see three lines for the forthcoming waves. The probablity of the first line being hit is high. Good enough for me. The probablity of the second line is less and the probability of the third line is significantly reduced. If you are a cautious trader, and especailly if you are using CFDs, you may look to take partial if not all profits at the first wave line.
So what I am expecting is that we will see the DOW rally back to 10,300. If it rallies all the way to the third line – 10,600 and beyond there is every chance that a new pattern could be in the making.
But assuming the above pattern is the one – I would expect after the relief rally we will see a new low to 9,600 or even a second level low of 9,100.
We shall wait and see.
Enjoy the ride
Tom Scollon
Chief Analyst
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