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Watching the market meltdown in recent days (and in particular the mad mid-week reversal), I was more taken by the so called ‘insight’ of analysts and fund managers, much of which was disgraceful. Last week, many bravely went out on a limb and suggested there were buying opportunities and that this was a stock-pickers market because of earnings and so on and so on. A week later they were still maintaining their stance and trying to justify their positions by highlighting the benefits of dollar cost averaging and buying into an easing market. For long-term Funds this might be reasonable but to imply this is a good time for retail investors to buy is irresponsible.
These buyers/analysts could be proved right but this is a traders market and has been for the last two years.
So what does Elliott say? Let’s look at the daily, weekly and monthly:
Daily:
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Weekly:
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Monthly:
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The daily and weekly offer a similar scenario – a relief rally followed by a new leg down to about 3400-3600. The monthly is even scarier, predicting a deeper low by year’s end, back to levels of 14 years ago. Phew!
While I can see fundamental justification for such levels, I don’t propose to undertake such an analysis here as I have sufficient confidence in the charts. They are much more objective and charts are easier to understand than the volumes that will be written on the fundamentals of the economic outlook.
A long-term buyers’ market will return one day. One that is supported by a sound trend backed by understandable rationale and not nebulous guesses by ‘analysts’.
In the meantime you should practise your trading two-step as you could dance your way to success in the coming months.
Enjoy the ride
Tom Scollon
Chief Analyst
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