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DJIA: Extended Fifth Wave In Progress

The last time we wrote about the DJIA was in December, 2016. The most important benchmark index was approaching  19 800, in our opinion “transforming optimism into mania”. However, the Elliott Wave Principle suggested the bulls were about to go even higher. The 22 000 mark looked like a reasonable target, despite the fact that the Dow Jones Industrial Average had already tripled since its March 2009 bottom.

The index reached 23 485 this week, significantly exceeding our initial target. Stock market valuations are at all-time highs, inspiring a lot of bubble talk, with which we agree by the way. The problem is that the market can stay overvalued for a long time before the bubble bursts. Is it time for the bulls to finally give up? Or is the uptrend simply going to continue? The DJIA price chart below might give us a hint.

djia elliott wave analysis

It has been over eight and a half years since the DJIA started rising in March 2009. After such a long period of unstoppable gains, it is very easy for most people to forget a bear market is even possible. It always is and we urge you to never forget that. The Dow’s phenomenal surge does not mean a market decline will never occur again. It only means it has been postponed. Right now, it still seems the index is in the fifth and final wave, labeled as (5), of a five-wave impulse. On the other hand, it also appears wave (5) is going to be an extended fifth wave. Judging from the wave structure, we think wave (iii) of 3 of (5) is currently developing.

If this count is correct, the bull party is not over yet. The DJIA has a couple of fourth and fifth waves left to make within wave (5), before the entire impulsive sequence is complete. In terms of price, the 26 000 mark is there for the taking. The time to short has not arrived yet. The bulls are still in charge.

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