In chapter one of “Why is Soros selling this?” we provided you with an Elliott Wave analysis of Citigroup Inc.’s stock, since it is one of the three major recent sells made by George Soros. The other two are J.P. Morgan Chase & Co. and Bank of America. In this second chapter we will look at J.P. Morgan Chase & Co. through an Elliottician’s eye. We are not going the tell you, if Soros is right or wrong. The only thing we are going to do is to say whether we agree with him or not.
Recommended reading: Why Is Soros Selling This? Chapter One
Now, if we look at the bigger picture, the whole banking sector, we have to say that in general we are on Soros’ side. “We suggest that a next crisis in the banking sector is inevitable and maybe a new major low will be reached in the future.” This is an excerpt from an article, published on March 19th 2014, in which we made a forecast of the KBW index – an economic index consisting of the stocks of 24 banking companies.
Recommended reading: How is the banking system doing?
Our opinion is that the banks are in danger once again. So in general we understand why Soros sold these stocks. But let’s look at J.P. Morgan Chase & Co. in particular. A weekly chart is shown below.
The rule states that if you cannot count an impulse, it must be some kind of a correction. On the above chart we are unable to see the price action as impulsive. To be more precise, we see it as a double zig-zag pattern. a-b-c for (W), a-b-c for (X) and w-x-y for (Y). Wave “c” of Y of (Y) is an ending diagonal, which has already been broken to the downside. This pattern is often followed by “a swift and sharp reversal”, so if we had shares in J.P. Morgan Chase & Co., we would have been eager to get rid of them. And that is just what Soros did. Corrections are movements against the larger trend, which usually are completely retraced. In other words, prices below 16.00 should be expected in the future.
Recommended reading: Elliott Wave Patterns
In conclusion, the Elliott Wave Principle provides us with a highly bearish outlook on J.P. Morgan Chase & Co., which coincides with Soros’ vision of this stock. As you can see, he is not a puppeteer. He does not make things happen on the markets. He is just cautious. The market is likely to crash with or without him, but of course, he prefers to be out of it, if disaster strikes.
Images by: topics.time.com
