According to my risk summation system, the days in the next week or so with the highest risk of a turn in or acceleration of the current trend in the DJIA are Tuesday Jan 31st, Wednesday Fed 1st and Monday Feb 6th.
Last week the Tuesday the 24th risk window had all the makings of a top, with double top action and a gap down, but nope, the bulls turned it back up the very next day, so chalk it up as a dud. The jury is still out on the Friday the 27th risk window turn call. Monday's action will determine its fate. A Monday rally and it gets relegated to the dud pile too.
The Wednesday risk window this coming week coincides with the Fed conflab, at which I assume they will roll out the pause that refreshes, not just a tapper in the Fed funds rate increase to 0.25%, but some clear indication that maybe one more little one and that's it. If so, I expect that bit of good news to light the fuse on the blue "c" wave rocket up that I show in the EWave plot below. Sure, J. Powell will talk tough, but actions speak louder than words, and a puny 0.25% increase tapper while every Treasury still yields less than the rate of inflation is not channelling fire breathing Volker, it's tiptoeing through the tulips with Arthur Burns.
The contracting triangle looking action in the DJIA has forced me to alter my short term EWave count just a tad as shown below. Bigger picture, I still think that a large A-B-C three part corrective wave is being formed with the "A" wave complete at the October 2022 lows and the "B" wave up currently developing which should finish this coming spring. Of course, if the DJIA rallies on Monday, the nice five part a-b-c-d-e contracting triangle thingy that I show below will not form. If I'm right about the Fed pumping the market at the Wednesday meeting, the triangle "e" will have to finish by then anyway. If the triangle ends Monday, I suppose the blue "b" wave will end where I show "c". As I've said a hundred times before, EWave must only be done in pencil with an eraser at the ready.
An early May completion of "B" would line up with the 3rd of May Fed meeting, which might be a real bell ringer if inflation starts to reaccelerate due to a premature Fed funds rate taper as I postulated above.
I also expect a turn of some sort in early March in the vicinity of the focus of the blue triangle in the plot above. It's too early for the completion of the "B" wave, but maybe the 1 of the "c" which should have 5 parts.
Regards,
Douglas
Edited by Douglas, 28 January 2023 - 03:16 PM.
