Fundamental vs. Technical model showdown ahead
In November of 2013 I wrote an article titled “Surfing the Elliot Wave” . In it I opined “One of the most respected long-term technical methodology to identify and chart financial market movement is called the Elliot Wave(on top). So far, the pattern displayed in US equity prices since 2009 follows the Elliot Wave model very accurately(for further analysis and explanation please click here). We are currently in the beginning of the final wave (4-5, look at top image) of the up move and the model suggests a peak of around 2000 in the S&P500 and 20,000 in the Dow, most likely within 12-18 months. I think this prediction is well in line with the typical psychological pattern of market cycles depicted below”.
So, here we are 10 months later and the perfect top of the final technical wave has been reached in the SPX(albeit not in the Dow). The coming year will be very interesting for those market observers who lean towards technical or fundamental models as one approach will be proven wrong. Fundamentally, capital flows and credit creation are solid, monetary policy is loose and inflationary pressures subdued, all fuel for continued rising equity markets. Technically, we should see this point in time as close to the top of the market cycle according to the Elliot Wave theory. Good luck!