Wednesday, December 24, 2014

Elliott Wave Stock Market Update - December 24

The market continued to rise to a marginally higher new all time high and it looks like there will be a bigger bullish leg coming up soon. I changed the micro labels because of the way some oscillators are behaving. Normally, whenever oscillators reset with rising or sideways prices, it usually means another price advance. I suspected this wave was going to behave like the previous one (1821-2079) and so far it's looking very similar. So, we might or might not see a correction on this advance and I won't be surprise if the structure matches the previous advance, which would put the market at 2230 (1972+258) and perhaps complete LT INT 3? However, considering this is the 5th of LT INT 3, this could well end up being rising wedge and we would get a lower target.

I meant to post an earnings chart I found recently but I don't know where I placed it. But I found the ones below that basically tell the same story. Currently, the market is trading around 17 PE (assuming $120 total 2014 earnings), this in a year with 2.5% annual GDP growth (perhaps a little more). Next year, the consensus is about 10% growth in earnings with a higher projected growth rate for the economy at 3%. So, if we use the same PE ratio we would get 2244 at the end of 2015. What remains to be seen is Q4 results to get a better picture of what the total earnings for 2014 actually are. Also, the historical PE is 16 so technically speaking the market is not that far ahead. We could see PE contract next year or expand and my guess is it will depend on general investor enthusiasm.

Also, I wanted to point the following out as it is very important. Industrial production is growing faster than GDP, the most in decades. This explains the faster earnings growth vs GDP growth. There are several factors for this and lower oil prices will generally help expansion due to lower costs.

Merry Christmas!

For further analysis on the NASDAQ, DJI, RUT, Gold, Silver and Oil please visit

Short Term Trend = Bullish
Medium Term Trend = Bullish
Long Term Trend = Bullish

* Trends are not trade signals. Trends are posted for situational awareness only and does not take into account wave counts, technical or fundamental conditions of the market. While mechanically trading the posted trends is feasible, keep in mind that these are lagging indicators and as such are prone to whipsaws and I personally do not use nor recommend them to initiate or close positions in the market without taking into consideration other factors.

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