The S&P 500 ($INX) saw Wave C (third wave) of its 3-wave major (long-term) downtrend extend past the Wave A (first wave) low of 3,636.87 from June. By definition, this completes the 3-wave pattern through the monthly close (3,585.62) near the monthly low of 3,584.13 indicates the trend could be extended toward the next target near 3,228.50 (middle dashed blue line). This is the 33% retracement (Dow Theory) off the all-time high of 4,818.62 from this past January. Historically major downtrends tend to last 18 months, putting the time target out at June 2023.
The Dow Jones Industrial Average ($DOWI) is showing a similar pattern as the S&P 500 with as its Wave C dropped to a low of 28,715.85 during September, taking out the Wave A mark of 29,653.29. While this technically completes the 3-wave pattern, the 33% retracement level is down near 24,758.30, also with a time target of June 2023. However, we need to keep in mind the 3-wave downtrend pattern has technically been completed so an abrupt turn could occur at any time.
The Nasdaq ($NASX) is still showing signs of a major 5-wave uptrend, with the ongoing selloff looking to be a Wave 2 retracement. It’s interesting to not the September low of 10,572.78 held above the previous Wave C low of 10,565.14 from June. However, I would be surprised if this held early in October meaning continued selling could be seen in high-tech stocks.
The US 10-year T-note (ZN) extended its major downtrend to a low of 110-190 during September, the market’s lowest mark since November 2007. While all seems bearish, the monthly close of 112-020 was near enough to its monthly low that the market could potentially see a bullish spike or 2-month reversal during October. Monthly stochastics remain well below the oversold level of 20% and have posted a series of bullish crossover the past year.