October 6, 1982
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This bull market should be the first “buy-and-hold” market since the 1960s. The experience of the last 16 years has turned us all into traders, and it’s a habit that will have to be abandoned. The market may have 200 points behind it, but it’s got over 2000 left to go! The Dow should hit an ultimate target of 3880, with interim stops at 1300* (an estimate for the peak of wave ①, based on post-triangle thrust) and 2860* (an estimate for the peak of wave ③, based on the target measuring from the 1974 low).
* Wave ① topped at 1286.64 (about 1300 intraday) in 1983-1984. EWT later reduced the rough estimate of 2860 for wave ③, as precise figures came out to 2724 (see bracket on page 201). Wave ③ topped at 2722.42 in 1987. Wave ⑤ reached and well surpassed Prechter’s “pie-in-the-sky” target of 3880.
The confirmed status of the long-term trend of the stock market has tremendous implications. It means: (1) no new lows in the averages on the next reactions, (2) no crash or depression in 1983 (although a “mini-crisis” could develop soon), and (3) for those who fear one, no international war for at least ten years.
From the perspective of Elliott wave analysis, the stock market is in sharp focus. Surveying all the market’s actions over the past 200 years, it is comforting to know exactly where you are in the wave count. [Figure A-6] is the Securities Research Company’s yearly range chart. Note that waves II and IV in the DJIA accurately reflect the guideline of alternation, since wave II is a short sharp zigzag, while wave IV is a long sideways combination. As unusual as the Dow’s structure was from 1966 to 1982, it was perfect Elliott, showing that no matter how difficult the pattern is to read sometimes, it always resolves satisfactorily into a classic pattern.
Figure A-6
Make no mistake about it. The next few years will be profitable beyond your wildest imagination. Make sure you make it while the making is good. Tune your mind to 1924. Plan during these five years to make your fortune. Then be prepared to lock it up safely for the bad years that are sure to follow.
A picture is worth a thousand words
The arrow on the chart below [see Figure A-7] illustrates my interpretation of the position of the Dow within the current bull market. Now if an Elliotter tells you that the Dow is in wave (2) of ① of V, you know exactly what he means. Whether he’s right, of course, only time will tell.
Figure A-7
The easiest thing to forecast is that the bull market will happen; the second easiest is a price estimate; the last is time. I’m currently looking for 1987 to mark a top, but it could carry into 1990. The important thing is wave form. In other words, it will be a lot easier to recognize when we’re there than to forecast it in advance. We’ll just have to be patient.
Breadth measures almost always begin to show weakness during a fifth-wave advance when compared to the first through third waves. For this reason, I would expect a very broad market through wave ③, then increasing selectivity until the peak of wave ⑤, by which time the leaders in the Dow may be almost the only things going. For now, play any stocks you like. Later on, we may have to pick and choose more carefully.
