Earlier, I took a look at “Dow Jones Similarities Between Dow Jones 1937/1938 and Today” and then followed up with “The Resolution of the 1937 Bear Market,” both of which were high-traffic posts. Let’s take a special look now at the Elliott Wave structure as more price bars have developed since that report and the structure is still as eerily similar now as it was then.
Dow Jones (^DJI: 7978.08 +216.48 +2.79%) 1937 -1938 with 5-Wave Structure:
One could have interpreted the final wave structure such that an “ABC” Wave 4 actually completed at the beginning of 1938 (meaning, replace “A” with a circled “4″) and then one might have an even more similar structure that’s playing out in today’s market - in that many analysts (myself included) were (maybe still are) expecting a final test of the March lows to mark a Five-Wave fractal pattern.
We see that in 1938, those expecting a final push to ‘double bottom’ or test the lows were disappointed, as price managed to retrace to the falling 20 EMA (off of a positive momentum divergence) and then form only half a test of the lows at 100 before marking the ‘bottom.’ We know from the “resolution” post that this was not the actual bottom of the bear market (it occurred in 1942) but this structure preceded a 62% price rally off the lows at circled Wave 5.
Let’s see how Today’s structure resembles that of yesteryear. I gave you a few more weeks to examine on the 1938 chart. If I froze the chart exactly similar to today, I would have done so at the Doji at the 120 level which came up into the falling 20 week EMA in April 1938 (how ironic).
Dow Jones 2007 - 2009 with (possible) 5-Wave Structure:
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