DJ30 will Fall to 32200 the Upcoming Week - Part 3 (Recovery)
Diupdate
Here, I am using trend analysis to highlight market psychology, it's corrective actions, and why I believe this week is substantial.
Ideally, after an abrupt market crash, the market would rebound to the same prices as before instantly or so. The Market Effifciency Hypothesis is not idealistic, though, and it takes into account the friction that it would take some time for the prices to settle. Yet, the is efficiency hypothesis has been proven wrong millions of times -- unless we wait till infinity -- as prices settle for long periods on over or undervalue, yet it's a popular belief among fundamentalists. Nevertheless, the hypothesis is write in the sense that there is equilibrium and this is controlled by diverse tensions. Obviously, one would need no hypothesis for that. Based on such equilibrium, I present this idea for why DJ tends to fall back to the same trend pre-COVID19 crash, as it has to do with the phases of recovery.
Let's break down what's in the chart:
The phases of recovery (shown as corrections):
From the trend lines, as you can see, the correction I am forecasting would bring us back to the equilibrium. Yet, due to the aforementioned inefficiency, it could be a beginning of a short-term down turn as the market overreacts. Yet, the equilibrium would prevail eventually until the market is no more reactionary and forgets about COVID19 altogether. Only then a new equilibrium could be found.
This week we are hitting at full speed the prominent resistance since the crash of last year, which is not a small feat, given the laws of physics. Since the resistance became prominent, such action caused a rebound. This time, aliigned with a Fibonacci crossroad (see part 1), it could be more than a mere rebound.
Ideally, after an abrupt market crash, the market would rebound to the same prices as before instantly or so. The Market Effifciency Hypothesis is not idealistic, though, and it takes into account the friction that it would take some time for the prices to settle. Yet, the is efficiency hypothesis has been proven wrong millions of times -- unless we wait till infinity -- as prices settle for long periods on over or undervalue, yet it's a popular belief among fundamentalists. Nevertheless, the hypothesis is write in the sense that there is equilibrium and this is controlled by diverse tensions. Obviously, one would need no hypothesis for that. Based on such equilibrium, I present this idea for why DJ tends to fall back to the same trend pre-COVID19 crash, as it has to do with the phases of recovery.
Let's break down what's in the chart:
- Pitchforks: One is for the Denial phase trend, the other for the insistence phase.
[*[Trend lines: Two showing the resistance and support of the pre-COVID19 trend, and the below one showing the prominent resistance since the crash.
The phases of recovery (shown as corrections):
- Denial: A belief that the market would rebound to the same levels quickly, nor realizing that many industries were affected by the COVID-19 lockdowns which should affect their stocks values. Not to mention the market's inherent inefficienies.
- Insistence: After the first correction, we realized that the market can't rebound instantly, yet we are motivated more and are moving faster than ever before to catch up and surpass the previous equilibrium. We become arrogant.
- Acceptance: We surpassed the previous equilibrium and thought we were invincible only to find out that pride is not a value per se. This corrections bring us back to the ground, metaphorically speaking.
From the trend lines, as you can see, the correction I am forecasting would bring us back to the equilibrium. Yet, due to the aforementioned inefficiency, it could be a beginning of a short-term down turn as the market overreacts. Yet, the equilibrium would prevail eventually until the market is no more reactionary and forgets about COVID19 altogether. Only then a new equilibrium could be found.
This week we are hitting at full speed the prominent resistance since the crash of last year, which is not a small feat, given the laws of physics. Since the resistance became prominent, such action caused a rebound. This time, aliigned with a Fibonacci crossroad (see part 1), it could be more than a mere rebound.
Catatan
Everything is going according to the plan.
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