Elliott Wave Options: Fed Confident They’re Right

Markets tend to make notable jumps on small events. For instance, this week, stocks jumped higher on Tuesday as Federal Reserve Chairman Jerome Powell started a major speech. Stocks then dropped lower, before finally rising to close the day for a gain.

On a shorter timeframe, traders could have been potentially whipsawed by the move. Over the longer-term, however, there may be a shorter-term drop ahead.

That’s because stocks have already had a strong run in recent weeks thanks in large part to the Fed. And those following an Elliott Wave analysis can see that the move may have marked the end of a Wave 3.

That could lead to a small downturn, before a longer-term uptrend plays out. Those would be Wave 4 and Wave 5 of the Elliott Wave. Should that happen, stocks may enter into a longer-term uptrend.

The move is reversed for interest rates, which also suggest that the rate hike cycle may be nearly complete. However, as with stocks, the start of a new trend won’t mean a straight-line move.

Interest rates seem to be locked in a range. This could be a “just right” sign, as it means there’s not too much money going into or out of the bond market.

Overall, the latest technical indicators from the Elliott Wave theory suggest that the Fed may be performing exactly as needed for the economy.

To watch the full analysis, click here.