Timing the market using Neo waves and deriving the targets much in advance!

dow jones neo wave trading Jul 27, 2021
nifty, neo wave

We​ have​ used Neo waves (diametric pattern) to ​forecast​ the exact target for Dow Jones Industrial Average​ well in advance on​ 10th April 2021. See for yourself how we derived the target.

We published the following article on DJIA Industrial Average on 10th April 2021 in the The Financial Waves Monthly Update”.


Figure 2: DJIA Daily chart AS ON 10 APRIL 2021


There was no looking back for US Equity Markets in the month of March 2021. Dow Jones Industrial Average gained around 7.52% in last month whereas S&P 500 rose by 4.24% followed by Nasdaq 100 which closed on the positive note with 1.41%. As against to this, we saw profit booking in many of the Asian Equities like Hangseng, Shanghai whereas Nifty was stable with 1.11%. This clearly suggests that outperformance of US Equity markets in the month of March.

Here two things are playing a crucial role as per Intermarket analysis, one is the recent rise witnessed in US Dollar index as well as rising US 10 Years Yields. Higher US Yields also suggest high inflation ahead as well as high economic growth and thus high interest rates. Nevertheless, as of now markets seems to be focusing on growth rather than on rise in interest rates. On a monthly chart of DJIA since the lows made in the month of March 2020, rally has continued which has been getting steeper and intact in a small upward rising channel. During such trends, it is better not to capture top and following trend with trailing stop method is a good idea. As per this, the lows of March 2021 is placed at 30547 levels. So as long as this low is protected, use buy on dips approach.

Figure 1 shows the DJIA weekly chart which shows that in the start of 2020 prices completed the Diametric pattern and since then bigger degree wave x is under formation which is forming an Irregular Flat correction pattern. Within this structure intermediate wave (a) completed at 2020 lows which was sharp and violent in nature. It took less time whereas post that wave (b) is ongoing which is corrective in nature and has been taking more time. This wave (b) is now more than 123.6% of wave (a) and yet there are no signs of exhaustion. This is the typical behavior of wave (b) where it can take more time and price action than we think. Thus it is better to follow the trend as long as immediate swing lows are intact. Here we can also see that after such long price action from the lows of 2020, there is still no negative divergence on RSI. This indicates that momentum on upside remains strong. From medium term perspective we can use 100 weeks EMA as trend following tool. So as long as prices remains above the same, trend can remain positive.

Figure 2 shows the DJIA daily chart. Here we can see classical text book shaped Diametric pattern development since the lows made in the year of 2020. This is double corrective pattern where second standard correction is also forming Bow Tie Diametric pattern. The one thing is clear here as long as faster retracement of the last segment of the rise does not take place, it is better to assume the direction on positive side. From near term perspective, as long as wave d low (30547) is intact on downside, trend will remain bullish. Here one needs to use the simple logic to be with trend. As long as prices are scaling higher from left to right, trend will remain bullish. The day we will see prices scaling from right to left, that will provide first indication that bearish trend has started.

In short, US Equity Markets out performance has continued and yet there are no signs of exhaustion on momentum indicators. It is better to follow price action and reactive methods to follow the trend. From near term perspective, wave d low of 30547 is important support and as long as this remains intact, trend is uncharted territory can continue. On upside immediate target zone is placed at 35000-35150 level as per channel on daily chart.


Prices moved precisely as expected and made a high near 35150.37 which was precisely the target we gave on 10th April 2021.

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