hard · Elliott Wave Theory corrective
After a multi-year rally, a stock index produces a 5-wave decline. The Relative Strength Index (RSI) plunges to 25 during the first leg down. After a 3-wave rally that retraces 50% of the decline, prices fall again and hit the 25 RSI level again while price makes a lower low.
What is the most likely diagnosis?
- The market is in a sharp Zigzag correction (Wave C in progress).
- This is a Truncation; Wave 5 of the decline failed to break the Wave 3 low.
- The market is in an Expanded Flat because Wave B retraced 50%.
- A new bull trend has begun because RSI failed to make a lower low.
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