The wave layout on the 4-hour chart of the Dow Jones index looks very convincing. At the moment, a third wave is being formed on the index as part of the correctional section of the trend. The entire section of the trend, which was formed on May 10, is still taking on a traditional three-wave form, but the waves are of a smaller scale. Therefore, I assume that the downtrend will be much more complex and extended than it appears now. If the current wave layout is correct, then the construction of the assumed major wave 3 was completed on May 10. If so, the formation of the wave 4 has already started. It should include at least three waves with several more waves inside them. Consequently, it can take up to two months to build the wave 4. Therefore, I expect the index to resume its decline towards 23.6% and 38.2% Fibonacci levels.
There were two landmark events for the US stock market yesterday. First, the Fed's evening minutes contained information that some members of the monetary committee are considering adjusting the quantitative easing program if the US economy continues to recover at a high pace. However, no more detailed information was available. The US dollar rose slightly amid this news, while the stock market has moderately declined. Any tightening of the monetary policy is bad for stock indices and US stocks. Also yesterday, the cryptocurrency market collapsed and bitcoin in particular. However, today BTC started to recover and has won back about $12,000 of yesterday's losses. Nevertheless, the volatility is very high now, so the stock market may experience a surge in investor activity. Still, I cannot say for sure that yesterday's events have had strong influence on the leading stock indices. The Dow Jones lost only 0.48%, the S&P 500 fell by 0.29%, and the Nasdaq Composite lost just 0.03%. Thus, there were no drastic changes. On the other hand, the wave layouts of all three leading indices are now indicating a further decline, and the explanation for this can be found easily. For instance, the market cannot continuously grow, and in the last year it was inflated at the expense of the Fed and the US government. Yet, money is likely to continue to flow into the economy as Joe Biden proposes to implement two more stimulus packages worth more than $4 trillion. Besides, the US Federal Reserve is not going to reduce the amount of monthly bond purchases, the minutes report. In such a situation, I recommend relying on the wave layout.
Based on the analysis performed, I believe that the three-wave correctional structure is not yet completed and should transform into a more complex set of waves. Therefore, at this time, I recommend selling the #INDU index with the targets located near the level of 32,915, which correlates with 23.6% Fibonacci for each sell signal of the MACD indicator.
