The Semiconductor Index Rally Is Underway: Where Will It Top Out?

The index did not drop as low as expected, based on an ideal, standard, Fibonacci-based impulse pattern, because it experienced a failed 5^th wave. What does that mean? It means the final fifth wave of, in this case, the decline, does not go below the end of the 3^rd wave. Truncation of the 5^th waves can always happen, but cannot be known beforehand.

Hence, we start with the ideal Fibonacci-based impulse pattern, and when it is invalidated, we apply, in this case, a truncated pattern. Therefore, “all we can do is anticipate, monitor, and adjust, if necessary.” Once you master this insight, the stock market suddenly becomes much easier to understand, forecast, and trade.

The Big Picture

Since our EWP count indicates an enormous Cycle-3 wave peaked in 2024, as shown in Figure 2 below, we are currently experiencing a Cycle-4 wave. Fourth waves are typically described in EW terminology as flat corrections. Additionally, EW theory includes a rule of alternation: Wave 4 differs from Wave 2. In this context, Cycle W-2 was an extended nine-year-long zigzag; therefore, Cycle W-4 is likely to be a multi-year flat.