The Dow Jones Industrial Average (DJI) is nearing the end of a long-term wave ((iii)), according to Elliott Wave analysis. A key price point at $45,781 acts as a support trend line that signals the conclusion of wave (iv). If this support holds, the index is likely to reach new all-time highs. Currently, the Elliott Wave analysis shows that the DJI is in wave three of a broader five-wave trend. Wave ((iii)) started from a low on April 21, 2025, and has been rising along a strong trend line. With wave (iv) finishing at the $45,781 level on October 16, our attention turns to wave (v) of ((iii)). The ongoing rally indicates that wave iii of (v) of ((iii)) is progressing, suggesting there is potential for more gains and new highs.

Completion Of Bullish Wave

To sum up, the DJI is nearing the finish of a bullish wave ((iii)). If prices drop below $45,781, it might indicate that wave ((iii)) has peaked, possibly leading to a 5-10% decline in wave ((iv)). Based on the current Elliott Wave structure, the Dow Jones Industrial Average is in the last stages of a strong upward movement. A major factor in this rise is the expected end of the US government shutdown, which is contributing to the drive for new all-time highs. In the short term, this suggests adopting a bullish approach by utilizing short-dated call options to take advantage of the remaining upward momentum. Low market volatility supports this outlook. The VIX is currently trading near yearly lows around 13, making option premiums relatively cheap. This presents a good opportunity for traders wanting to profit from the final phase of this rally, as long as the critical support level of $45,781 remains intact. Recent economic reports show that October’s core inflation is steady at 2.1% and job growth continues, indicating that the Federal Reserve is likely to keep interest rates stable, removing a potential hurdle for stocks in the near future.

Planning For Market Correction

However, it’s essential to prepare for the end of this wave, which suggests a forthcoming correction of 5-10%. This pattern is similar to market behavior in early 2018, where a sustained rally was followed by a quick 10% pullback before the broader uptrend resumed. Therefore, traders should start planning to buy put options or set up bearish spreads as the index shows signs of peaking. A decisive break below $45,781 will be the main signal to shift from a bullish to a defensive strategy. Create your live VT Markets account and start trading now.

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