In 2020 the capital market did not have mysteries in general, the collapse of March caused by an external agent of the financial market that commerce was interrupted, resulting in increased unemployment and company bankruptcies. In short, consumption slowed down and in certain industries it even stopped completely, such as tourism, aeronautics, fitness, etc. Therefore, we can define the behavior of the capital market in 2020 as before and after the announcement that COVID19 had become a pandemic.
After the drop in March, many markets tried to recover what they lost, some succeeded and widely outperformed others could not even reach the levels of March. In general, capital markets tend to be high correlation when the most important markets rise or fall, secondary markets do as well, but with greater or less intensity. For example, if the Japanese Nikkei rises 3%, it does not mean that the US SPX will rise the same 3% but it depends on the attractiveness of the market and it could rise only 1% or otherwise rise 4%. Ultimately, everything will depend on the economy of each country.
American Capital Market for 2021
Given the depth of the corrective movement in March 2020, we can conclude that the new bullish cycle that began in 2009 has ended. The correction reached the area between 38.2% and 50.0% of Fibonacci, an area that theoretically speaking is enough to intuit the 2009 cycle concluded. The rebound started at the end of March 2020 is a new cycle and we are seeing it as an impulse. (For more information about Elliott Wave Theory please click in this link: Elliott Wave Theory) This impulse has already finished wave 1 and wave 2, and we are building wave 3. For this reason, wave 3 being the wave with the greatest strength within an impulse, it is most likely that in 2021 we will have a market clearly bullish.
We are currently building wave i and we should see a correction possibly in March or April, when we reach somewhere in the blue area. That correction should be wave ii of 3 and it should be the deepest of the entire year 2021. From then on, we should have a strong bull market with mild corrections to break above the 4600 levels.