Elliott Wave Options: More Downside to Come?

Both consumer price inflation and producer price inflation have shown a bump higher in the last few months. That’s caused overall inflation to trend slightly higher as well.

As a result, investors and traders are considering the potential for inflation to remain high. And it could even increase further in the months ahead. That’s caused the market to start trending lower, following a rally to start off 2023.

Of the two, producer price inflation is the more concerning factor. It’s a sign that wholesalers and producers are paying higher prices. Those higher prices are often passed on to consumers as much as possible.

So it’s no surprise that markets have started to trend down. Traders are starting to price in higher interest rates – and for rates to stay higher for longer.

That selloff was enough for the market to break its 50-day moving average, a sign that a further decline in the coming weeks could occur. Added to the prior market declines in recent days, and it’s possible that markets are oversold in the short-term.

That could mean a small bounce here, with a longer-term downtrend still setting in.

That means investors should be more cautious in the next few weeks. A bigger market drop could lead to more buying opportunities in the weeks ahead before the next move higher.

But rising inflationary measures are a sign that the overall market pain that started last year is nowhere near done yet.

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