The U.S. stock market has not yet reached the halfway point of the bear market. The decline is poised to accelerate in 2023. Near term, a countertrend rally from mid-October ended at the December 13 intraday highs in the Dow Industrials, S&P 500 and NASDAQ 100.

As the Socionomist explained in an August 2009 study of Wave-Principle dynamics, third waves mark the time when psychology flips. When wave (3) down passes its center point, the widespread feeling of ebullience will morph into a feeling of deep pessimism. Third-wave declines are watershed moments at all degrees. This is the psychological “point of recognition” within an impulse when people are no longer net optimistic but start to become net pessimistic. An emerging exasperation with the downtrend in financial markets has appeared in recent months (see December issue, p.6). This frustration will become more pronounced as the stock market progresses closer to the mid-point of wave 3 of (3), at which time annoyance will “suddenly” turn into fear. The developing wave structure has kept us market bears patient, waiting for this point in the developing decline. This patience should be rewarded in the months ahead.

The S&P 500 is a hybrid between the Dow and NASDAQ, comprising the blue-chip stocks of the Dow as well as the more speculative shares of the NASDAQ. Minor wave 2 up of Intermediate wave (3) down took the form of a zigzag and peaked at a close of 4080.11 on November 30 and intraday at 4100.96 on December 13. The decline from December 13 to December 22 is an impulse, which we label Minute wave 1 of Minor wave 3 of Intermediate wave (3). Like the NASDAQ, the S&P is moving toward the point of increasing downside speed.