We’re at an inflection point. However, in this market (as in just about all markets), turning points are “a process.” As I’ve been saying over and over, the financial world as we know it is moving as one entity. When a turn comes, everything is turning, and as with a large ocean liner, it takes time to turn around something this large. The turn into the fourth wave is imminent. The market is suggesting to me that it’s hours away rather than several days.
A Higher Tide Floats All Boats
Whenever we get close to a major top in this market, the email start to flow in dismay that this market will never top. Usually these comments seem to come from those fixated one one index—the SP500. But, the market actually consists of more than one index, and the driver of the entire thing is the US dollar (the reserve currency).
I’ve written about this before here. But, people have short memories, I guess, or see only what they want to see.
I have always maintained that once one index tops, they all have to (so that they stay in sync). I’ve not seen it fail yet.
But it’s more than this that keeps the SP500 from not topping until the others top. The next wave down will have to start with five waves. So to get to the point where that can happen, the indices all need a “fresh start”—in other words, a new high.
This time, it’s the Nasdaq and related indices that we’re waiting for. Once they get to their targers, everything will turn down.
So, the key, as I preach over and over again, is to watch the entire market, certainly indices that are related to each other. Both the SPX and DOW are subsets of the NYSE. They move more or less together. The wave structures have to be correct in order for the next wave down to start.
In more indices (and USD currencies), we appear to have one more small wave up to go: a major turn of just about everything associated with the US dollar.
All the Same Market
I’ve been mentioning for months now that the entire market is moving as one entity, the “all the same market” scenario, a phrase that Robert Prechter coined many years ago, when he projected the upcoming crash (although he and his group don’t seem to be paying much attention to it now …).
We’re starting to deleverage the enormous debt around the world. Central banks are losing the control they had and we’re slowly sinking into deflation world-wide, with Europe in the lead.
The US dollar is fully in charge of both the equities and currencies markets. They’re all moving in tandem, as I’ve been saying since September of 2015. For a short while, currencies were moving contra to the US market, but for the past several months or so, they’ve been moving together. The EURUSD is very closely aligned and will likely trace out a fourth wave as the SPX traces out one, too.
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The Market This Week
Here's the latest daily chart of ES (emini futures)
Above is the daily chart of ES (click to enlarge, as with any of my charts). We're back up at the top as predicted and waiting for the turn down. I believe it's imminent and we could see the turn on Monday. The Andy Pancholi turn date was Friday and very often the turn happens the day after.
I don't have an accurate target for the bottom of the fourth wave, but the 2262 area is a good candidate at the moment.
The NYSE index (and sub-indices) appear to be in a correct set of waves (this refers to Elliott wave structure), while the Nasdaq indices appear to be tracing out impulsive waves. This makes analyzing of the SP500 more difficult; it's even more important now to keep your eyes on what the Nasdaq is doing.
The DAX has the same wave structure as the SP500.
All eyes should be on NQ (Nasdaq futures) as well as the cash counterparts. As per my theme above, all boats need to get to the top to (clear the decks, as it were) and then they'll start down in tandem (USD currency pairs also have to turn, which looks like is may happen at the same time).
The USD currency pairs are still in various stages of topping/bottoming. EURUSD appears to be the most advanced in the "topping process," with USDCAD and AUDUSD a close second.
Summary: We have one more small rally to a new high to go before we drop into the fourth wave.
After completing the larger fourth wave, we'll have one more wave to go, which could be an ending diagonal as a fifth wave. The long awaited bear market is getting closer.
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Verne
ill quote you .
These turn dates I think are only useful when they line up with, and confirm other technical indicators.
You are exactly right on point !
well i have 3 levels im watching on the dow and im a bit gun shy about
being short .
cash dow
sticking to the weekly low last week as key at 21279.30
yet shorter term moving level up to yesterdays low at 21471.14
and very short term going to watch 21547 <—-
Holding above 21472 targets 21758 .
Verne there is a seasonal pattern that has high odds
nov 7th to jan 16th tends to be bullish .
its not perfect but its the seasonal bias .
Not all years ending in 7 are bearish and not every year ending in 7
brings a crash . yet a lot of things are lining up
Yep. I think it is always smart to look at different indicators. A few days ago one of Tom’s awesome energy charts was showing what he said was a possible blow off top but based on my then wave count I did not think we were going to see a top and said as much. The other nice thing about multiple indicators is that on those rare occasions when they all line up you are looking at a high probability set-up.
Speaking of which, I am still thinking long and hard about the fact that we would get seven Hindenburg Omens in a year ending with the famous crash number seven! I am standing firmly by my own conviction that if we are going to get a crash in the Fall, it is going to have to be a third wave. That it turn means we have to have a top BEFORE then. We will need the first impulse down, followed by a probable deep retrace (because of the historic bullishness of the crowd) to set up the huge third wave down. Frankly with us still possibly being in a a third wave, I am starting to have some difficulty timing wise, seeing how we could complete both a bigger fourth wave correction, and then a final fifth wave up, then an initial impulse down and second wave up by this Fall. I guess it is possible that these last two waves could complete faster than what we have been seeing but there is absolutely no basis for making such as assumption. I guess it is possible that when this long manipulated market finally gets away from the manipulators the end could come with a ferocity that stuns us all so I am still open to that terrifying possibility. All things considered though, I am now heavily leaning toward a top in 2018, and thinking that so far as crash years ending in seven are concerned, 2017 may well be a dud!
The other monstrous elephant in the room which very few no one are acknowledging is that we are putting in a top as we speak, and are on the verge of that initial impulse down to get that party started – I am also open to that possibility, and will be very happy to let price tell the tale. 🙂
i am am not short mind you
just gun shy to get short.
cash dow vs spx completely different patterns
the low on july 18 on the dow is the low at 21471.14
60 minute chart im following .
same levels noted above
The DOW is in an ending diagonal, as I’ve been saying. It’s in the fifth wave, which will be a wave in 3.
i might get long the futures next week
based on the parameters of the cash dow
i posted above .
Thanks peter
I think i see the ending diagonal your talking about peter.
it seems like the dow has a lot of 1 2 3 4 1 2 3 4 yet no 5th
maybe that’s what i have been missing ( the 3 wave moves
with in an ending diagonal )
ill look at it further over the weekend
Thank you
I have tried to but am just not seeing the clear zig zags in DJI. I was also trying to find a fourth wave going back into a wave one price area that did not break any rules but had no luck so far. My EW eye not as sharp as you guys! 🙂
Peter the USD/CAD is just sinking day after day. Shame I missed out on the trade but it’s not really aligning with your wave 4 call. I thought it was meant to drop along with wave 4 in ES
No, that was never the plan. It moves in reverse to the other currency pairs, so it will go up with wave 4 in the US indices.
Oh dear I got that one wrong obviously. The rise in euro and pound made sense as they will drop as wave 4 starts. The currencies should help confirm the start of wave 4 hopefully
next week should be interesting .
dow still following the general pattern
I exited my short trades today. I also opened a few bullish credit spreads and bought a few SPY calls. I think the minor correction is over and we put in final wave up next week Have great week-end everyone!
Oh and by the way, that new 52 week low in VIX tells me we are heading up next week. Later!
Verne,
“One trader came into the VIX pit mid-day on Friday with what could be considered a massive trade. ” Trader sold VIX Oct 12 Puts, purchased VIX Oct 15 Calls and then sold VIX Oct 25 Calls.
http://www.cboe.com/blogs/options-hub/2017/07/21/weekend-review-of-vix-futures-and-options—7-17-2017—7-21-2017
What do you think?
Sorry Verne, I pressed the enter button too soon. Do you think it’s time to buy some October VIX calls?
A pretty sophisticated trade. I like the fact that he is getting paid to get positioned. I am long volatility with a simpler structure with a standard August expiration, namely VIX 10.00 strike calls and VXX 10/12 bullish put credit spreads. Under water on both at the moment but not particularly worried. I am also looking at a potential 10X trade in SVXY and waiting for an entry trigger. That trade set up to or three times a year but I thin few people take it.
Someone or entity is massively short volatility. The selling has been stunning and relentless. We have not had anything resembling a capitulation spike (over 25) in VIX since Jan/Feb 2016.
We again had very hard selling into the close on Friday on divergence with equity prices. We have known for a long time that there is no fear in this market but this is beginning to resemble the theatre of the absurd. What is going on now in the markets is beyond hubris, what you are seeing unbridled insanity. I am curious as to what explanations and/or excuses will be cited for the mindless stupidity of the herd – remember many of these folks are margined to the hilt.
Meanwhile the confident calls for SPX 3000.00 and DJI 25,000.00 become ever more strident….
Peter,
I read your article with fresh perspective. While the ducks seem aligned for a multi year bull market due to astro/decadel/tech cycle, IF your thesis is correct that could result in market selling. When or if this occurs what types of investments would most likely be best: energy, materials, precious metals? Or would they fall in tandem?
Thanks for the Question. I would like to know the same.Even though it seems difficult to see any major bear market. What I dont agree is I dont see total collapse in next 5/10/15 years. Its not in anybodys interest.
Bill, it definitely isn’t in anybody’s interest. In fact in the best interests of everyone there should never have been a recession in history but unfortunately that was not the case. One day when we reach the perfect formula where inflation = wage inflation = house price inflation = S&P annual gain we might have a long period of strong organic growth. At the moment the first two are super low and the last two are super high suggesting growth is being bought out from higher than normal asset price inflation. This unfortuntely cannot last forever otherwise you would have people earning $50k trying to buy an average house worth $5million in 20 years time. If this carries on for 5/10/15 years as you suggest it won’t be a world I would want to live in.
think about correction to 1800 or 1500 and then go back up gain for next few years ..how about 3500/4000 SP500 in 5 years
Valley,
A simple question with a long answer. I will get to this, but I’m figuring out the best forum. I’m working on updating the Navigating the Crash video which will be a webinar, but I’ll try to get back with a shorter answer than that this week.
Hi Peter
I finally went out and bought the parts for next computer.
Been a while since I bought a desk top . I explained to the guy
What I wanted and why . Sent the parts list to my son who has friends
Who work in I T .
Looks like the guy did me right .
I’ll begin programming in October and it’s going to take a while
But the computer is probably double or triple what I need .
128 gigs of ram ( next step up is 512,and lots more money )
Digital hard drive with 1 TB storage while have a hard time filling up .
2 graphics cards which cab handle up to 10 monitors yet I’ll begin
With 3 yet have room for 9
Price a bit high at 3800 dollars but that should do me for several years .
Speed should be incredibly fast .
Next comes decision on software then it’s programming and testing .
In the mean time I’ll use my laptop and stick to what I’m already doing .
I went crazy on the ram and was told it was overkill and I know it
But from what I have read , it is easy to slow down a computer if you have
To many processes running and my laptop with 8 gigs gets bogged down
And I’ve heard even up to 18-20 gigs when your programming auto program systems
You can get slowed down .
I don’t want to deal with cutting out anything .
Worst case I have failed system but it won’t be for lack of speed or lack of
Thought going into it .
Years of research all in spread sheets and I look forward to learning the programming
Process and creating what will be my system which is a combination of everything
I do but is broken into separate pieces .
Finally I’ll be able to put everything into one program and let it run and prove itself
Valid or fail .
Lots of brain work this next year and I’m looking forward to it .
Joe
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