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.
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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