Out of Gas
On the left is how I’m feeling about this market. Let it end, please!
This weekend, it looks like we’re finally going to get that wish.
There’s a full Moon on Monday with the apex at noon, EST. Full moons often warn of a turn down once their bullish influence wears off.
Sometime during the day on Monday, or at the latest, Tuesday, I’d expect to see our long-waited top (full moons often warn of a top, and we’re certainly ready for one!)
The big question this weekend is whether the structure that I’ve been calling an ending diagonal in both the SP500 and ES actually is one. The internal waves count just as well as a third wave, which would make our current position somewhere near the top of a final fifth wave.
The structures of the waves over the past week leave a whole lot to be desired. They’re impossible to count with any confidence, but they’re at least pointing to a slight new high. Keep in mind that the structure is questionable. The fact that we’re topping is not.
DXY has dropped below the 94.00 area and turned sharply up in what could be a motive wave, but not quite complete, if it is. We need to see a second wave down in three waves to below 62% of this recent wave up. Then we’re looking for a new high to confirm a bottom in is. We still could see another low (or double bottom the way things sit now).
WTI Oil still has one more wave up, the fifth of an ending diagonal, before it will finally turn down.
Gold and silver appear to be very close to, or at, turning points.
Monday is the big day, as far as I’m concerned.
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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.
We’re in the midst of deleveraging 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 2017. Over the past three years, their movements have been moving closer and closer together and one, and now they’re in lock-step, with the major turns happening at about the same time.
it’s challenging because often times currency pairs are waiting for equities to turn, and other times, it’s the opposite. The other frustrating thing is that in between the major turns, there are no major trades; they’re all, for the most part day-trades. That’s certainly the case in corrections, where you very often have several possible targets for the end of the correction.
We’re now close to a turn in the US indices, currency pairs, oil, and even gold. Elliott wave does not have a reliable timing aspect, but it looks like we should see a top very soon.
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Here is a page dedicated to a relatively basic description of the Elliott Wave Principle. You’ll also find a link to the book by Bob Prechter and A. J. Frost.
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US Market Snapshot (based on end-of-week wave structure)
This chart is posted to provide a prediction of future market direction. DO NOT trade based upon the information presented here (certainly NOT from a daily chart).
Above is the daily chart of ES (click to enlarge, as with any of my charts).
We're at extremes just about everywhere, except perhaps oil, which is in an ending diagonal, but having difficulty climbing its final wave to the top. Never fear, however, it will get there.
Last week, we finished what appeared to be an ending diagonal in SPX. However, that count is in jeopardy, as I can also count it as a third wave, with the expectation of a new high to finish off this roughly four month rally. The wave structure has become questionable and as a result, I don't have a measurement for a top tick — there are too many options this weekend.
Ending diagonals on rare occasions finish the five waves of the diagonal and then slowly rise "against the current" to complete a double top. That's one option. There's also the option that we're going to see a relatively benign fifth wave, as I can also count the internal waves of the ending diagonal as a third wave. We could also just see a double top, but ES and the SP500 won't both do double tops (they have different current highs in price), and so I'm expecting slight new highs from both the SP500 and ES.
It's become obvious late this week that we're rallying to a final test of the highs in both ES and NQ. Wave action tells me this market is "out of gas."
We have a full Moon on Monday, August 3, at about noon EST. I'd expect this event to have an effect on the market.
I warned on Thursday about the potential tech blow-off at the end of the day (AMZN, FB, AAPL, and GOOG reported) and sure enough, we got it. However, at this late stage, it stands as a last ditch effort to make a positive statement, with little positive data to support it. Look out below.
All this week we had the pundits talking about the demise of the US Dollar and the expected gold rally into the stratosphere. These are sure signs the opposite is about to happen.
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Summary: It's an exhausted market about to top.
We appear to be in a "combination" fourth wave down from the 3400 area. We have an A wave down in place from 3400, a B wave up almost to that same level, and now we're completing the C leg down to a new low below 2100. There are several possible measured objectives below that point.
The balance of the drop from February should be a combination pattern and, as such, may contain zigzags, flats, and possibly a triangle or ending diagonal at the bottom.
Once we've completed the fourth wave down, we'll have a long climb to a final slight new high in a fifth wave of this 500 year cycle top.
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