Yes, it’s more than time to be looking down from here. We’re at extremes in all the usual indicators that I look at. In fact, some of them are so extreme, it’s amazing that this market has been “levitating” as long as it has.
But it has one unusual factor that’s the cause of this mind-bending correction: the all-the-same-market phenomenon. That’s the fact that all asset classes (and even international exchanges) are moving in parallel. That means they all have to “line up” at the appropriate level (most of them making testing previous highs and lows) so that they can all turn together.
It takes more time than usual and has been a tedious process in this particular instance. But, for the most part, we’re done.
This week, as has been the case for the past few weeks, it’s the US dollar that’s the asset to watch. At the moment, it’s retraced almost 62% of the previous wave up. Once this index reaches that low (at 96) and turns up, everything else should turn with it (USD currencies, all US equities’ indices, oil, and most likely silver and gold).
The “indicator” ducks that are all lined up are:
- market sentiment
- the EW count generally
- the ending diagonals in multiple assets (and asset classes)
- the time vs. percentage of retrace of this corrective wave up
Even though I’ve talked about all of these in previous posts (as we’ve waiting for this monster), here’s a brief summary.
Market Sentiment is at bullish extremes. You can get a bit more information at to the extreme levels by visiting this site.
Volume in emini futures is ridiculously low and it seems to market could collapse through lack of interest.
The EW count is an ABC corrective wave, with the C wave having a full extended five waves in its count. Five waves requires a retrace – it represents a full count.
There are ending diagonals in WIT Oil, emini futures, the SP500, and USDCAD. Ending diagonals are ending patterns that forecast a dramatic turn and imminent trend change.
In terms of time, the corrective rally has now retraced 75% of the previous 12 week drop to the Dec. 25 low. A 75% time expectation of the wave down would suggest about 9 weeks for the rally duration. Nine weeks exactly takes us to Wednesday, Feb. 27. I have my doubts, looking at the wave counts of all the asset classes, that we’ll be able to stay aloft until then.
Elliott Wave Basics
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)
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 have a B wave that's now risen to about the 76% level of the of the height of the previous set of waves down from the all-time high. The "greed factor" is at an extreme. It's time to look for a turn down in a continuation of the fourth wave.
For the past two weeks. we'll been moving sideways to slightly up, and we finish up final ending patterns. The wait has been more than a little frustrating. However, the key to being successful in markets is the waiting.
The top of this corrective wave up from Dec. 26 appears to have traced out an ending diagonal. The SP500 also has a very small diagonal, an ending expanding diagonal, right at the top.
In any event, the next major move is to the downside. Ending diagonals are ending patterns. They warn of an imminent trend change.
The turn at the end of this pattern is dramatic. The first wave in the opposite direction targets the previous fourth wave. In other words, it retraces the entire ending diagonal and then some.
There are other asset classes (currencies, oil, silver, and gold) that also suggest a turn is imminent.
Summary: My preference is for a dramatic drop in a C wave to a new low that should begin this week. The culmination of this drop should mark the bottom of large fourth wave in progress since January 29, 2018 - over a full year of Hell. It may be a dramatic drop that lasts multiple months, and will target the previous fourth wave area somewhere under 2100.
Once we've completed the fourth wave down, we'll have a long climb to a final new high in a fifth wave.
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