Update Thursday, April 22, Before the Open
Sometimes you just need to sleep on things to think through what could be happening … (chart updated ~12:30PM EST)
Above is the 60 minute chart of ES (emini SPX futures). I’ve completely re-labelled this wave and I’ll tell you why. The circled area has always been the area of contention, because it sports an abc pattern. However wave 1 was in 5 waves. Wave (i) looks like three waves, though. I’ve labelled it as a 1-2,1-2 pattern, as a result (that wave in 3 is still an issue, however).
I’ve labelled the entire wave up as a third wave within a larger five waves, because each of the major waves look like they’re in 5 waves and labelled this way, there is no overlap. However, it’s unusual for wave (ii) to be lower than wave 2 (in the circle). Usually the third wave is fully within the confines of the larger wave enclosing it, but in this case, it has fallen slightly below it.
This would make the final pattern we’re in probably a triangle. This works for timing due to the fact that we don’t have a cycle turn until April 28/29 (right after
the fat lady Yellen sings). A triangle warns of only one final wave up after it’s over and that wave up is usually about the same height as the triangle itself. My target for SPX is still 2116/7.
This seems to me to be the most logical labelling of this wave at the moment.
Above is the 30 minute chart of the SP500 showing the final set of waves. The structure and wave measurements project a target top of just over 2116.
I’ve relabelled the chart as I have with ES. However, this chart is much more normal in wave structure.
We get this by measuring the first wave (yellow 1) which in this case is an abc wave. The third wave (yellow 3) should be 1.618 X wave 1. It is exactly. Wave 5 should also be 1.618 X wave 1. The red line is at 2116.02.
2116 is also the previous wave 2 high. At the end of todays’ session, the wave structure looks like it needs one more subwave for high.
During today’s session:
- the VIX hit a new low of 12.50
- put/call ratio is .776, the lowest in 2 years
- volume continues to tank and had been moving steadily lower since Feb 11.
- 5 day sentiment is at 83.4%, higher than even the market high on May 20, 2015
These are all attributes of a market in the final stages of a second wave, ready for a trend change.
Update Tuesday, April 19, Before the Open
Futures headed up to almost finish the ending diagonal. It’s not quite finished because we have 3 waves down.
We look to be at the level I had forecast in the video—the previous second wave top. For the SP500, that would be at 2116. For the DOW, about 18,137 (by my chart).
If so, I would expect a reversal with one more small rally close to the open. We’ll be looking for five waves down.
If you look at futures, you can clearly see the 3 waves up, with each A and C leg comprised of 5 waves.
USDCAD is right at my target ready for a turn. EURUSD is clearly in a triangle and should start heading down relatively soon (likely with a first wave down in the indices).
Update Monday, April 18, ~ 10AM EST
Top Tick Time: Today we really are looking for the top tick. We’re in the final leg of the fifth wave. The waves in the indices should go up in 3 waves. We’ve arguably finished the A and B wave and are working on the C wave.
We need to reach a new high above the upper sloping trendline of the ending diagonal. The top will be a sudden turn. Then we’ll be looking for 5 waves down. Finally, three waves up in a second wave will confirm the change in trend. More on that at the very bottom of the post.
The Second Coming refers to the top of this second wave, which is slowly inching it’s way to a double top.
But The Second Coming is also a poem written by Yeats in 1919 in the aftermath of the First World War.
“Yeats incorporates his ideas on the gyre—a historical cycle of about 2000 years. He first published this idea in his writing ‘a vision’ which predicted the expected anarchy that would be released around 2000 years after the birth of Christ. The gyre suggests the image of a world spinning outwardly such that it cannot recall its own origin. These anxieties are closely tied to the traumas of a continent at war, and the rise of industrialism and militarism on a global scale.” … cycles yet again.
This 2nd wave is almost over. The next cycle turn date is the end of April for just about everything. This is a MAJOR turn date (the middle of the month was a more minor turn date and gave us the start of the final subwave wave up).
We were expecting some sort of geopolitical (or financial) event towards the end of the week. We got Doha and some other events.
- The Doha oil talks ended without agreement, as expected. We already knew oil is in an ending diagonal and hasn’t hit the bottom yet, so this meeting falls right in line with expectations.
- Japan had two major earthquakes, one after another.
- We’ve got Brazil’s President in the midst of an impeachment vote.
It certainly isn’t boring!
Events don’t affect the market to any great degree, of course. Social mood affects the market (it’s a mathematical projection of the social mood of the masses); human cause events as a result of their mood.
In terms of the market, the dollar controls the market and it’s coming to a major turning point. Watch it closely for the signal of a turn down in equities. (More on this in the video).
The direction of US equities is still up. But not for that much longer.
We’re still in the the final fifth wave of the C wave. The structure of the move up in the SP500 is questionable. I’m going with the start of an ending diagonal, as I explain in the chart below and in the video. While we may see a spike in the indices in this fifth of fifth wave (the throw-over), it should be short-lived and I would expect a dramatic turn down, with waves that should revert to the beginning of the ending diagonal relatively quickly. I don’t have an upside target for the SP500.
The short story is that equities and currencies all seem to be heading for the same top tick (or pip) all together!
As I mentioned last week, the VIX has flashed a sell signal for equities, so a turn down is imminent.
There’s a lot of information in this post to digest. I hope I’ve made it clear what I’m expecting. I’ve been saying for some time that the markets are all moving in tandem as one (due to deleveraging debt worldwide) and I see everything lining up for the turn. I actually pointed this out last September.
I’m casting my attention towards month end now.
Here’s a video overview of the market for Monday, April 18, 2016:
Market Report for April17
|Make sure you zoom the video to full size with frame expander (arrows) in the bottom right hand corner and also set the quality to as high as your web connection allows. This is an HD quality video so the best viewing is at that level.
Futures Sunday: Above is the 60 minute chart for ES (emini SPX futures). You can see that we opened lower—at just slightly below the 2.618 retrace level (the extension of the first wave down) that I mentioned in comments on Friday. This now lets me draw an ending diagonal with overlapping waves (finally!). It’s now clear where we’re going …. up to a new high. I was clear before, but the pattern was in question.
We still could top on Monday—we’ll have to see how rapidly this market moves to a new high.
Here’s the 60 min chart of NQ. Same structure. You’ll find YM is almost exactly the same, except the 4th wave happened at a slightly different time.
Above is the 4 hour chart of NYSE. I keep a fairly close eye on this index as it’s by far the largest in the world (in terms on capitalization). We are at the top of an ABC corrective wave (a bit more to go). I’m expecting at least a test of the yellow (B) level before the turn down.
Above is a two hour chart of IWM (Russell 2000). It’s traced out a very obvious ending diagonal and just has the throw-over to complete. This is a small caps stock base and should give a pretty good indication of what’s happening overall.
Above is the 4 hour chart of the SP500, showing the possible double 2nd wave top waiting to trace out. This would negate the “truncation” and create a spectacular EW textbook set up for a huge third wave down.
Second waves have few restrictions. The key rule is that they can not retrace to the previous top. They should retrace between 62 and 100% (but cannot hit the 100% retrace level).
It’s typical in a bear market for second waves to trace out a double prong (and ABC wave down in this case and a 5 wave structure up). The five wave structure, however, is not motive (subwaves won’t necessarily all be in “legal” 5 wave motive configurations).
Above is the 10 minute chart of the SP500, so I can focus in on the wave structure of this final wave up. From the fourth wave bottom, we have a wave up in 5 waves. There is no overlap, so this suggests a simple 5 wave ending wave. However, none of the subwaves are in 5’s. They’re all in 3’s. Now, if you look at the most recent wave up (wave i on the right), you’ll find it’s also in 3.
These threes lead me to believe that we’re looking at wave 1 of an ending diagonal complete and that we’re working on the third wave up. OR … we’re going into a normal third wave, that interestingly enough (based on the length of the first wave) projects at top at 2120 (1.618 X the first wave), which is exactly the previous higher degree 2nd wave top (see my next chart below).
If this is an ending diagonal, this final wave will go up in three waves to a top and turn. If it’s a normal 5 wave ending wave, it will go up in 5 waves, of course.
Above is the 15 minute chart of the DOW. It’s similar to all the other indices, as it should be. Don’t be surprised to see the double pronged 2nd wave make it to the previous wave 2 level.
Note that just about everywhere I look at individual stocks, we’re in huge second and fourth waves spikes. This whole market is about to turn.
A Major Inflection Point: Above is the weekly chart of USDCAD. I have been following this for some time, and called the bottom of the third wave, expecting a retrace (although unsure as to how deep it would be).
The larger pattern is an ABC corrective wave, but the C wave is in 5 waves. We are completing the 5th wave of this pattern (an ending diagonal), which should reach the 38% retrace level (shown by the bottom white line) before turning back up.
Once it turns and heads up, it will head up in a fifth wave to a new high, a very lucrative trade. The euro, Australian dollar, dollar, and Canadian dollar are at similar major inflection points.
A Major Inflection Point: Here’s the daily chart of EURUSD showing the major corrective pattern from the low of March, 2104. I have been advocating for some time for a retrace to at least the 38% level, and I’m entertaining the possibility that we’re finally going to get there. Although I’ve been able to anticipate and call all the major turns, it was two weeks ago that the white C wave we’re in now turned decidedly corrective, as well. However, this current C wave should continue up to either the previous high (yellow A) or touch the 38% line and then turn down. Note that at that point, the white C wave would be exactly 1.618 X the white A wave.
On the chart, I’ve labelled my preferred top as (4)?. But I’ve also labelled yellow 2 (in case we don’t make the 38% level).
There is also the possibility of this being a triangle. Considering what’s happening Sunday night, the triangle may be the highest probability active pattern.
The eventual turn (at any level) should send up down into a very large 5th wave. It should turn in tandem with the US equities.
The US dollar (this is a 3 day chart) should do the same thing but in the opposite direction (up). I’m up in the air right now about the structure of this wave. Although in 5 waves, it looks more corrective to me than motive.
Short term, however, we’re heading up (after a pending double bottom). More in the video.
Above is the daily chart of GDOW (Global DOW) showing the current count. It looks to me like we’re tracing out a second wave after an ABC lower part of the wave. I think we have one more small leg up. This wave has stopped at the the 23.6% retrace level (or 76.4%) from the bottom of the wave (as forecast). Whether it will stop here or not is the question. If not, it will likely retrace tot he wave (2) level.
I do not see a path to a new high for GDOW and, in my opinion, this strongly lowers the probability of a new high for the main US indices.
First Wave Down – What to Watch For
This weekend we’re dangerously close to a top of a second wave (in the fifth of the fifth, with an ending diagonal pattern).
What we’re looking for to confirm a turn is a motive wave down in 5 waves.
Because we have an ending diagonal, the first wave will likely drop to the previous fourth, which is also the beginning of the ending diagonal pattern (~2022). After that, we should get a second wave that will retrace in 3 waves about 62%. That’s the preferred EW entry point. So don’t feel you have to rush in. There’ll be a much better opportunity at the second wave level than at the top and the risk is substantially reduced.