The Top of Two

Update Friday morning, June 17, ~10AM EST

Above is a 3 minute chart of SP500 this morning. It’s not a typically motive wave, but rather an A wave with 5 subwaves. I’ve drawn on lines that show where the retrace might go down to. The wave is short in terms of meeting the previous 4th. So there are options. If this wave doesn’t retrace any lower, it may simply continue up.

You can see that the subwaves are not clean motive waves. In fact, the last wave up is in 3 waves. This configuration could also be a 1-2, 1-2 pattern, which would mean we’re in a third wave up at the moment.

Above is the 15 minute chart of USDCAD showing the motive looking wave it’s traced out overnight. I’m expecting it to reverse at ~1.2830 and retrace in a second wave to ~1.290. This may have some bearing on what ES and SPX do next.

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Update Thursday night, June 16, ~6:30PM EST

Above is the 2 hour chart of the SP500 after today’s action. I’ve had to back out the chart after today’s action to get a handle of the triangle that’s forming. I had to actually hit the textbook to “see it.” Ending diagonals aren’t always that obvious. In any event, you’ll find the text book version just below here.

Today, we trashed the expanding ending diagonal option by dropping beneath the lower trendline of the pattern I had posted.

I’ve relabelled the larger wave slightly, making a larger wave 4 into wave ii and starting the ending diagonal a little earlier. You can see the similarities to the textbook version below. The waves are all in 3’s (a requirement of an ending diagonal, which is a triangle) and so a triangle of some sort has always made the most sense. Plus a correction can’t end a wave sequence. It has to be a five wave move or a triangle. This is the pattern that for now seems to fit the bill. We would have to hold the wave iv low, however.

There’s an alternative in that wave ii may need to be labelled as wave 4 and that would put us only at the bottom of the second wave of the ending diagonal.

Above is the textbook version of an ending diagonal from The Elliott Wave Principle book—4th edition (page 38). You can see the similarities in terms of what the market has traced out in the SP500 so far today. The problem with the book version is that the 4th wave should not be part of the ending diagonal and they’ve improperly extended the lower trendline to include the bottom of wave 4. The ending diagonal is actually only the five waves (1-v) that make up the ending diagonal itself.

Above is a daily chart of ES (emini SPX futures) showing much the same pattern.

ALTERNATE – LIKELY THE VALID VERSION

Above is the same chart of the SP500 at the top of the post. However, this is more likely to be the path of this ending diagonal. It’s actually the same path I drew out earlier in the week. In this case, we’re in the very early stages.

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Original Post: Sunday, June 12

Here we are at the top of wave two. It  doesn’t mean we’re done, but we’re almost there. Many of the major indices have hit my target. However, the pattern is not complete. The “fifth” wave (or more properly, the C wave), is in three waves. As a result, it has only one option—to form an ending diagonal, which is what I believe is taking shape tonight.

It’s difficult to project a final path, as the pattern is just starting to unfold, but it’s looking to me as if we’re going to trace out a converging ending diagonal, rather than one that’s expanding. In any event, I’ve provided a chart with the projected waves drawn in. We’re possibly just days away from a top.

We have a much anticipated Fed announcement on Wednesday, which should disappoint, and of course, the Brexit announcement on the 23rd of June (next week.)

In regards to the upcoming possible cycle turns, Andy Pancholi has provided a great little video, which you can watch here:  Andy Pancholi Special Report.

To purchase Andy’s high-end cycles report, click here. Andy is 99.9% accurate on major cycles turns and using his turn dates with my Elliottwave projections is really the holy grail in trading. You won’t often go wrong in timing the market.

In this weekend’s video report, I take another look at the bigger picture with the NYSE, because it’s crazy to look at the sub-indices in isolation (the DOW, SP500, RUT, futures, etc.). They all have to do more or less the same thing and the NYSE is the ultimate determiner of market direction. Actually, it’s the US dollar that’s the real ultimate determinant of market direction, but within the stock market, the NYSE is the largest cap index (in the world, actually) and so it’s the one you have to pay attention to.

As I’ve mentioned here over and over again, the currencies and US market are becoming more and more tightly aligned. They’re all moving together as debt is being deleveraged. If you’re good at seeing patterns and mentally manipulating them, you can easily see them aligning and this helps you forecast the market moves.

It certainly won’t always be this way forever, but they’ve been moving closer and closer into alignment for the past couple of years. Now the moves are almost identical, from a technical analysis perspective.

Bottom line: The final high for the SP500 should be at or slightly above 2116. I’m looking at the June 16 (the next Federal Reserve announcement) as perhaps being the catalyst for a top. WE also have Brexit on June 23. I’ll repost the charts for the larger third wave down we’re expecting in the forum later tonight or tomorrow.

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Here’s a video overview of the market for Tuesday, June 13, 2016:

Market Report for June13, 2016

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.

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The Charts Going into Monday

The US indices appear to be tracing out an ending diagonal. The cash and futures markets seem to be more or less in sync.

Above is the 60 minute chart of ES showing most of the large wave up (from May 19) and the projection for the ending diagonal. I had projected a drop to below the previous, most recent fourth wave (at 2083) but it looks like that’s all we’re going to get. I would want to see this wave drop at least a tick below the previous two waves down to 2083. If it makes  a new low, that would bolster the wave 2 prediction in an unfolding converging ending diagonal.

Ending diagonals end in a throw-over (they exceed the upper trendline), but they don’t project a final target.

The above chart is at ~ 12:30AM EST. You can see how we’re almost at the 2083 level, so I would expect a drop to a similar level on the open by SPX and most likely a turn up sometime tomorrow morning.

The Alternate – An Expanding Ending Diagonal

Above is a 15 minute chart of the SP500 at 10:30 AM EST, Monday, June 13. After watching the opening and see that neither the futures or SPX went to a new low, this puts the expanding version of the diagonal front and center. So I’ve drawn in the projected path. It’s not a lot different than the converging ending diagonal in terms of where it’s headed.

The outcome is the same, the look of the pattern is slightly different. The trendlines expand.

Above is the daily chart of NYSE (the largest cap index in the world) and the one we really need to pay attention to for the US market. It’s showing a very obvious 2nd wave pattern, with the most recent wave up being clearly corrective. We’re in the ending wave of the pattern and have reached the previous high at ~10648, as projected.

The next major move down is a very large 3rd wave. All we need to do now is finish up the final pattern (an ending diagonal expected here, too.

Above is a 4 hour chart of SPX. This has a similar look to the NYSE, although more elevated. I’m expecting to see a top to this second wave somewhere above 2116.

Above is the 15 minute chart of the SP500, showing a projected ending diagonal similar to ES. This isn’t much more to say about this chart, since is should more or less follow the path and timing of ES. I’ve added a projected path for an converging ending diagonal, which is what I believe is starting to trace out. It’s early yet, but I’ll update the chart as the week progresses.

I’ve added a fibonacci retracement tool, which gives a projection for the end of this wave down (2?) at ~2084. It should drop slightly below the previous two shorter waves down to this same level. I don’t expect the SPX to reach up to a new all time high. However, it may get very close.

Above is the 2 hour chart of USDCAD.

I cover off what’s happened recently with this currency in the video. In this chart, you can see us heading up to my projection of Friday last. The extension of the A wave of this fourth wave correction, puts the top of this move up at ~1.28407. Close to that point, we should turn down in a fifth wave to a double bottom at ~1.24579. After that, we’ll turn up in a very large fifth wave, which will eventually take up to a new high for USDCAD.

Here’s the daily hour chart of EURUSD showing the “4th wave” of the major corrective pattern we’ve been in since March, 2014. We’re in the final stages of a bearish triangle formation, with one more leg up after we finish this leg down.

The EURUSD, as well as other USD currency pairs, completely changed direction with the most recent labor report On Friday, June 3. As I explain in the video, we had a failed triangle the day before and this led to a “truncation,” or  shortened pattern from what I was expecting. As a result, I shortened the width of the triangle. We’ll see if we follow through, based on this change.

In order to do so, we need to turn up from the point that we’re currently at (~1.12536), to complete the E wave of this pattern. If we continue down, then we will need to widen out the triangle. However, USDCAD seems to be supporting a turn up in EURUSD right about here.

There are two fibonacci measurements you can do to determine the c wave target (E Wave end point). They both give the number ~1.161 as the turn point for the E wave top.

EURUSD should turn down after finishing the E wave in tandem with the US equities.

Above is the hourly chart of the USDJPY, which I’ve been stalking for the past week or so. It’s finished one wave down (in five waves) for an A wave. I had originally expected a 62% retrace due to the original shape of the first three waves down. But again, the June 3 labor report changed that situation. It looks to me that the C wave tracing out now should drop to approximately 103.22130, before turning up in a large 5th wave.

 

Above is the daily chart of XGLD (gold). It continues to follow the path I laid out at the beginning of 2016. We should turn down here to complete a C wave, taking us close to 1136, before turning back up for a larger C wave to about 1600.

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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 at small degree. After that, we should get a second wave that will retrace up 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.

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History: The 1929 crash

I think it’s important to look at 1929 and the wave structure (above and below), which was the same as 2007—to a point. I will show the 2007 crash below in the “What If” section.

The wave structure of the 1929 crash was in 3 waves overall. There were 5 waves down from the top (the A wave) and then a very large B wave retrace. The final C wave down was a stair-step affair and lasted over 2 years.

Let’s look  a little close at the timing of the 1929 crash because the similarities to today are uncanny.

The market peaked on September 3, 1929 and then it took 2 months for the crash to actually happen (to reach the bottom of wave 5 of the A wave). The larger crash  which we always hear about began on October 23, 1929. Then there was that large B wave, which lasted 5 and a half months and finally (which I explain a little further in the cycles section below), the C wave which went on for more than 2 years. This might be the scenario we’re looking at going forward.