World Cycles Institute

The Turn of the Century

Multiple Major Turns

I’m dubbing the impending turn as “The Turn of the Century.” It’s not the top of the market, but there are turns happening at the same time in the US Dollar (and related currencies), the US indices, and gold and silver.

It looks to me like they’re ALL going to change direction during the coming week (perhaps earlier rather than later).

For over two years now, I’ve been saying that we’re going to see all major asset classes gradually align in their movements to end up at a top all at the same time. That’s what you’re seeing. I refer to it as “All the Same Market,” a term that was coined by Robert Prechter quite a few years ago.

It’s one of the reasons this market has been so difficult to trade: Every asset class depends on the movements of all the others. In other words, the US Dollar (being the reserve currency) is in control, as everything pretty much relates to it in today’s financial world, and all asset classes have been slowly moving into alignment with its movement.

At the same time, all assets have to conform to Elliott wave rules in terms of how they move, which they’ve done, but it has meant some long periods of waiting (eg- USD currency pairs) as other asset classes move at a faster rate. It’s made for some very odd movements and, as a result, a very difficult market to trade.

That’s about to change as we trace out the remaining waves to the ultimate top.

Non-Confirmations

There are almost always non-confirmations at the top of a market. In other words, patterns in the various US indices don’t match, or different asset classes make major turns at different times.

I would expect nothing less at the top of a 500 year bull market. However, in the past few weeks, I haven’t paid a lot of attention to it, because until patterns are fully developed, there isn’t much need: It ends up being fairly speculative.

For example, both the SP500 and NYSE morphed out of perfectly good contracting triangles into something that looks like an ending diagonal … BUT. The “but” is there because there are problems with calling some of these patterns ending diagonals. They either don’t look quite right or measure improperly. However, some of the patterns have changed over time. However, we’re at the end of this B wave up in the US indices and virtually everything is aligned for a turn.

Now that we’re in the final 5th of 5th wave up in the so-called “third wave” of these patterns, it’s time to focus in more specifically on what we have here, because the length of the next move to the downside will be a result of the pattern we’re in.

Now, let’s Look at the NYSE …

Above is the 4 hour chart of the NYSE. I always go to this chart to ensure I have the right count, because this is the largest market cap exchange in the world, as all the major indices you follow (Russels, OEX, DOW, SP500 and ES) all fall under its umbrella. This chart is my “truth-teller,” as it’s not directly traded and therefore is devoid of most of the “animal spirits.”

We’ve been following the changing shape of this index as it morphed from a perfect contracting triangle into what looks like it might be an ending diagonal, except that is can’t be. Here are the reasons why:

If this pattern is an ending diagonal, with the top of the third wave being the current high (13,039), the fifth wave of an ending diagonal must not be longer than this third). However, doing the measurements, a projected wave five (measured from the highest level of the fourth wave trendline) cannot possibly reach a new high. Therefore, the ending diagonal option is off the table.

That leaves only an ABC pattern, which means we’re expecting a C wave down. In that case, there are two most probable targets:

  • 11,552, which would mean the C wave will equal the length of the A wave
  • 11,060, which would mean the C wave will drop to a 1.618 extension of the A wave

The C wave could go lower, but that’s less likely. Because we have an A wave that is in three waves, the first option is preferable, imho. This will result in an overall ABC pattern, which requires a new high.

Bottom line: I expect a C wave down before another wave up to a slight new high to end the 500 year rally.

And in my opinion, this prognosis also affects the SP500 (and ES), which have patterns that look like ending diagonals, but for a number of reasons, these patterns are already on shaky ground.

As my Trader’s Gold subscribers know, my prognosis for the SP500 and futures have changed slightly. I don’t think we have an ending diagonal in ES. I’ve provided my preferences under the ES chart below.

The overall view of the market has not changed. The only thing that has is my projection to the downside for the next wave, which will likely turn down early this week.

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Elliott Wave Basics

There are two types of Elliott wave patterns:

  • Motive (or impulsive waves) which are “trend” waves.
  • Corrective waves, which are “counter trend” waves.

Motive waves contain five distinct waves that move the market forward in a trend. Counter trend waves are in 3 waves and simply correct the trend.

All these patterns move at what we call multiple degrees of trend (in other words, the market is fractal, meaning there are smaller series of waves that move in the same patterns within the larger patterns). The keys to analyzing Elliott waves is being able to recognize the patterns and the “degree” of trend (or countertrend) that you’re working within.

Impulsive (motive) waves move in very distinct and reliable patterns of five waves. Subwaves of motive waves measure out to specific lengths (fibonacci ratios) very accurately. Motive waves are the easiest waves to trade. You find them in a trending market.

Waves 1, 3, and 5 of a motive wave pattern each contain 5 impulsive subwaves. Waves 2 and 4 are countertrend waves and move in 3 waves.

Countertrend waves move in 3 waves and always retrace to their start eventually. Counrtertrend (corrective waves) are typically in patterns — for example, a triangle, flat, or zigzag. Waves within those patterns can be difficult to predict, but the patterns themselves are very predictable.

Fibonacci ratios run all through the market. They determine the lengths of waves and provide entry and exit points. These measurements are really accurate in trending markets, but more difficult to identify in corrective markets (we’ve been in a corrective market in all the asset classes I cover since 2009).

To use Elliott wave analysis accurately, you must be able to recognize the difference between a trend wave (motive) and a countertrend wave (corrective). There’s very much more to proper Elliott wave analysis, but this gives you the basics.

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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).

Although I'm still showing the ending diagonal trendlines, my preference is for this pattern being a regular flat.

This is due partly to the look of the current "third" or "B" wave up that we're currently at the top of. It hasn't quite topped (look for one more wave up at the beginning of the week) but once it does, it should drop to a new low to at least the 2537 area and probably lower.

My preferences (in order of probability) now for the unfolding pattern in the daily ES chart is:

  1. a regular flat (meaning a C wave down in 5 waves to a new low)
  2. a C wave as the end of an ABC fourth wave correction (similar to the projection of the NYSE provided above)
  3. an ending diagonal (this is now a very distant third option), which would lead to a wave down the the 2625 area

We're still waiting for this complex B wave to top. Last weekend, I predicted one more wave up to a final high and that still seems to be the case (after a couple of wave failures). The waves down are corrective. I do not expect a new all time high before we turn down in the expected C wave, as that would change the count and pattern completely.

Summary: We're waiting for a top in a B wave, which will result in a C wave to a new low. Once the c wave (down) is complete, expect a final fifth wave to a new high. That fifth wave up to a new high will be the end of the 500 year bull market.

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Trader's Gold Subscribers get a comprehensive view of the market, including hourly (and even smaller timeframes, when appropriate) on a daily basis. They also receive updates through the comments area. I provide only the daily timeframe for the free blog, as a "snapshot" of where the market currently trades and the next move on a weekly basis.

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{ 26 comments… add one }
  • Charles Lloyd August 12, 2018, 11:39 am

    Thank you Sir PETER for your continued brilliance. Few analysts are as precise and matter of fact as you are. Muchos GRACIAS! One quick question on ES. There may be a head fake or two before the real move in my earnest opinion. What level will ES need to drop to for confirmation of the 4th wave?

    • Peter Temple August 12, 2018, 12:03 pm

      Charles,
      haha … you’re welcome. At this point, I’m calling for a C wave of the fourth wave (rather than a fourth of an ED), but it’s always the previous small fourth of one lesser degree that provides that clue, and that’s still around 2790.

  • Joe Longwill August 12, 2018, 1:25 pm

    Hey Holmes
    It’s a compliment Peter
    One thing I’d add to your excellent update .
    Percent moves :
    C % decline = A % decline .
    Thank you Peter
    Joe

    • Peter Temple August 12, 2018, 3:35 pm

      Well, Joe, my subscribers get that information but I can’t share everything they get.

      As far as interests rates go, they’re not going up; they’re turning down, despite what the Fed says.

    • Jeff Trimble August 13, 2018, 7:21 am

      Joe, in this circumstance, would that be around 7.5%?

  • Joe Longwill August 12, 2018, 1:47 pm

    Elliott wave theory is about probabilities ?
    I tend to think so which is why I agree with Peter t
    In today’s update .
    I have an issue with the Dow failing to poke above the 25,800 level
    And I hate option expiry weeks because they tend to skew the data
    As positions get unwound . It is not a forgone conclusion that the spx
    Breaks below the Feb lows even though the NYSE or cash Dow look like
    They have a high probability of doing so. We are still in a mercury retrograde
    Time period which tends to flip the market all over the place .
    My bias for the ” mini crash” stands but ….There is no 100% guarentees ever !
    The end of August ( 29-31 ) should be important yet I give this market until Sept 9
    Even with my bearish bias.
    I expect suprises to the downside
    The us dollar will eventually ( sooner or later ) effect corporate profits .
    I guess it becomes a similarity to the 2000-2001 time period when the
    Strong dollar caused a similar effect .
    Add in overseas loans based on the US dollar and the currency risk
    And we have a case for the US dollar going much higher then most imagine
    As those who try to hedge currency risk panic and buy the US dollar.
    They could also buy USA assets ( stocks )
    Governments also will have problems trying to finance their debts .
    It’s not going to hurt the average person if interest rates run higher
    To 5-8% yet it will balloon deficits. All governments eventually default
    There are so many things to consider going forward that my head spins .
    As Martin Armstrong says: everything is connected
    Thanks Peter t for your time and effort

    • Verne Carty August 14, 2018, 1:20 am

      SPX was a mere 16 points from a new ATH. If the current move down is indeed corrective, it is hard for me to see how we avoid a new ATH with any new wave up to complete a B wave. I guess that would change the pattern to an expanded flat.

  • Joe Longwill August 13, 2018, 12:56 am

    Moon in Virgo Waxing Crescent Moon

    The moon is currently in Virgo
    The moon is 1 day old

    Distance: 57 earth radii
    Ecliptic latitude: 3 degrees
    Ecliptic longitude: 168 degrees

  • Joe Longwill August 13, 2018, 3:50 am

    Peter
    I finally had some time ( and phone reception ) to
    Listen to your interview with Steve puetz.
    Off the top of my head, that interview was done back
    In mid 2014. I also noted he did not go into detail on
    Some of his new work back then ( he wanted his work published first )
    That interview was very good and I found myself in agreement with
    His comments regaurding ” time Windows” vs ” specific time “,
    I also agree with him about market turn early or late vs the theoretical
    Cycle turn window Yet as he states there is no shift in general of the next
    Cycle turn .
    Ed
    If you listen to that interview , that was what I was talking about when
    I mentioned left translations vs right translations .

    Very good interview overall and if possible I think it would be great
    To hear a follow through interview in the future if it’s possible .
    Lastly : I view cycles from low to low but not sure if puetz does .
    Hence the 6.37 year cycle turning down in mid 2014 or the 3.5 year cycle
    Turning down leaves me to wonder where that cycle low would be .
    Do I look out half that distance ? 1.75 and 3.18 years or ?
    Taking that in mind , mid 2014 plus 1.75 and 3.18 years I get a very rough
    Early 2016 to mid 2017 cycle low which was a very good cycle turn call !
    If I then add those half cycles again though there is still some time left before
    The next ideal cycle high .
    Adding the full cycle ( low to low ) 2016 plus 3.5 ( I’m being general ) or 6.37
    Late 2019 to 2023 points to a cycle low .
    I agree in general yet I’ll have to refine this because I’m seeing something a bit differently .
    Anyways
    Thank you Peter for the time ( I imagine editing video is more time consuming then most realize )

  • Verne Carty August 13, 2018, 5:33 am

    I was completely wrong about the dollar. It broke to the upside from what looked like some kind of triangle. Some analysts see an IHS pattern which if correct, means the index is headed to 100.
    This has big imiplications for equities.

  • rotrot August 13, 2018, 6:06 am

    NOT AN ENDORSEMENT

    Erik Townsend and Patrick Ceresna interview Martin Armstrong | Published July 27, 2018
    https://www.youtube.com/watch?v=B-Hhvtc9qGA&feature=youtu.be&a=
    “Is there room for the equity bull market to continue?
    Outlook on the global bond markets
    Is a monetary crisis on the horizon?
    Outlook for the U.S. Dollar
    How do the geopolitics playout in Europe?
    Short bonds long equities?
    Perspectives on China and their credit markets
    Where is gold headed next?
    U.S. politics and the midterm elections
    What is next for Russia/U.S. relations”

    Economic Confidence Model | August 8, 2018
    https://www.armstrongeconomics.com/future-forecasts/ecm/ecm-the-cycle-inversion/
    “The entire world economy NEVER peaks and bottoms together”

  • Jeff Trimble August 13, 2018, 7:36 am

    Thank you Peter T for all you do. Wisdom is an incredible gift and you use yours to help others. It is noticed.

    Jeff T

    • Peter Temple August 13, 2018, 8:05 am

      Thanks, Jeff, you’re being too kind.
      While trying to help people is the underlying motive, I’ve learned that herding is an extremely powerful force … sigh.
      And that is why I’ve shown up online. I’m trying to contribute what little I know … always learning.

  • Willem August 13, 2018, 8:38 am

    Short of time.
    Today was the Low and now up to the (last) High on 21/22 august. Indicators shows the same. I have checked Bradley with my indicators 2a and 2b and they turn the same with High and Lows from 25 of july (perhaps before also?) So if that continues we have the turningpoints t/m 6 september. http://www.prognoseus500.nl/
    Be carefull

  • Vivek Sahay August 13, 2018, 9:11 am

    Thanks Peter and everyone else for your inputs. Its very helpful. I do see some chance that we get a head-fake move to form a double top on ES (maybe by 8/16 or 8/17 to around 2875-2878 area), but I cannot assign a high probability to that outcome. From a probability standpoint, I would much rather be short right now than be long to play for that last potential move higher. I do agree that we need to break below 2790 to have confidence in the short trade.

  • John August 13, 2018, 10:28 am

    Peter, thanks for the update over and over again.

    Aug 7 was the top, for now i have a low Aug 14/15, after that we will rebound till Aug 21 should be a lower high with a mini crash into the full moon or end off the month.

    • Verne Carty August 13, 2018, 12:54 pm

      August 8 was Phi turn date so the August 7 top was right on the money. The next Phi turn is due October 2nd.

  • Verne Carty August 13, 2018, 12:39 pm

    Yep. Nothing I see about this move down suggests we have a low in place.
    Willem’s assertion a bit of a mystery to me….

  • Verne Carty August 13, 2018, 2:23 pm

    From what I can tell, we have one more wave down in a fifth wave to complete a possible C wave, OR a small one of a larger C. VIX already tagging upper B band so hard to tell how much more downside. It will be interesting to see how the lunar cycle plays out this month as we are two weeks away from the full moon anticipated low. Interesting times!

  • Dan Goulding August 13, 2018, 5:14 pm

    Hey Joe,

    Puetz’s work is not that useful in timing bottoms, as he himself admits. Essentially these cycles play out in an idealised fashion when emotions are running high – that is, when speculation and borrowing are rampant, and these tend to disappear at the bottom. Puetz work is based on harmonics of 3; each cycle is 1/3 or 3 times greater in length than its neighbouring cycle.

    Dan

  • Peter G August 13, 2018, 5:27 pm

    Verne, interesting how you reference a VIX tag of upper B Band today as a possible limit to downside market potential. Normally, that would be true, and it might be again, but for a couple of days now I have been noting an analogy, so far, between market action after Jan 26 high and after August 7 high. The Jan high saw three days trading at the high while this August 7 saw only 2. But the gap down is where the analog begins. They were both very similar in terms of magnitude on SPX. Friday, Aug 10 gap corresponds to Tuesday, Jan 30 gap. In both cases, the following day (today in the analog) saw a very slightly higher high than the preceding gap-down day, 1.51 SPX points higher in Jan and 1.20 SPX points higher today. On the following day (tomorrow, August 14 in the analogy), the futures opened the daytime trading session 8.75 points lower but held right around the previous day’s (today in the analogue) low. It was the next day (Wednesday of this week) when the collapse began! SPX was down 2.1% on a closing basis with the futures down 2.32%. But here is why I bring up the analogue now. The VIX Index was playing with the upper B Band as that happened in Jan, perhaps implying at the time that downside stock potential was limited, just as it is happening here. In January, of course, the VIX went from around the 14 level to 50 (!) within three trading days. Is that going to happen here? Only if the analogue continues 🙂 VIX past 2 days is right around 13-14 just as in Jan!

    • Verne Carty August 13, 2018, 6:37 pm

      Very interesting Peter G. I also noticed that VIX hugged the upper B band for four days in June as well (22-28) so the current move certainly does not forestall additional downside. VXX also displayed sharp positive divergence at recent lows and I do not think a target of 39-40 is out of the question. I will be watching that analogy with great interest. It would align perfectly with the possible full moon low.

      • Verne Carty August 13, 2018, 7:17 pm

        Sorry, June 25- 28

  • Red Dog August 13, 2018, 5:37 pm

    Not sure if many of you are watching crypto. Ethereum has fallen out of bed and BTC is testing some serious lows.
    Luri – whats your chart say now.

  • Joe Longwill August 14, 2018, 2:39 am

    Vernes post
    August 8 was Phi turn date so the August 7 top was right on the money. The next Phi turn is due October 2nd.
    ↩ ∞
    I find that interesting since I’m seeing Oct 12 ..
    Dan’s post
    Puetz’s work is not that useful in timing bottoms, as he himself admits. Essentially these cycles play out in an idealised fashion when emotions are running high – that is, when speculation and borrowing are rampant, and these tend to disappear at the bottom. Puetz work is based on harmonics of 3; each cycle is 1/3 or 3 times greater in length than its neighbouring cycle.
    Thank you for your input Dan .
    Peter G post
    I’d paste it but it’s a bit long .
    Thanks Peter g for your input as well .
    I can add that we are in a few odd cycles that are similar
    to January Feb .
    In regards to puetz I’d like to finish with this .
    If you look back at the 1929 collapse , the puetz cycle did not work
    Yet if you look up the mercury retrograde cycle back then
    You may discover something .
    Sticking with the big picture and holding to my bearish bias
    Into January . Mid Oct though ( Oct 12 ) might end up as a low of
    Some sort .
    I’m loosing track of all the sub cycles being out here in the ocean
    Not to mention lack of decent data , indicators etc….
    The mini crash window opened and the market turned down
    No way I’m going to fight my own research .
    I have posted this time period all year .
    I just stick to my work .

  • Verne Carty August 14, 2018, 6:54 pm

    We had an inside day in the cash indices today while ES notched a lower low.
    I think we are going to see strong support at 2800 so I am now strongly leaning toward a final wave up later this week and possibly an unusual back to back instance of a full moon witnessing a turn at the high rather than at a low. I know this is contrary to what most folk are expecting but price trumps all. In my book this will be confirmed if we see VIX put in a new high with a strong bearish reversal candle this week. From an EW perspective, I think it would be completion of a fourth wave followed by a final fifth wave to new ATH before we get a deeper corrective fourth wave of larger degree. Looking for a new low and reversal around 2800 tomorrow.

I welcome questions or input about Elliott Wave, cycles analysis, or astrological input relating to any market. However, due to a heavy schedule, I may not have the time to answer questions.

I reserve the right to remove any comment that is deemed negative, disparages the Elliott Wave Principle, is otherwise not helpful to blog members, or is off-topic.

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