Update: Friday April 29, 1PM, EST
Above is the 60 minute chart of ES (SPX emini futures) showing the fourth wave triangle in progress. I will post a little study in the forum on the weekend so you can see how the blue circle area has resolved itself. If you’ve been following along, you know that I was having an issue with the c wave up in that area as it was in three waves. In hindsight, of course, it’s because this has been a triangle all along (and that was the clue).
We still need to trace out the D, E, and 5th wave up to the top. Although not shown by the arrowed lines, these waves will all be in 3’s and this will at long last end the larger second wave pattern.
I have overlain the fibonacci retracement tool so that you can see how the length of the C wave is the correct length (the ABC length is 1.618 X wave A). The wave down is in a clear 3 waves.
Updated at 4PM EST: Above is the 30 minute chart of the SP500 showing the same ending pattern—a fourth wave triangle. It will resolve in a similar manner to ES.
I’ve marked on the abc (lower case) labels so you can see that the A wave down (of the triangle’s C leg) is in 3 waves. This is the clue that the wave down that we had today could not be motive. A motive wave always has subwaves in 3 waves and this does not. Therefore, it cannot be a motive wave. The only option was some king of corrective wave and so it was relatively easy, once the wave down has hit its target, to see that we’d begun a fourth wave triangle.
Triangles are the final pattern before a single ending wave to the top, so it won’t be much longer.
Update: Friday Early Morning, April 29, 12:15 AM EST
We may not be at the Ultimate Cycle Turn yet, after all. Cycle turns don’t tell us direction, of course. We’re looking for the top, but Andy’s turns have been highly accurate at the top of the third, for example, and other points along the way. This turn (April 29/29) looks now like it’s pointing up.
Today, we simply extended the fourth wave, tracing out a C wave. Interestingly enough, the height of the remaining gap between the bottom of today’s 4th wave at the end of the day and the previous most recent high is exactly 1.618 X the length of wave 1, as it should be. Let’s look at three charts: the DOW, SP500, and EURUSD.
The targets haven’t changed, and the labelling hasn’t changed. The fourth wave is simply a little larger.
Above is the 15 minute chart of the DOW showing the larger 5th wave up in its entirety. I’ve overlain the fibonacci retracement tool across the gap between the bottom of the fourth and the projected top of the fifth. The length is 1.618 X the length of yellow wave 1, lower left corner of the chart, as it should be. We’re still looking at the same target. The direction is still up.
Above is the 15 minute chart of the SP500. It has exactly the same configuration as the SP500. Lengths of waves are relatively the same. The target is the same. The fourth wave is a little larger than it was yesterday.
In terms of the Nasdaq and NDX, the waves do not look motive. It too, has extended the fourth wave down. Analyzing NQ is a little tougher and I’m on the fence as to the structure of that particular wave at the moment. The related waves being corrective suggests it is also corrective.
ES (SPX futures) is clearly corrective. It still has to properly bottom tonight, by the looks of it.
Finally for this morning, here’s a daily chart of EURUSD, which is moving in tandem with the US indices. It’s slowly creeping to it’s final target as the US indices top. There are three probably targets left here for EURUSD. It’s either tracing out a triangle, which means it will have a couple of other legs to go (D and E), it will head up to the current (4) high, or exceed that slightly to test the 38% retrace horizontal line just above it.
Once it hits the target of its choice, it will reverse downwards into a very large fifth wave. The turn is imminent here, as it is with the US indices.
Original Post (Saturday, April 23)
Welcome to the Top of the Third! (it’s also the top of the 2nd)
We’re here! Not right now, but later this week we’ll see the start of the big drop. Thursday, April 28th is the day—the ultimate cycle turn. We have Janet Yellen (Federal Reserve) in the afternoon before to kick things off (Wednesday, 2PM, EST). What could be more perfect!?
This is the ultimate cycle turn. Why “ultimate?” Because we’re going to head down into the third wave. This is the big one. It’s the one we’ve been waiting for.
From the Elliott Wave Principle: “Third waves are wonders to behold. They are strong and broad, and the trend at this point is unmistakable. Third ways usually generate the greatest volume and price movement, and are most often the extended wave in a series. Virtually all stocks participate in third waves. They also produce the most valuable clues to the wave count as it unfolds.”
Preliminary Targets (at 2.618 X the length of the first wave down)
- SPX: 1405
- DOW: 10,460
- NDX: 2370
Last week in the video, I brought you up to speed on a host of markets and I’ll do the same this week. The predictions along the way have been highly accurate. Put the Elliott wave count together with Andy Pancholi’s Market Timing Report and you have what I refer to as “The Holy Grail of Trading.” Cycles give you the major turn dates and EW gives you direction and price.
You don’t want to miss this once in a lifetime opportunity coming up—to capitalize on the largest crash in history.
This Past Week:
- the VIX hit a new low of 12.50 (it will likely hit a double bottom, before advancing up)
- put/call ratio is .776, the lowest in 2 years
- volume continues to tank and had been moving steadily lower since Feb 11
- breadth continues to drop—only a few stocks are keeping this market up. It’s earnings report time, and we’re seeing more and more of the big guys drop in large down waves
- 5 day sentiment hit 83.4%, higher than even the market high on May 20, 2015. As contrarians, we always want a high sentiment number at a major turn and we’ve got one!
These are all attributes of a market in the final stages of a second wave, ready for a trend change.
A word about events. 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. The recent Doha conference on oil was a great example. Immediately after the announcement that the conference was a failure, the oil futures markets tanked. It was a corrective wave in 3 waves.
Well, the media and pundits were all over the story, until the next afternoon when it retraced and eventually went to a new high. That was because it’s in the middle of a pattern that requires a full retrace. It will turn down when the pattern is done and not before. It got really quiet on the pundit front. They had no idea what was going on. But, they never do. They don’t understand how the market moves (Elliott waves).
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.
One of the frustrating elements though, is that when the market turns, it takes longer than usual to do so, because the entire world (in terms of the major indices, and by extension, the mood of the masses) is turning at the same time. So, in this report, you’ll see an underlying theme of currencies moving in lock-step to the US equities, because … that’s what’s happening, something I noticed last September.
The entire world is moving to the tune of debt and the deleveraging that has to happen. All bubbles burst eventually and this one is one that will go down in history, because it’s the largest debt bubble in history.
The direction of US equities is still up for the first three days, at least. Then I expect a big change. Thursday.
Here’s a video overview of the market for Monday, April 25, 2016:
Market Report April 25 REVISED
|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.|
The Charts Going into Monday
Note that there aren’t huge changes from last weekend. We’re simply progressing in this final wave and are virtually at the final target. I’ll start with ES to give you an idea of where we left off at the end of the day on Friday and then we’ll take a look at the bigger picture. Everything is pointing to the same end point and a major turn.
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.
Above is the daily 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 a termination of this 2nd wave up at ~10648. This would “correct” the truncation and end in a double-pronged second wave. Third wave down should drop to around 6100.
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. It has a little more of the throw-over to do and may end up even with the top of the yellow 2 wave.
Above is the 4 hour chart of the SP500, showing the double 2nd wave top waiting to finish tracing 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). I expect us to reach 2116 before a turn down.
It’s typical in a bear market for second waves to trace out a double prong (an 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 15 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. I have re-labelled the chart to reflect the final ending wave structure in 5 waves. This wave now mirrors ES above, but we look like we’ll have a final wave up in 5 waves, rather than a triangle.
Above is the 4 hour chart of the DOW. It’s similar to all the other indices, as it should be. I predicted we’d reach the previous 2nd wave high and that in fact is what we’re done. Look for a double top with the most recent high before a turn down.
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. The labels have been changed slightly in the ending diagonal to reflect more precisely the ending wave structure.
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 now don’t think we’ll rise to the previous 4th wave level, but most likely turn at a retest of the most recent high. We will either end up with a 2nd wave (yellow 2) or the C leg of a triangle (which would still need a yellow D and E leg before it’s complete).
In the case of a D and E leg, they would like form as the US equities complete the first and second waves of the third down.
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).
Above is the 4 hour chart of GDOW (Global DOW) showing the current count. We’re tracing out a second wave after an ABC lower part of the wave. We have one more small leg up. It will likely retrace to the wave (2) level at about 2473.
Major international indices like the GDOW and NYSE are where I do for the overall count. I can be much more committed (as I was on the SP500 first wave down, while everyone was questioning it) when I see a count on these two indices which is clear.
Above is the daily chart of XGLD (gold). The movement of this asset is a no brainer. I called the ending diagonal at the bottom and turn up. I said it would head up in 5 waves to the previous 4th (around 1300). I also forecast a turn down in 3 waves. Now we’ve finished the a and b waves and will head down to the 1150 area.
There are two possible targets. The lower one is the 62% retracement (in this case, the c wave will be 1.618 X the length of the a wave). It could also come down just to the 1.618 extension of the A wave (the higher horizonal line at 1155.42). From there we’ll head up in a C wave to somewhere around 1600 before heading back down again to around 750 (months away).
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.
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.