World Cycles Institute

You Keep Me Hanging On …

On Friday, the frustration with this market took me back to the music of the 60s …

“Set me free why don’t cha babe
Get out my life why don’t cha babe
‘Cause you don’t really love me
You just keep me hangin’ on”

That’s the chorus from “You Keep Me Hanging On,” a big hit for both the Supremes (1966), pictured to the left) and Vanilla Fudge (1967).

This market from a big picture perspective just keeps “hanging on” and this D leg of the triangle is doing exactly the same thing.

In any event, my prognosis of the D leg has changed since the Chart Show on Wednesday: I now think we have one more small wave up to the original target of 2750 (or slightly higher) before the E leg down gets underway.

Subwaves are exceptionally difficult to analyze at the moment, so my confidence level in that call is about 70%.

All the Same Market Turns

Last week I wrote about “All the Same Market” and laid out the current supercycle count.

But there’s an additional point I want to make about the recent action in this market. This weekend, we have USD currency pairs in various stages of a turn. They all turn together now (more or less with the US indices) and this is wreaking havoc with the wave structures.

Currency pairs tend to wander around aimlessly waiting for the US indices to turn, for example, so this makes it more difficult to catch them. Waves in the US indices, by and large, are shorter than waves in currencies and so we tend to wait until they sync up. It’s frustrating, but that’s the market we have.

Volume is also exceptionally low and this is adding to the challenge. As I tell my Trader’s Gold folks almost daily, this is the most dangerous market you’re ever likely to experience, so extreme caution is warranted trading it. Entries are not as clear-cut as they normally would be.

Extreme caution is warranted.

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. These patterns move at what we call multiple degrees of trend (they are 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 that you’re working within.

The motive waves shown above are typical in terms of their look and length. Subwaves of motive waves measure out to specific lengths (fibonacci ratios) very accurately. Motive waves are the easiest waves to trade.

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

Motive waves also travel in channels. The red channel above can be drawn from the apexes of wave 1 and 3 on one side and waves 2 and 4 of the other. The end of wave 5 typically meets the trend line on the wave 1 & 3 side before it reverses.

Countertrend waves move in 3 waves and always retrace. You’ll find much more about them in the countertrend section and the page on “The Right Look.”

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).

This past week was a quagmire. We have small degree corrective waves in both directions this weekend and not much to go on for direction. However, my preference is for another final wave up to finish the D leg of the contracting triangle properly.

Volume is exceptionally low and this plays a factor in the volatility and lack of momentum at times (volume is the purple line indicator below the chart).

The D leg wave structure is very complex and the original target was in the 2750 - 60 range. We still may be targeting this level, but the waves are anything but clear. So, early this week, we'll be looking for a top to the D leg, followed by a turn down into the E leg.

The bottom line is that I don't think (based on Friday's action) that we've completed the D leg.

After the E wave down is complete, we'll take off again to the upside in a fifth wave, which will simply finish off the pattern. We'll get to a new high and probably more, but don't expect (as I've been saying for a very long time) a large fifth wave that travels any great distance. (I think 3000 is possible but at the high end of the probability spectrum)

Summary:  I think (although I can't be absolutely sure) that we are not quite finished the D leg of the contracting triangle. Targets for the D leg top are within the 2750-60 area. This will result in a high probability trade to the downside (the E leg of the triangle). Once E leg (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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{ 56 comments… add one }
  • Joe Longwill May 19, 2018, 3:04 am

    Great post Peter
    $RUT has 5 waves up on the daily chart
    Yet I doubt it looks like 5 up on weekly chart.
    Spx 2600 ? I can agree yet that move will open the door
    To a potential bearish triangle as well.
    Dangerous market most definitely !
    Thank you for you time and efforts Peter
    They are appreciated
    : )

  • Ed May 19, 2018, 9:17 pm

    Peter T,

    Dittos on Joe’s Comments! We don’t thank either of you enough!

  • Jack Carter May 20, 2018, 9:27 am

    Hi Willem,
    What happened to your “old indicator”? I found it most useful!

  • Willem May 20, 2018, 10:11 am

    Hi Jack, The old Indicator has replaced the blue line.

    The next period is declining.
    Monday the LOW and 23th the HIGH. A lower HIGH on the 25th, then a lower HIGH on the 30th, Then a lower HIGH on 5/6th, then a lower HIGH on 11th again in 13th

  • Verne Carty May 20, 2018, 12:06 pm

    Thanks Peter. Missed the chart show as I screwed up time zones.
    Definitely a trying market!

  • Willem May 21, 2018, 8:40 am

    I just made the last adjustments for this week. I replaced the blue line by my old indicator and I will take the Bradley prediction close. For June it seems to fit with indicator 2a and 2b. The top on the 23th or with a lot of support the 30th.
    http://www.prognoseus500.nl/
    Be carefull with trading. My old indicator is new on the podium. QE made it look like nothing.

  • Peter G May 21, 2018, 9:59 am

    387 trading day Turning Point Pattern… on daily a-d line, not the popular indexes…
    March 26, 2012 Top (middle high of triple top)
    October 9, 2013 Bottom never since exceeded
    April 24, 2015 Exact high lasting over 1 year
    November 3, 2016 Exact low never since exceeded
    May 21, 2018 !!! ?????
    Should be said that these a-d points are from TradeStation and may differ slightly from Wall St Journal or Bloomberg data points…

  • Joe Longwill May 21, 2018, 12:59 pm

    Peter
    Your site is quoted in this article
    He has a different view yet… This site is referenced
    http://www.thetechnicaltraders.com/fibonacci-and-elliot-wave-predict-breakout-highs/

  • Joe Longwill May 21, 2018, 1:01 pm

    May 28 is a shorter term low to low to…..high ? Count
    Also June 6-9 is a turn day .
    Thanks for the post Peter G

  • Ed May 21, 2018, 8:09 pm

    Peter G,

    Trying to read between the lines of your comments…Are you thinking that this might be the beginning of the long awaited divergence between the A/D Line an price?

    Perhaps I have too vivid an imagination tonight!

  • Liz H May 22, 2018, 9:05 am

    Thank you for all the updates Peter T!
    Sold upro, udow. Have a great memorial day. See you all early June. https://worldcyclesinstitute.com/the-500-year-market-top/#comment-30047

    • Peter Temple May 22, 2018, 10:14 am

      Liz H,
      Sounds like a short holiday. If so, have a good one!

      • Liz H May 22, 2018, 10:39 am

        Lol Peter. “Short” holiday vs “long” holiday.

        • Peter Temple May 22, 2018, 10:41 am

          Yeah, well that’s what I thought … coupla days by the time you get anywhere.

          • Liz H May 22, 2018, 3:53 pm

            The SPX May 14th and May 22nd highs on the 4-hr chart looked similar to the /BTC 4/24 & 5/3 highs. Fractal too similar for me to ignore.

  • Peter G May 23, 2018, 12:39 am

    Ed,
    In answer to your question above, all the pattern tells me now is that there’s a cyclic chance that the daily a-d line has reached a top of some kind—perhaps even an important one. The amazing aspect of these new highs in the daily a-d is that not only are the popular averages not confirming those new highs, they are several percentage points below their all-time highs. I am searching for a previous time when this was seen. In the 2000 market, there was historically strange behavior by the daily a-d, but I have not found a time when the daily a-d was making new all-time highs while the DJIA and S&P were 5-6% below their all-time highs. It is perplexing indeed. Until strong evidence argues otherwise, I still feel the Jan 26 high will turn out to be a very major one for two reasons. First, the DJIA broke convincingly below its parabolic upward arc from that high. Parabolic breaks tend to be important and rarely if ever completely retraced within a few years of the break. Second, the 17 year cycle which has been amazingly consistent throughout the complete life of the DJIA beginning before 1900, pointed to late 2017 or very early 2018 as its next resolution after the year 2000. New highs from here on in would be hard to explain if the 17 year cycle, turning point pattern, proves to be accurate this time around…

  • Verne Carty May 23, 2018, 10:13 am

    Most analysts will argue that the A/D line should be viewed as a leading indicator, which is why most of them are seeing a bullish count. In fact the most commonly cited argument against a top cited is the absence of A/D line divergence at recent highs. This market has continued to nullify numerous fib and cycle relationships the past few years so I tend to be a bit cautious when referencing them. The most stunning development in my view is the negation of NINE official Hindenburg Omens in the last year. That is truly a statistical anomaly as significant as I have ever seen!

  • Verne Carty May 23, 2018, 11:51 am

    Hi Peter, just confirming that the chart show is at 4.00 p.m central standard time today (5.00 EST)

  • Ed May 23, 2018, 11:52 am

    Peter G,

    Thank you for providing your insight! Always interesting perspectives!

  • Ed May 24, 2018, 3:28 am

    Peter G,

    As I have asked before…Aren’t there lots of stocks making new highs that are losing money, losing market share…that have large amounts of debt that will never be repaid?

    Why wouldn’t the “answer be” these stocks are making new highs because they are components of an ETF? Wouldn’t that distort the A/D Line?

    I believe you are correct when you suggest that the January 26th high might well be
    the high for the two reasons you mention. We shall see!

  • Verne Carty May 24, 2018, 6:45 am

    I have to say it is very intriguing to hear so many thoughtful comments about the plethora of anomalies that persist in this market, and has for some time. I suspect when the story is fully told, we will have discovered an obvious reason that so far,I have not heard a single person offer as a possible explanation, namely, outright FRAUD!
    We know that banksters are liars and cheats. I refuse anymore to keep large overnight positions in what to me is clearly corrupted and grossly distorted ( wrt price discovery) market. Just one man”s opinion. Trading instruments are not FDIC insured, and even if they were, there is not remotely enough money to cover potential losses. Caveat Emptor!

  • Willem May 24, 2018, 9:19 am

    Everything adjusted and Bradley’s Siderograph added in the graphic

    What does that mean???
    I have the indicators 2a and 2b that indicate the direction over a period of time.
    Let’s exactly agree on September 12 !!

    That could therefore be a confirmation that what Bradley predicted is correct.

    Careful!
    http://www.prognoseus500.nl/

  • Willem May 24, 2018, 9:20 am

    Till 12 september the indictors 2a and 2b give the same as Bradley

  • rotrot May 24, 2018, 11:39 am
    • rotrot May 25, 2018, 5:29 am

      Free Amanita Newsletter – Manfred Zimmel | May 23, 2018
      https://www.amanita.at/docs/open/newsletter-e.pdf

      “This model reflects good & bad times for humanity:
       good times: economic growth, political stability/ peace, equity bull markets, commodity bear markets, low unemployment & inflation, good world health, calm earth
       bad times: economic, financial & political crises/ wars, equity bear markets, commodity bull markets, high unemployment & inflation, epidemics, earth changes
      Almost all models in the Amanita system have their bottom of the 21st century around 2022/23 or 2033-37”

      • Peter Temple May 25, 2018, 8:43 am

        To all …
        I am suddenly unable to post a comment (happened within the last 15 minutes – I get told it’s spam). I have a sneaking suspicion this has to do with GDPR lockdown that’s happening in Europe. I have my site on a European server, scheduled to be moved this weekend, so I may have to speed up that process. I have a message left with my server company, who will hopefully call me back soon.

        I’ve never had to leave my number for a call back before, so this tells me I’m not the only one that’s having issues. The complexity at the top of a major cycle continues to play out …

        • Peter Temple May 25, 2018, 10:06 am

          I’m now in the midst of moving my site to another service, so there may be some downtime over the weekend but I should be up and running by Monday with everything working.

  • Joe Longwill May 24, 2018, 1:08 pm

    Peter G
    I think ed makes a good point on individual stocks
    Being part of an index. I could add all of the various
    Etf’s as well. This is off the top of my head yet I’d say the
    Mindset of investor’s/traders has changed from looking at
    Individual stocks to buying an etf or just buying a sector vs
    A stock . As for the advance decline line I’m curious which
    Advance decline your looking at : NYSE ? Or nasdaq or ?
    Is that a cumulative advance decline line or just advancers minus
    Decliners ? Does a person buy say Facebook and Amazon
    Or do they buy a FANG etf which buys all of them ?
    I do look at the advance minus declines on the NYSE and
    I don’t see it as making new highs . It trades in a range .
    As for the oddities in this market I’d say the year 2016
    Was where the extension began . Also I’ll mention the year
    2015 was also an inversion of sorts .
    Corporate buy backs also play into this and I read somewhere
    That this year 2018 is forecast to be a record year for corporate
    Buy backs .
    The bottom line though is cycles do appear to change
    From to time yet do they really change ?
    You mention the 17 year cycle from 1900 yet you didn’t
    Elaborate . You also mentioned the year 2000 which the nasdaq
    100 crashed into April that year and the monthly closing high
    For the spx was July or August 2000 even though the print high
    Was March. If my memory is correct it was Sept 2000 when
    All of the index’s began to drop $NYA included .
    A similar cycle exists this year as well.
    One thing I try not to get caught up in though is the
    Thought that “this time is different”
    History does rhyme but it’s never exact .
    Just my thoughts .
    Look at previous market peaks there are similarities
    In all of them and no 1 indicator is perfect .
    Joe

  • Joe Longwill May 24, 2018, 1:14 pm

    Lastly
    The cumulative advance decline line making new highs
    As the market index’s fail to make new highs is a very bearish
    Sign. Go back and look at the rally from October- Nov 1929
    To April 1930 as just 1 example . That same pattern shows up
    Enough times to watch for it near market peaks

  • Verne Carty May 24, 2018, 1:41 pm

    I like Avi Gilburt and think he is a fairly competent EW analyst. Having said that, I must say I find his confident call for several more years of a continuing bull market to take the S&P as high as 4,000.00 to be sheer lunacy. According to him, this bull market will not end until everyone is convinced that it will not. What irony! 🙂

  • Liz H May 24, 2018, 3:03 pm

    Possible fractal. Check daily chart.
    Netflix 4/25/2018 to 5/29/2018 (?) is similar to
    12/26/17 to 1/29/2018.

    • Peter Temple May 24, 2018, 3:17 pm

      AAPL, AMZN, NFLX – all in ending diagonals. One more down and one more up to go in the lot of them.

      • Liz H May 24, 2018, 3:45 pm

        Thanks Peter!

  • Pieter van Leeuwen May 24, 2018, 7:45 pm

    How about crude? I’m seeing one more minor high likely there as well, based on my own non EW methods and also some EW charts I’ve seen out there that look solid.

  • Joe Longwill May 24, 2018, 8:01 pm

    Liz H
    I can’t recall the dates but use a daily chart on the Dow or spx begin on May 28 2018
    And count backwards . There should be 2 equal distances between lows which then
    Points to May 28 . Also while I have said I don’t rely on the Bradley model . June 9
    Is a Bradley date for a high . That said using calendar research timing June 6 is a low .
    All I can make from it is June 6-9 th as a turn which then targets a Sept 8 turn .
    My own work shows a down turn from mid August: mid Sept as a high with a Jan 20 2019 bottom.
    The Jan 2019 cycle low points to a late 2019-early 2020 top.
    The years 2021 and 2023 being cycle lows.
    Some call highs as left translation or right translation .
    A high on the left side of the cycle being a weaker type decline yet a high on the right
    Side of the cycle tends to bring a crash . That said a high into late 2019-early 2020
    Would be on time in my work yet for many I’ll suppose they would consider it a right side
    Translation and if so we get one hell of a dump in 2020 going into 2021. .
    There is a ton of reasons to expect a late 2020 to 2021 low .
    According to the late George Lindsay you count 12 years 3 months to 12 years 8 months
    From a major top and look for an important low.
    Look at the 1919 high and the 1932 low , or the 1929 high and the 1942 low , 1937 high to the 1949 low .
    The March 2000 top as well as the August 2000 top the dates surrounded the Nov 2012 election .
    Now take the Oct 2007 top and count 12 years 3 months to 12 years 8 months .
    Jan 2020 to August 2020 , the Benner business cycle has a year 2021 low from a year 2018 high.
    And the mars Uranus cycle of which has been in effect in major market crashes calls for a rough
    Jan 2021 low ( it’s a 2 year cycle )
    There in sits my dilemma , everything pointing lower into Jan 2019 and then up .
    I’ll go with the right hand translation .
    What matters most to me is how this market moves from mid August into January
    As that is where the decline should be. Until then I give this market some room
    Yet don’t trust it and stay bearish . Next year should be up and that can be a blow off
    To higher highs or just a counter trend bounce that retraces a steeper decline .
    The Feb 2018 lows I expect to be broken yet I have no downside targets at this point .
    This year to me is the set up turning the long term indicators down with 2019
    Leaving the market with bearish divergences . 2020 ends up a right translation high
    A presidential election and many cycle lows targeting 2021 – 2023 .
    So far this year the Dow and other index’s going nowhere .
    Short term trading and trading the range may last longer than most expect .
    Anyways may 28 is a low to low to high count on the daily chart .
    The real move though should begin in Aug- Sept .
    We will know soon enough .

  • Joe Longwill May 24, 2018, 8:02 pm

    1929 high to 1942 low I meant

  • Brian Baird May 24, 2018, 8:08 pm

    is there any point making a forecast beyond tomorrow?
    as we can see even tomorrows forecast changes each day

    wasted energy if you ask me

  • Liz H May 24, 2018, 9:55 pm

    Hello Joe, count backwards up to when?
    Based on nflx, if tomorrow, plays out like 1/26/2018, here are some stocks that hit ATH last 1/26/18 and may have + gain tomorrow:
    GOOGL
    HD
    MA
    NFLX
    AMZN
    PFPT
    DHR

  • Joe Longwill May 25, 2018, 3:45 am

    Liz h
    Feb low and late march low
    Chart is old post yet will matter now
    It’s a weekly chart using all of the major index’s
    http://imgur.com/Vt81aBt

  • Joe Longwill May 25, 2018, 3:47 am

    8 weeks and 16 weeks
    I never used a daily chart nor
    Did I use calendar days . If I had
    The data I’d use all of what’s available
    Now since we’re getting close .

  • Verne Carty May 25, 2018, 4:13 am

    Quite right about corporate buybacks Joe. That is where the bulk of the tax break is going, and no doubt has extended the duration of the bubble.

  • Verne Carty May 25, 2018, 4:21 am

    The Btadley dates only specify significant market turns, NOT highs or lows.

  • Joe Longwill May 25, 2018, 4:32 am
  • Ed May 25, 2018, 6:07 am

    Verne,

    You mention that “nine” Hindenburg Omen’s have been negated in the past year…
    What negates a Hindenburg Omen? I have never gotten an answer from McHugh on what negates a H.O. Thanks in advance.

  • Peter Temple May 26, 2018, 12:30 am

    The site has been moved and seems to be OK. The problem with leaving comments ended up being a spam plugin that was made GDPR compliant yesterday.

    In any event, comments are now working again.

  • Verne Carty May 26, 2018, 7:05 am

    Hi Ed. The HO specifies a specific time window in which a market crash is expected to occur after the omen appears. The last omen “expires” at the end of May in just four more trading days. I think a failure of nine consecitive omens would be a first. In some ways it is really not too surprising. We have seen how the era of central bank hegemony has made it a vety dangerous game trying to predict this market, whatever the method employed. I pay absolutely no attention to prognostications and simply take a day to day approach to trading dcisions. The banksters have made many of us day traders, by necessity. Folk with all their life savings in this market in my opinion face outsized risks.

  • Verne Carty May 26, 2018, 9:37 am

    That is very interesting Joe as I have heard a few analysts making the exact opposite argument, namely that the A/D line new highs ahead of the indices is bullish as it is a leading indicator. I have never actually verified the assertion by looking at the evidence and just assumed they knew what they were talking about. I know of late OBV has been a really good indicator (one of the few I still find reliable) of market direction but I need to take a historical look at both the A/D line and OBV. Things can and do change.

    • Pieter van Leeuwen May 27, 2018, 10:04 am

      Someone did an historical study in the last year or so on the A/D line. Perhaps James Goode, but don’t remember for certain. That person looked at every major top in the last century, and in only one case did the A/D line not form a divergent LOW coincident with new highs, to signal the top. Meaning at the last highs (Jan) if the A/D was not below a prior high, new highs for the markets should still lie ahead.

      Would this be TOO difficult for our financial engineers to rig, and thereby fool the majority. Many many folks are paying attention to this “rule”.

  • Verne Carty May 27, 2018, 3:45 pm

    My point exactly. Just because the market adhered to certain rules in arriving at previous tops does not necessarily mean it has to adhere to the same rules in the current top being formed. It is really interesting how emphatically some folk are pressing the A/D line argument and dogmatically insisting we will not have a top prior to divergence. Look at the remarkable number of new 52 week lows we have seen with nine Hindenburg Omens yet no significant downturn. Something strange is clearly going on. I think it could be a combination of passive investing via ETFs, concentrated buying of heavily weighted index components, and unprecedented leverage. All these factors suggest that when the market finally does unravel, it will fall faster and farthet than any decline previously seen.

  • Peter Temple May 27, 2018, 3:55 pm

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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