Monday, December 5, 2016

En Garde!

Some market commentators have us about to explode in a minute iii of 3, upward. The DOW says something different at this time. It tells us to be on guard for a sharp reversal soon.

DJIA - Hourly - Be On Guard

The pullbacks along the way are so shallow as to make one hunt to find even a B wave. That, of course, looks most like the running triangle in the middle of the pattern that we commented on in prior posts.

Then, today, in live chat, we began counting out a likely contracting ending diagonal in the (v)th wave position of minute v (circle v) of the Minor C wave.

Just look at the divergence with the Elliott Wave Oscillator - a clear warning! Many, wave counters are probably being fooled in the count because the DOW made a lower low at the point shown at 0, while the S&P500 did not. They are likely counting one extra wave where the DOW says that's not allowed for this count.

Have a great day!



Saturday, December 3, 2016

No problem

By the time you read this, the figures below will already be hopelessly out of date. But, here, courtesy of USDebtClock.org is the U.S. debt, as of Saturday morning.

US Debt at $19.9 Trillion

The current debt is $19.9 Trillion, rounded down. (What is the other $29.4 billion between friends?) And this debt is currently growing at about $1 MM per minute. Now, some market prognosticators and web-sites say a great economic boom is about to begin. Gulp! Really?

It is true we have just been through a period of economic growth - since the Great Recession of 2007 to 2009 - but that growth is uniformly described as "tepid", or "the most sub-par in history after a recession".

From an Elliott Wave perspective, this sub-par expansion we have just enjoyed fits best in the fifth wave position, after an age of Golden Economic growth from 1932 - 2000, which is best described as being in the third wave position, with the years 2000 - 2009 being best described as being in the fourth wave position - with the marginal new high of 2007 in the major indexes, the most classic of all Primary B waves.

So, now we have a republican president elect, and a republican congress - still pending the vote recount challenges outstanding - and some will ask, "What will a fiscally responsible - yeah, right - republican congress do?" Remember, Ronald Regan and George W. Bush were supposedly of this ilk, and they did nothing but expand the debt either.

For my part, I don't think it matters. As interest rates have risen recently, the rate of increase in the debt has increased even faster & faster, and not because of spending! This is a situation of the tail wagging the dog. It would be one thing if the debt was increasing to increase spending and fiscal stimulus - but now the debt is increasing even faster, not due to increase spending, but just to account for the increasing interest rates.

This is a growing problem, not one of more and more irrelevance. And, even so, fewer and fewer Americans went to polls to express their desires. Stock market bottoms are defined by crisis and panic. Stock market tops are defined by boredom and ennui. Welcome to the latter, as evidenced by the lowest voter turnout in 20 years, according to CNNPolitics! There's a sentiment gauge for you.

So, what will the new congress do, if allowed? Will they implement a flat, fair and simple tax that you can fill out on a postcard - and cause significant unemployment in the IRS? Will they dismantle several of the regulatory branches of government - like the Department of Education in an effort to cut spending - again cutting more government jobs? Who knows. But actions of this type - if they occur - are contracting, and not expansionary in nature. Or, will they just continue the sham, and continue to talk a good game while they, too, increase the debt?

No one knows for sure. But we already have evidence - by the GDP growth of the last eight years - that even this level of debt is a 'drag' on the economy. And, increasing interest rates are causing the debt to grow faster at this time. Just imagine if we have this level of debt and contracting types of policies are enacted into law. Even with a help of a friendlier Federal Reserve - if such is appointed by President-elect trump - economic growth could waffle even worse.

If 2016 - 2017 results in being the Primary V top, of the Cycle 5 top (the fifth we noted above) of SuperCycle 3 - the great period of U.S. expansion, then SuperCycle 4 would represent a potentially unprecedented level of sideways volatility in U.S. Indexes. A SuperCycle 4th wave would be difficult to predict (it could take on one of several forms - from a triangle, a flat, etc.), and it would likely contain very "jerky" movements upward and downward which could ruin accounts - while going largely sideways in the end from a millennial perspective.

As viewers of my video channel know - fourth waves are particularly difficult to predict. I have even given a special name to this phenomenon called the fourth wave conundrum in my video entitled, A Critique of Elliott Wave for Trading. But perhaps this fourth wave - when it begins - will initially mirror the personality of the president-elect. What has Donald Trump been, if unpredictable? That is the one constant of every purported news story about him.

And, maybe, just maybe, there is more here than the work of man. Given that the planet is growing warmer and warmer so far, with the hottest years on record in many cases, and that many people deny it - even given the evidence of polar and glacial melting; given that many areas are still experiencing either unprecedented drought or cycling between that and flooding; given that world population growth is still increasing and taxing planetary resources; given that there are few restraints currently on corporate growth or corporate irresponsibility; given that the political process put into office the person who got the fewer popular votes, then maybe the resulting downturn in social mood that is occurring or will occur is nothing more than nature's way. And, maybe the candidate elected is simply a reflection of the current natural state of social mood.

And, maybe, just maybe, if we are careful and true to it, Ralph Nelson Elliott's principle of natural stock market movement will help us navigate the trying times ahead. Let's hope so.

Wednesday, November 30, 2016

Watch 2,193 on the ole S&P

In Saturday's post, we noted the booming level of sentiment, and the building divergences. With today's higher high, most of these have have gotten worse - not better. Here is the count as we have it today. We are happy to say that in live chat, we pointed out the "running triangle' fourth wave shown in blue, making today's new higher high the potential wave v .. of something .. we'll explain below. And we did start a downward count.

Hourly S&P 500 with higher all-time-high out of Triangle

So, when we took some measurements on this chart, yesterday, and provided them in live chat, we found that a minor C wave would equal 0.618 x minor A between Friday's high, and today's high. Further, within wave C, then minute iii would equal 2.618 x minute i, to the pip. The internal waves are also shown.

Because of the narrow trading channel, indicating loss of momentum for the C wave, and the "election result" wave A - which itself has some very peculiar properties (like starting from an overnight halt in the futures market), we think this minor new high in both the DOW and S&P500 counts best as Intermediate wave (3) in the weekly chart below.

Intermediate (3) likely complete in the weekly SP-500 with marginal new high

So, now the thing to do is to watch to see if Intermediate wave (1), upward, is overlapped in the downward direction by price crossing below 2193. If it does, and if the minor A wave of Intermediate wave (3) at 2182 is also overlapped. then there should be much more confidence that an Intermediate Wave (4) is getting under way.

We'll have more to say on this later. But any bulls out there - and there are quite a few of them based on the sentiment numbers - simply had to be disappointed by today's close. Instead of today being "gap and go" for them, it was "gap and trap", as today's opening gap was closed in short order. We can not 'positively' rule out new highs at this point, but the overlaps indicated would help do so.

For my part, and this is not trading or investment advice, just my opinion - I do not currently have a favorable outlook on the market. That may change, but that's the way things stand today. In my opinion there is more down side risk than there is potential upside reward, and this is said with complete recognition that higher highs of 3 - 5% are possible.

Hope this helps.

Saturday, November 26, 2016

A Few Charts

Although not publishing it regularly, I've have been rigorously tracking bullish sentiment as the market has risen. Here is a current update.



Weekly Combined Bullish Sentiment

You can see combined bullishness is at a new recent high at 58.6% bullish, compared to the February low of 37.1%. This is quite a swing and compares to previous market peaks in the 63 - 66% level. In fact, professionals and newsletter writers are 63% bullish, and individuals have recently swung from 23.6% as a low to a recent level of 49.9%. We are not claiming this level of sentiment necessarily represents an ultimate top. But things are definitely heating up.

One might also want to note that even as the DOW and S&P500 have powered to new all time highs, the $VIX is currently diverging and has not yet made a new all time low.

$VIX is Diverging Currently

The all time low in the $VIX is in the 9 - 10 range, and, even though the 11 level was reached in August, even that level has not been breached in November.

It is also worth noting that the Dow Jones Transportation Index may soon run into the resistance of a parallel trend channel line, as in the chart, below.

DJ Transportation Index - Possible Trend Channel Resistance Soon

A further look considers the S&P500 Index versus both it's current volume and it's On-Balance Volume which has not by any means broken out to new all time highs as price has.

SP500 Compared to Volume and On-Balance Volume

Finally, there is this comparison to the current NYSE Advance-Decline line, as below. Even though the SP500 and DOW are at new all-time highs. The advance-decline line is not currently.

NYAD Currently Diverges from Price

So, one has to ask to question if these are actually the first real chinks in the bull market - or whether they will correct themselves on short order. If these conditions do not right themselves, then it is possible the diagonal is actually forming. If they do get corrected relatively quickly, then it might suggest that Primary V will be the impulse count and not the diagonal count.

Cheers!

Thursday, November 24, 2016

A Wave

Not just any wave, but the "A" wave : the minor A wave - most likely. We had said that if  the DOW passed 19008, then it would numerically invalidate the possibility of a diagonal A wave in the hourly Dow Jones Industrial Average. The Dow did that this holiday shortened week, and formed an impulse count as best as we can tell.

But unlike some market prognosticators - even some various serious Elliott wave types - we did not scream "top tick", nor did we call for a new Primary III bull market. Neither did we post some outlandish new price targets like many gurus. Instead, we advocated for calm, and flexibility. (Check out or post of 11/12/2016 - and look how many more days have had new higher highs.)

So, after considering numerous possibilities this week, this is the count that seems most on track. It is just the Minor A wave as a impulse, rather than as a diagonal.

DJIA - Hourly - Minor A Wave as a Diagonal

This count has already proven itself, and since minute wave iii is longer than minute wave i, then minute wave v can be almost any length - but it is a common target than v = i, and this wave is approaching that level. The A wave may still not be completely done, but it is getting very close.

After this wave wraps up, then there should be a pull-back for a B wave - that realistically can be 23.6 - 78.6% of wave A, followed by a C wave up.

We have to admit because there is a triangle involved - which 'could' be the B wave, itself, then the best alternate would be that Intermediate (3) is completing at this time. But there is no significant evidence, other than the triangle, for that point of view just yet. Still, there is a triangle, and a triangle should precede the last wave up in this series. But, and this is a big but, that triangle is a "running triangle", and running triangles - with their higher (b) waves - are still bullish, and still point to higher market highs at some point.

This "A" wave would be part of Intermediate (3) of the potential larger weekly diagonal we diagrammed in previous posts. And, again, we said we have no preference as to whether this upward wave completes as a diagonal or an impulse. And there is no good solid evidence for either count, yet. The Diagonal would be better supported by a three-wave Intermediate (3), and the impulse would be better supported by a five-wave Intermediate (3). In the overall impulse wave up, this minor A wave would be the minor 1 wave.

So far, the market has been slightly stronger on the upside than we might have expected, but this still can be the "no-pullback" quality of an A wave up. So, once again, we remain flexible and patient and will continue to follow all the rules, and as many of the guidelines as we can.

On a positive note, we were correctly critical of those calling for "top tick" in an effort to sell their newsletters, and/or promote their services, and we hope that helped your perspective to some degree.

Cheers, and have a great holiday!

Sunday, November 20, 2016

Here's Where Some Others Think the Market is Going

In an article published on November 18, 2016, authored by J. L. Yastine, and published in the The Sovereign Investor Daily, here is where some other people think the market is going.

Four Market Gurus Call for DOW 30 - 50,000

Right on? Not in my view! Have a good week & safe travels if you are on the road.


Friday, November 18, 2016

Five Waves Up

As of today, we successfully counted five-waves up in the SP500, and E-mini S&P futures. The significance of this is two-fold. First, with five-waves up in the direction of the trend - one should expect at least another five waves up - albeit after a correction.

Secondly, we are finally able to place the latest A wave up of Intermediate (3) on the two-daily chart, as below.

SP500 2-Day Chart - Five Waves Up to A

Next, some will say that the five-waves up could also be a minute wave (i) of a much larger Intermediate (3). And, again, while we are not ruling out an impulse, when we just look over the wave above, it is very hard to find impulsive character in it. So, the "look" right now is one of a diagonal.  That means wave Intermediate (3) has high odds of forming as three-wave zigzag, rather than a full-on impulse.

We can not say for sure, yet. But we do find it telling that a wave A may have stopped short of making the new all time high - perhaps as a warning. Certainly, there is no signature on the EWO of an impulse third-wave. The EWO is still diverging. Then, too, as we were counting waves today, we noted that the DOW may have slightly truncated it's fifth wave up - where the S&P 500 completed it successfully - another possible warning sign.

So, we remain patient and flexible, and continue just to follow the rules and guidelines as best we can. (And let's see how many web-sites and bloggers begin to follow this count and post it as their own - as they get whipped around in the near constant chop at the moment.)

As usual, I will indicate that the downside invalidation level for this count is below the low of wave (2) on the cash chart. Each of the Dow, the S&P500 or the ES may make one more higher daily high as part of the A wave, without affecting the overall count, (and that would likely have to be Monday or Tuesday), but another new high is not required in the A wave. It counts acceptably as it is.

Have a good weekend!

Cheers.