According to The Eight-Fold-Path Method (the featured post in the upper right of the main blog page) any newer recovery high yield for the U.S. 10-Yr interest rate will likely validate an impulse wave which may still run a bit higher.
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| US 10-Yr Yield - Weekly - In A Parallel |
After the higher highs, and perhaps a (5) = (1) wave, then a significant pullback in rates is likely to occur. This might coincide with a FED pause and stabilization of FED activity until sufficient weakness is shown to enable an actual rate-cut. Note: because of TEFPM we have not been one of those voices saying, "the FED is gonna cut; the FED is gonna cut" as the impulse pattern had not played out according to the method. It is now getting close (many weeks or a few months away to stability).
As you can see from the above, wave 3 of (3) occurred on the peak of the Elliott Wave Oscillator, and wave 5 of (3) diverged. The EWO on the fourth wave, (4), went back to the expected area of +10% to -40% of the third wave EWO peak, crossing the zero line to go negative. And the EWO has now come back above the zero line for a fifth wave, (5) where it may again diverge on the EWO.
To check for form and balance, the EMA-34 is added to the chart and one can see that every Intermediate wave (with the parentheses) is on an opposite side of the indicator as it is expected to be. Further, wave (3) has five clearly marked Minor Impulse waves 1 - 5 and is an impulse wave itself and not a diagonal of any sort.
Still (1), (2), (3) is (A), (B), (C) until it is not. A higher high is needed for validation of the impulse. It is also possible that wave (4) might want to get a bit testy and make a triangle. This is certainly possible, but not required.
Lastly, back at the beginning of the chart, we correctly sited the likely truncation (*) at the low after the triangle which allowed the degree labeling in the rest of the chart to be followed without incident.
This is the second post this weekend, and if you have not read the first one yet, you may wish to.
Have an excellent rest of the weekend.
TraderJoe
That is nice and a Neely truncation to boot!
ReplyDeleteAn impulse higher comports wellt of with the reality of weak Treasury auctions..I think the seminal question whether the FED will opt to rescue the U.S economy, or protect the dollar's reserve currency status, already facing serious head-winds, not the leat of which is the recent loss of triple A rating for dollar-denominated debt.
ReplyDeleteThen some small banks will be in pressure but big banks will bail them. Markets should correct a bit.
ReplyDeleteThe big banks are actually in worse shape. For some strange reason the bought the FED feint that rates would stay low until 2024 and did not hedge their bond portfolio. If they were forced to mark to market, or liquidate due to withdrawals, they would be insolvent. Swallowing the regional banks will not save them.
DeleteGood to see this type of analysis on bonds. Virtually no one does that.
ReplyDeleteStrange considering the bond market dwarfs the equities market and will ultimately determine its fate.
DeleteIndeed, but it does not garner as many clicks I suppose. The average person knows nothing about bonds, and has no clue that they just missed out on a 30 year long bull market.
DeleteSPY 1-Hr: now has an outside bar, up - going along with Saturday's theme of retracing. And if lower lows are made, in the next couple of days, they may be in the form of a diagonal.
ReplyDeletehttps://www.tradingview.com/x/o6et8VsY/
Yes, there remains the outside chance of a triangle here, but the odds just dropped a bit.
TJ
..just the triangle option is invalidated now. TJ.
DeleteSPY 1-Hr: this can be a,b,c up into noon. There are ways for c to extend yet. But be careful of a 4486 downward overlap in ES.
ReplyDeletehttps://www.tradingview.com/x/5kx5x3wM/
TJ
Seems Michael Burry, of "The Big Short" fame, just went 95% short QQQs and SPYs. YMMV.
ReplyDeleteDan, why do you say that? Burry hasn't commented on twitter in months
DeleteIt's 13F season, when hedgies are required to list their holdings.
DeleteES in another well defined channel since Friday's low. Not sure what it is.
ReplyDeleteSPY 1-Hr: lower high and lower low. Watch for whippy behavior; may be a diagonal.
ReplyDeletehttps://www.tradingview.com/x/AbpoF5i0/
TJ
SPY 2-min: expanding diagonal, lower, with ⑤ > ③ > ①; ④ > ② and ④ overlap ①.
ReplyDeletehttps://www.tradingview.com/x/iNWqQ1rx/
TJ
SPY 2-min: now up over upper diagonal trend line.
Deletehttps://www.tradingview.com/x/d3TmCLub/
TJ
SPY 5-min: 62% retrace, so far.
ReplyDeletehttps://www.tradingview.com/x/oahcAFcn/
TJ
SPY 5-min: over the prior high again into the close. Possible upward diagonal forming. As I said, 'caution' because of the retraces. TJ.
DeleteSPY 1-Hr: we don't know with any high probability as the upward wave is not known to be over. Clearly, the prior downward diagonal was 'ending' and the lower high and lower low were a small degree a-b-c.
ReplyDeletehttps://www.tradingview.com/x/f8VJikTV/
Be careful in whippy conditions as significant upward retraces are a likelihood this week.
TJ
Bonds peak first than stocks than commodities. October I notice $ started turning down just as market started going up. Early yet but $ and commodities showing strength along with bonds. At some point strength in commodities is going to show in FEDS outdated inflation numbers.
ReplyDeletehttps://www.cnbc.com/2023/08/15/fitch-warns-it-may-be-forced-to-downgrade-dozens-of-banks.html
ReplyDeleteSPY 15-min: now below the prior ⓑ wave. Watch out as whippy conditions persist.
ReplyDeletehttps://www.tradingview.com/x/9kwfEueZ/
TJ
ES 1-Hr: ES has now broken the prior 11 AUG daily low marginally. Let's see if SPY can. TJ.
ReplyDeleteES just keeps getting weaker in a down sloping channel. I think it could puke anytime.
ReplyDeleteNAAD Nasdaq adv-decline is about to break into new lows on weekly / daily charts after the decline halted in late May. i.e. breadth is deteriorating after a 3 month respite. Plenty of damage done regardless of the index. VZ for example is trading around 2011 levels. Tesla looks like it completed a simple ABC upwards correction after its decline from ATH, and is resuming the larger down move. 10Y/3M have been saying recession in 12-18M after inversion, and that would be around Nov/Dec-May/Jun. Markets usually predict 3-9 months in advance. Seems like everything is lining up. All that said, the almighty momentum indicators keep saying we should see a bottom soon.
DeleteES / SPY now have lower lows. A lower low for wave (iii) is required -met- if wave 5 is to be a diagonal.
ReplyDeletehttps://www.tradingview.com/x/CVuMtjpX/
Now, watch the lengths of the waves, and still expect a whip around at some point.
TJ
A new post is started for the next day.
ReplyDeleteTJ