Wednesday, July 23, 2014
This gold market is moving at a snails pace compared to other times, but it is the summer and understandable. Gold stocks have come off "a" bottom, not necessarily the "real" bottom though.
I have moved my trend lines to reflect a bigger picture, but it also shows the gaps. One major gap is at the HUI 320-340 price level, but there is also another gap below at the 220 price level. Which one of the two gaps will gold stocks fill first? There are many big name gold stock bears out there but, I have no real reports of any insider selling in gold stock related companies. Until the time that my Google alerts start sending me news of insider selling, there is more of a chance for upside, than there is downside.
The situation seems more like a 50/50 chance of going either way, and that is the worst situation we can be in. I like it when it is more to an extreme side but the markets clearly are not in that position right now. Gold investors became bullish very quickly since the 2014 beginning, and that is not a good sign, unless a clear wave 1-2 has already completed. HUI is above the 200 day moving average, right at my gap below me, so a correction filling my gap below could always happen. Of course those types of corrections can be fast and furious, and be over before you finish your Tim Horton's or Starbuck's coffee in the morning.
We do have a higher low already in place for 2014, but we need some stronger evidence for the HUI to breakout of this funk it is in. It's not late 2008 where the bottom was much more clear than it is now, even the 1999 bottom was more clear than what we have had in 2014.
Gold stocks have to start performing if we are still in a bigger bullish gold cycle. Consistent higher lows in the markets is a sign of a bull market. These higher lows are created by Elliott Wave "ABC" wave action. In other words big and small "ABC" crashes have to be constantly produced, otherwise these patterns reverse (inverted ABC's) and that would mean the end to a bullish move.
Many think that gold stocks will perform as the stock market crashes, but this does not always work as gold stocks clearly demonstrated in the 2008 crash. Right now the early June 2014 bottom is the last higher low to beat, as that low must hold.
Tuesday, July 22, 2014
Gold has been traveling radically in both directions producing very choppy patterns, mixed with 5 wave runs that look like great impulse waves. That's not especially a good sign.
Many analysts are using the speculators traders positions as being the smart guys, but I never do that. It is the commercials that look at the markets from a different view point, as for the non-commercials, or speculators, carry most of the risk.
We had a nice run up in gold and then it started to decline , with a real choppy counter rally. This counter rally is looking more like a potential triangle still in progress with some short term upside still to come before another strong decline. I have started it with a wave 1-2 but it could be another inverted zigzag as well. If gold starts any rally and it is struggling then this helps to make a short term bearish case. In this case any "C" wave decline could also be the 5th wave decline. I will not know, until we see how the rally from a potential wave two bottom will behave like. Any rally that does not produce nice clean impulse waves, is under suspicion of being a fake start to a bullish trend.
We have approached another peak but I hold no great expectations that the US dollar will all of a sudden turn, and make a bearish move south at this time. The US dollar keeps pushing higher keeping the lid on gold prices. I am sure you will find no shortage of reasons why this is happening as many are saying it is due to the economy getting better, Maybe it has nothing to do with that, instead investors could be running to the USD as a safe haven. Many analysts will tell you that gold is going down, as the hostilities in the Ukraine or Iraq have decline a bit.
I believe gold is indifferent to many outside reasons for it's decline, as it goes up and down due to the fluctuations of the US dollar. If a big chunk of cash gets injected into the real economy for any reason, the US dollar would decline and gold would go up, but on the flip side, if the demand for cash increases then the USD would rise and gold would fall. Any inflation figures would be lagging to gold. This happen in 1999 as the Fed dumped massive amounts of cash into the system, (remember Greenspan?). The USD imploded in a 5 wave decline as gold shot up in a 5 wave rally.
Not until we see a clear reversal in the trend of the USD will we see a substantial boast in the price of gold. At this point the USD is traveling against the commercial short positions, and the Euro is doing the same thing, as it is declining as well against commercial long positions.
Since the 11th of July the USD has rallied right along with the full moon cycle , and this week we are approaching the new moon cycle. Will the USD be repelled by the new moon? It sure looks like that can happen.
The Nasdaq has create new record highs this week, but has left several open gaps in it's wake. On the cash Nasdaq charts there are many gaps in the charts, which all have a 90% chance of getting filled sometime in the future. We have three full trading days to go before the new moon, and new moons can be very bearish for stocks. Many gaps have opened even way before the two I know show and they have all been closed on the trip back up. If the markets or in this case the Nasdaq were to just close the last two gaps quickly then, that would send a little shock wave of fear into the hearts of investors. Apparently there is nothing around that can spook these mom and pop investors, as the markets have ignored all fundamental bearish developments, and pushed higher.
This market is looking for that illusive breed of investor that belongs to the, "Greatest Fool Clan".
What kind of a cave do these guys live in?, The mainstream media has been calling them out with their bullhorns for weeks already. A war breaks out and those investor clans run back into their caves for safety. The majority may be winning in this bull market, but they will be winning on paper only, as the last one in will hold paper that will be falling in value.
In the age of the Internet it is no longer paper, as we would have to call it something else as everything is just a digital entry in a computer. As rapid as this move went up, it can come down just as fast, or even faster as fear works much quicker than any hope and greed does.
Overall the markets are boringly slow and have yet to show a clear trend of lower lows, even though I am getting many inverted zigzags. Inverted zigzags give the impression of a bull market, but are actually displaying some stages of ending patterns. Of course all bearish news has been ignored which is a sign that we are still over on the bullish side in the Nasdaq.
Besides my two open gaps I have right now, the next open gap lower as at the 3680 price level., and another one at the 3300 price level.
A correction or an end to this bullish silliness is long overdue, but as usual the markets keep pushing north.
Monday, July 21, 2014
I also posted the link above, but it deals with my Cycle degree Impulse.
The markets are doing everything in their power to fool us, and they are doing a good job of it. Sooner or later this bull market has to finish or go into a good old fashioned bull market correction.
The media has been harping on this bull market for so long, they don't even know who they are talking to. To what tribe does the greatest fool belong to, that is still dying to buy stocks at these valuations. Even to Warren Buffets calculations, the stock market is over done. When the good news no longer pushes the markets higher then we will be slipping into a correction.
My small wave counts are diagonal related and there is the potential for this market to push higher one more time. This is also where little triangles can come into play. They give me a warning that a degree change is also very close. These corrections can go deep, and they can go so violently fast, but reverse just as fast. If this is going to happen then this week would be a nice time. Either way I am working it as a zigzag rally and the more inverted zigzags I get, the closer we are to another turning.
Since mid 2013 the markets changed in pattern as they started to tighten up again, with choppy and erratic behaviour. Inverted zigzags start to show up more frequently and flats can give us the clues that an explosive rally can happen.
I have talked about the start of my wave zero in Cycle degree many times, as it is the basis of all my wave counts. Anytime a market does not do what it should do, it is a fault of bad wave counts from the past. Never reviewing the entire 5 wave sequence in Cycle degree is the biggest mistake all of us wave counters make. I followed GSC and SC degree wave counts for many years believing they are true or fairly accurate. Nothing could be further from the truth! Once I extend one single wave position, namely the 1929-1932 bear market, then all other wave counts travelling up the chain, were knocked off, as they no longer fitted.
The majority of changes were wave count extensions, as I look for extended wave three' before I ever look for extended wave 5's. In the EWP rules, wave three's should never be the shortest wave, and only two waves can extend in a 5 wave impulse at anyone time.
I follow the Cycle degree 5 wave sequence, and I have used the expression of a "Cycle degree box".
Another way of describing it is living in a Cycle degree dome. The Cycle degree dome is just like the Steven King TV series Under The Dome. That dome produced a very clear start and cutoff point, with no chance of escape. Even the cow got cut in half, and this would be the start of Cycle degree zero. Sooner or later the 5 wave Cycle degree sequence must end at a Cycle degree wave 5, where you would crash into the dome somewhere to the west. All charts have a North, South, East, West direction, as charts always travel north easterly.
Not until all 5 waves in Cycle degree are completed, can we escape or get out of the Cycle degree dome. Supercycle, and Grand Supercycle degree cannot start anywhere in this "dome" until we reach Cycle degree wave 5. Every wave analyst has a choice if he feels the need to review the charts going back, and most never do this as it's too much like work. Elliott Wave International has never reviewed their GSC degree wave counts. Only changing wave counts after 2000 is a cosmetic way of wave counting, which does nothing to help in finding a better fitting sequence.
Many wave counters are showing me that they are still counting in GSC degree, and maybe even SC degree, but all those wave counts missed the biggest bull market since the the depression.
Missing a bull market after insiders and smart contrarians have loaded up stocks, should have never happened, as insider buying is public information.
This is the wave count I am presently working with the start of wave zero in Cycle degree at the 1932 stock market bottom.(Wave 2 in SC degree) Many commodities also bottomed around the same time. By looking at the 1932 bottom, the markets instantly started into wave 1 in Cycle degree, and fundamentally you could never tell that there was a historic depression in progress. The biggest point to remember is that after extreme pessimism all markets swing to extreme optimism. Many wars were in progress and wave 2 in Cycle degree coincided with the Battle Of Midway. To this day many wave analysts still have the 1970's bear market as a Cycle degree wave 3-4,so many will tell you that the markets have to crash back to this level again. The Dow 1000 price forecast is based on a GSC degree wave count which I have eliminated and thrown in the trash heap a year ago.
I have not been compelled to change it back at anytime in the last year. It is impossible for the 1987 crash to be a Primary degree crash as we can see the physical size does not even come close to Primary degree.
The chart above only takes us to the 2009 bottom and we can use futures charts to carry on with the wave counts today.
The 2009 bottom may still need changing, but I am treating the 5 year+ bullish phase as a diagonal 5th wave, with a running flat for a wave 2 correction. This still needs to be confirmed once we know how deep the impending correction will end up at. How deep a correction we will get is based on the degree we are at, and 4th wave diagonal corrections can go very deep towards the previous wave 2. It must not go below the previous wave two low, at a max of 11,000. I can give you several more price levels and all of them would be dubious at best. I look for large across the board insider buying which will put a price bottom to our next correction. Nobody knows at what price level the insider contrarians will start buying, but we know insiders have been selling for months already.
At each gully of the DJIA bullish phase, can be a place to look for a potential bottom, but insider buying would have to confirm it. Since June 2013, the markets started behaving differently again as that also coincided with a gold bottom. From this June, the markets are looking like an ending diagonal as wave 4 dipped well into the wave two price range. Eventually the markets will have to dip below this June price level, and there would be no more support until the 2012 price levels.
The DJIA has maxed out at about 17,150 on July the 17th, but it is still too early to tell if this will hold. The Russell 2000 has already made a great decline, so it is leading the charge down so far. With so many traders playing this market short, then they can get into traps very quickly causing the markets to explode. The markets have in general ignored any war fears, and that dosn't surprise me at all, as it has happen many times before. Hell, the Mideast could be in flames and the markets could ignore it. Any news that gets repeated, over and over, usually turn irrelevant by the third time.
I have mentioned the July, 16, 2014 dates many times, but I was expecting the markets to be at a bottom and ready to start up again. The last time this setup occurred was in 2002, but even then it took a few months after that when the markets hit bottom. This gives us until this Oct 2014 to match the same time lag. The latest I would expect some type of strong bottom would be in the first part of 2015, which would match 1915 extremely well.
Sunday, July 20, 2014
I thought it would be a good to look at the gasoline futures charts and see where the wave count may be. Of course it is so choppy and has overlapping waves exactly at the critical points, when I am not allowed to take them. Futures charts have extreme leverage associated with them that many times waves overlap just enough to throw out a wave count.
The commercials are net short on crude oil and gasoline which I think they call, "Blendstock".
The ratio that the gasoline commercials are about 1.40:1, which is nowhere near any extreme. This does not give gasoline the freedom to fly to the moon, but there is still upside potential until maybe late September.
I chuckle when I look at this chart because of the wild pattern gasoline has produced. Back in 2007, and the following rocket move in gas, can only fit as an expanded type pattern, followed by the subsequent crash down into the late 2008 bottom. Gasoline bottomed a little after gold and was matched by a glut in crude oil at that time.
Steven Jon Kaplan from the True Contrarian was calling for a gasoline price crash at that time, with some deep numbers which I can't recall. I was watching crude oil at the same time and was also forecasting a crude oil crash below $75. At the "Peak Oil" frenzy, Kaplan's readers were sending him emails saying how crazy and insane such a bearish gasoline forecast was, when we were running out of oil. Readers got very vicious in some of their comments. Needless to say he got it right as he understands this type of optimism extremely well, and I would say he understands crowd psychology better than most Elliott Wave analysts out today.
At this time gasoline is a truncated pattern and I would like to see it make new record highs, but it has very little room left to make or break a bullish wave count. At $2.40 - $2.50 a gallon we would be at a critical price level as my present wave count cannot fall below $2.50. Just remember these are not retail prices, as retail prices would be much higher. Each contract represents about 42,000 gallons.
I am trying a triangle 4th wave in Minor degree and maybe we will get a spike when we end the summer driving season in September. They manufacture driving fuels all the time but import more if they need it.
Saturday, July 19, 2014
I will not be posting any updates for the first week in August as I will take some downtime.
Crude oil has been in the news since all the massive dislocations in Iraq has spread fear far and wide. Fear of an oil shortage is a common theme and crude oil has bounced in response. This is a pretty normal reaction, but oil has been in a bullish phase since late 2011 showing consistent higher lows in the process. These higher lows are all created by "ABC" crashes. The higher lows are deceiving as they are not pure impulse waves but show dramatic overlapping wave structures. These types of waves fit into a corrective pattern far better than some impulse wave that is supposed to take crude oil prices to the moon. $150 and $200 priced oil forecasts have become popular again. This choppy pattern started after the 2011 peak and is still ongoing.It also makes wave counting a real challenge to say the least.
On top of that charts in futures contracts, from daily charts to weekly charts, are dramatically different from each other.
Any fears of lost production coming from Iraq is overblown as that entire region is gearing up to produce much more, even during any fighting going on. The Kurdistan controlled region will double their oil production, and even Iran is starting to look to it's area closest to the Kurdistan oil fields.
Every dictator or terrorist controlled area wants to pump oil, even to sell on the black market, as they are all desperate for increasing their cash flow. Blowing shit up cost money, and oil is the perfect vehicle to get revenues from.
Fear rallies rarely last and crude oil has backed of dramatically. The question remains if this was a short term decline or if there will be more to it. Any oil price below the $99 price level will help to confirm the bearish side, as any wave two can never be lower than the start of wave 1. If we are in a 4th wave decline, then I could see another big crude oil rally, but shit that could not happen until next year. Right now the $75 crude oil price range would be a potential price level to hit, from which oil can crank back up. Then that $115 price level should get exceeded one more time. After the September long weekend crude oil can make dramatic moves as well, and they usually head down.
Crude oil would be very susceptible to a decline if the USD turns very bullish at the same time.
The gold/oil ratio is around 12.7 to one which still makes oil rather expensive when using gold as money. Either way oil is in a triangle that many call a "wedge" but they ignore that when fundamentals like a war get in the way.
Sooner or later all this planned increase in crude oil production could lead to another world oil glut, the only question is at what price level the mainstream medias realizes that a crude oil glut is here.
As soon as they do figure it out then you know it will be the end of the oils glut and another bullish crude oil phase will start. This has happen twice before in just 8 years so saying, "that it's different this time" will not work.
Commercial traders net positions have not changed that much last week with no big moves. They are still net short the USD by a margin of 5.46 to one which bodes well for gold. I view the USD far more important for gold than the news reports you may read regarding safe haven buying. Safe haven buying is an emotional act, and short term trends of emotional buying never last. Gold's big bull market was a result of the major decline in the US dollar. Anytime that there is a good chance that the USD can decline, then gold could see a well deserved push up.
It is also important to know that in order to get wave counts from the USD, we must flip the EWP upside down, the exact opposite in what we do in stocks and other commodities. This restricts every bull market in the US dollar to form inverted corrective waves only, and severely restricts the ability for "any" bull run in the USD to form certain impulse waves. Of course this is all depends on what degree we think we are in regarding the USD. There is little chance that in my lifetime we will ever see a five wave impulse in primary degree, and even 5 waves up in Intermediate degree is questionable at this time. The only time that the US dollar made a great looking 5 wave decline was from 2000 to 2008. That also happen in a decline not in a bull market, but that 5 wave decline is also the key to fitting all other wave counts into as that decline produced one of the best formed impulse waves that I have ever counted out.
At first glance we can see a run up in the USD which now looks like an inverted "ABC". For it to be something else, the USD would have to blast past my trend lines and keep heading north. Well we don't want that to happen, and the USD has to decline or correct to help confirm this. Sooner or later the USD has to breakout of the channel lines, and in doing so it will also produce another degree change. If my wave count has short term validity to it, then an inverted "ABC" will get retraced by 100% or more. This all looks like a potential zigzag rally just in the completing phase, and there is little room to move for this to get confirmed. Early next week price action will hopefully tell us more.
If the USD falls then it will be import to see how low it can go on the daily charts. If it stops well short and completes another "C" wave down. Then a strong counter rally in the USD could also translate into another sharp decline in gold.
Since 2011 stock mania has been in effect, and that was the biggest killer of the gold bull market, not some conspiracy theory that many experts dream up! Sure price manipulation is rampant in the markets, but they have to manipulate it to Elliott Wave specifications. Besides you can't call it manipulation if the good contrarians saw the USD 2008 bull attack, and the 2011gold bear attack coming.
Notice to readers, There may be no updates during the first week of August as I will be taking a break.
Friday, July 18, 2014
The fast ride up in the VIX was countered with another fast down move and so far is making a small double bottom or at a previous 4th wave gully, (valley) Sometimes they even go a bit lower.
What is not so obvious to the majority is that the VIX created another huge open gap on the way down. This gives confidence that the VIX can push higher again, as fear would return. Obviously the downing of the plane in the Ukraine was only a fleeting fear attack, and the markets brushed it off quickly. Another good example that analysts will grasp at straws to try and find a reason why markets go up and down.
Once we look at the Nasdaq price moves in the last few days, we can see a down side run fitting a 5 wave impulse at this time. As the VIX crashed the Nasdaq exploded and both left a big open gap in it's wake. Talk about identical twin action. Of course the Nasdaq is riddled with gaps and the next big lower gap is at the 3680 price level. A gap open below in the Nasdaq and a gap open above in the VIX makes for a powerful combination to support a bearish outlook.
I have talked about the July, 16, 2014 date many times before and initially that date was supposed to be a bottom from which the markets would rally from. The last time this same setup occurred was in August of 2002. The markets never hit bottom until about Oct 2002. This is a rough 12-13 year cycle time period and will not come close again until the 2026 time period. Keeping rough months the same, then Oct 2014 could be another major bottom time period, with the spring of 2015 creating a secondary bottom. Either way I have not seen or counted any years ending in 5 that were bearish years, they were all bullish years. This has probably a 100 year track record that I know of, so for 2015 to be supper bearish, will truly be extraordinary and therefore highly unlikely.
I am sure the Cycle, SC and GSC degree wave counters will get their wave counts trashed again as they are expecting 5 wave declines of a very high degree. It is mathematically impossible for any SC and any GSC degree wave counts to happen between a Cycle degree 5 wave sequence. My goal is to track the Cycle degree sequence and until wave 5 in Cycle degree has shown itself no SC or GSC degree can happen. If I am lucky some Cycle degree wave threes may be completed but otherwise even my Cycle degree wave three peak is not clear enough just yet and may just be temporary.
If you have seen the TV series "Under The Dome" then this fits wave counting very well as nothing can escape from a "Cycle degree Dome" between Cycle degree wave zero and Cycle degree wave 5!
My Cycle degree wave zero starts in 1932 and if we are lucky may end closer to 2029 at wave 5 in Cycle degree.
Many investors maybe focusing on banks as the source for another financial crisis, but many times and cause for market stresses to come from will not happen twice in a row. It could be any problem that is not even related to banks that can setoff and bearish decline. Margin requirements by excessive bullish positions can also materialize very quickly. Airline stocks could get hit which will effect the banks stocks as well.
Individual indices can have a life of their own and not relate well to indices like the DJIA and others. After all banking stocks have never achieve the glory highs like the DJIA has. The BKX index is not in any type of a true impulse run as the BKX would have to fly north with gusto. This is not likely to happen as it seems to be rolling over already. BKX would have to blast past my top trend line to prove a bearish wave count wrong. If it did that then our present rally would have to be switched to a "C" wave bull market, otherwise we have the potential of being in a triangle "B" wave.
In a long term worst scenario the BKX index could make a large double bottom from which it could blast to new record highs. In the DOW 30, Bank Of America's stock pattern also matches this index fairly well., except BAC has already peak in March 2014. The BKX index has also retraced back up to within my previous "B" wave top.
It takes a long time to build any wave count and I would also need more data to get an even bigger picture. What we do know, there is no room for a major decline containing 5 waves of any degree in this BKX index. This would further compounding SC and GSC degree wave counter problems. We would be lucky to see a 5 wave move in Minute degree never mind anything in Intermediate degree or larger. I would also say that Warren Buffet's stock price would also implode if the banking sector were to take a big hit, as he owns many of the companies in the DOW 30.
Gold has crashed right back down to the $1306 price level at a small previous wave two gully. If gold will play nice then a small wave two bottom may have completed this morning. The gold bears are out in full force, and it would take very little for gold to fall much further, but who says the gold bears are right? If gold falls much further, below $1292, then we still have a chance at a bigger corrective pattern which would send gold right back up from where it came from.
I am open to the idea that gold may have an expanded pattern in this intraday chart, and if that is true then that only means one thing, and that is gold will pass and exceed the $1345 price level. Even though Goldman is still a growling gold bear, and is famous for calling past short moves, they did not call a bear market until years after the 2011 peak.
All it will take is the US dollar to show some bearish moves and gold can crank up again. Patterns of higher lows is the contrarian way of explaining a potential bull market in the making, but from an Elliott Wave perspective they are all "ABC" patterns. "ABC"crashes produce these higher lows. Any degree "ABC" we run across will get retraced by a move 100 % or more, and the larger the degree, the longer it will take to do it. If a small sideways pattern gets establish, then yes I would have to throw in the towel and review the daily charts again.
This $1345 price level is a serious roadblock which gold has to fight past, if a bigger bullish gold run is still going to happen. Isn't gold supposed to be a safe haven hedge? What more of a reason can you think of than the downing of a plane flying over a war zone. The fact is the mainstream media will change their reasons why gold goes up and down, at anytime they feel like it. They can use the same reason as an excuse if it goes up or down, much like the climate change scientists use the excuse that colder winters means global warming! Consensus forecasting never works in prices and it sure does not work in the climate change debate!
There is little room for gold to move as it must stay in a bullish phase when higher lows have already started, otherwise it is just confirming that it is still in a bear market rally.
Thursday, July 17, 2014
I have talked about the July, 16, 2014 date many times , but the markets were supposed to be at a bottom ready to start up again by this time. The last time this happen was August, 11, 2002. The market did not hit bottom until Oct 2002. This is 3 months away about the second week in Oct 2014.
Oct months are famous for producing Black Monday or Black Friday stock market crashes. If for some strange reason the MSM declares a Black "any day" stock market crash, then chances are good it will be close to being over, and another bullish cycle would commence.
I have also mentioned that airline stocks could become a target for short selling. Would you want to get on an airplane in the Ukraine? If they shoot down another plane, others may just get the idea as well. After all the mainstream media is blaming the stock market declines on this missile attack.
The VIX was already making higher lows and did not fail to disappoint an expect rally. Just like some cowboy firing shots in the air to stampede the cattle, this tragic missile strike did the same thing. It has sent investors into a small selling panic. The mainstream media will use any reason why the markets have fallen.
I believe there is a bit more VIX upside to come, before we see another good VIX correction. My gap on the left was just a hair's width from closing but it sure repelled the VIX. The question is how far down? This may not take long to answer, but we could head down for a 4th wave bottom. Just one more shot higher, to completely close the gap would be nice, but then we are running up against resistance again. The ace in the hole is the fact that I have an opening gap below that will eventually get filled again. My tallest gap is at the $21 price level which will take much longer to fill as we could get a wild VIX correction after that.
If we shoot higher on the VIX, and commercial traders switch to heavy net VIX short positions, then watch out as a reversal would be near. They can switch fairly quickly, but this data is not available until Fridays.
If any future decline looks like it contains an "ABC" then the VIX will roar again, pushing another leg up. So far todays rally, has no real gaps to speak of, and I would expect another gap to open as well.
It looks like nobody is interested in my crude oil commentaries and wave counts as they do not get picked up in my stat numbers. Not a single crude oil posting has been showing up on daily and even weekly pages viewed. You would figure with all the turmoil in oil producing nations that interest in crude oil would at least register on my daily stats. If this keeps up I will contemplate shutting down my blog or quit wave counting in crude oil altogether.
The violent crude oil reaction in the last 2 days was mostly related to stop loss orders getting hit, and we have to see if corrections start to develop in the next week or so. So far this has all the look and feel to an ending diagonal and one more blast to new highs would confirm it.
There is no shortage of oil in the world, but only fuel production problems like what we see in Iraq and the Kurdish areas.
Stocks have decline very little today but the fear factor cranked up this morning with a wild and crazy spike. This is to be expected as fear makes a comeback. I think there should be more of the same as the VIX should push well past the $13 price level. Only a very small part of a gap is still open below us, and that could stay open for sometime yet. We can see how fast the VIX had spiked, on very little downside in stocks, so we can imagine a much higher VIX as this plays out.
At this rate the VIX could hit the $21 price level before we wake up and realize what is going on. When the MSM starts regurgitating the VIX move, then it will be ready to go the opposite way.
We also have a higher low at this time but at this small of a degree it may not work as well.
I have two major gaps still open above present VIX levels, so these will all get closed in time.
The VIX COT numbers still favour the VIX bulls but if we see that commercial traders switch to a large net short position then a bull market in stocks will return. The VIX gives us real numbers that reflect the emotions of investors, but analysts use it the opposite way than what contrarians use it for.
When the VIX is low, it tells us that investors see no reason to be fearful of any market downturn, but when the VIX is high they are all scared of further market declines. When that situation arises then I am sure the markets will be setting up to go the opposite way again.
This morning gold made an impressive straight push to the upside. Those types of moves usually are short squeeze plays as the gold bears got caught in a bear trap. There is a chance that another small sideways pattern could develop as a 4th wave but it may take until next week to fully show itself.
Either way a correction or a resumption of one more down cycle can happen. This could all still be part of a bigger "ABC" crash as where gold bottomed we have no real support. I would be looking for support at the $1275 price level, as $1292 support has nothing backing it. I look for previous correction bottoms as potential support price levels and right now gold did not do that.
Gold has already backed off showing a nasty spike even on the daily charts. Any gold price lower than $1306 would go a long way in helping to confirm a bearish rally as any potential small 4th wave cannot go that low.
Wednesday, July 16, 2014
I made this chart yesterday just to show the potential trend lines pointing to a support range at 14,500. This still would not even be a 20 percent correction that many of the experts claim as a bull market correction. I use a .382 or a 40 percent correction on 4th wave bull market corrections. I usually calculate this on the net of the run I am working. My wave counts started in March 2009 at 6500 and now has surged past 17,000 and my calculations we could end at the 13,000 price range. That target would force the DJIA to blow well past my bullish trend line.
I am including an expanded pattern with this wave count, with a choppy "ABC" still in progress.
Sharp declines develop from these types of rallies and the previous 4th wave or the previous "AB" wave would be my next target. The entire run for 2014 has coincided well with the mom and pop buying operations as individuals have been the biggest buyers for even a better part of a year. Many funds enter the markets which just seemed to be a 2014 Tax move more than them buying low.
They are the buyers when insiders have been the biggest sellers, even though many pros have mentioned that the markets are getting top heavy. Even with all the information out today on the Internet about how overvalued the markets are, they choose to ignore it. even by Warren Buffets calculations the markets are over extended.
The VIX also crashed this morning, just a bit short of filling my biggest open gap, but another gap opened as the VIX crashed. This still gives us 3 open gaps to the $21 price level, which all work as an invisible pulling force. Next week we are being setup into a new moon date on Saturday July 26th, which tend to be very bearish for stocks.
The cocoa shortage has been around for a long time and you would expect futures prices to be way up!
They are up but once I looked at the COT reports I see that commercials are net short the cocoa contracts. Not by a wild amount but still net short they are. It stands to reason as commercials are the traders that sell high and buy low. On March 2011 cocoa prices peaked corresponding well with gold and since then cocoa prices have crashed. Since Dec 2011 cocoa has been in a bullish phase.
This bullish phase did not start as a perfect impulse and therefore could be an inverted "ABC".
There may still be a bit left to go, but if good crop results come out, or news of increased cocoa acreage production, the price of cocoa could crash.
Any inverted "ABC" can get retraced by 100% or more as this is starting to look like a zigzag once it is completed. If this turns out then the 2004-2005 bottom would be a great turn price level again.
NASA has not updated their solar cycle charts which is now 2 weeks behind. In the meantime I watch the daily sunspot activity by spot checking several times during the week, especially the days prior to a full moon date, and for the days immediately following a full moon date.
We are now 5 days after the full moon date, which was also a Supermoon. Within about 5 days the sunspot activity crashed from a maximum of 11 sunspots to the present 2 active sunspots. I have notice this happening on a regular basis, and we should see sunspot activity very low to the next new moon cycle, which will be July, 26, 2014.
Solar activity also changes during new moon dates but have not been as strong as activity during full moon dates. Even on the highest activity days the maximum sunspots have not exceeded 11. Maximum active sunspots should progressively become lower as we work our way down solar cycle #24. Sometime around 2020 we may come to the bottom of solar cycle #24, and when it turns the new solar cycle #25 will be born. Bottoms are easier to see as the polarity shifts in the sunspots. They also pop out in the northern hemisphere and drift towards the suns equator.
On the left side of our sun is the east and sunspots travel to the western side to the right as the sun spins.
This all translates to a beautiful graph showing how consistent the solar cycle is. Solar cycle #19 has been the tallest in all the history that I have seen, since global warming began after the Little Ice Age. Many expert scientists blame the industrial revolution for global warming, but I see it as the pickup of solar activity that was the main driver of global warming.
Without global warming the industrial revolution would have never happened in the first place. Any great civilization of the past always coincided with a warm period peak as well, but mankind took major setbacks during global cooling era's.
After each solar cycle bottom the stock markets started on bullish cycles that at times have lasted two solar cycles long. ( about 20 years) The markets that we had back in the 1950's was a demographic market as well, but we are nowhere near that type of market now. It could take until 2050 for that type of market to flourish again. With all my Elliott Wave counts I track 5 waves in Cycle degree which wave zero of this Cycle degree, started in 1932. This matches the bottom of solar cycle #16.
Solar cycle #24 would be the 8th solar cycle since Cycle degree started. This all matches very close to 9 solar cycles in each 100 year time period. Another more friendly way of looking at it is that the sun has 9 heartbeats for every 100 years. The sun is the driver of climate change on earth, but scientists are blaming mankind for global warming.
They say solar cycle #25 will be smaller than solar cycle #24, but I would expect solar cycle #25 to coincide with the Roaring 2020's. That's not going to happen until Cycle degree wave 4 has clearly shown itself. This I expect could happen closer to 2021, a perfect 89 fibonacci years from 1932.
It still may take until 2029 or so for Cycle degree wave 5 to be completed. In short we are nowhere near anything even remotely close to SC or GSC degree in any markets, as 5 waves in Cycle degree could end up being 100 years long.
July, 16, 2014 was also the date I expected the markets to be at a bottom and be ready to start up, but yet we have the exact opposite still in progress. No the spring of 2015 could be the next possibility as that would follow 1915 more closely. I have never noticed a year ending with a 5 to be bearish, as they all have had very bullish years since 1932! This gives us about 8 months for a correction to play out.
Right now the US dollar has hit my short term trend line in a shape of a zigzag. If this turns out to be true then, the USD will turn south again retracing 100 percent or more of the rally that started on July the 1st. This makes the low of 79.74 the number to beat. Any correction in the US dollar should also be bullish for gold, as gold took a beating from all the gold bears last week. Maybe it's time for some payback.
If any correction in the US dollar turns sideways or starts a choppy decline then, I could see more bullish upside in the USD.
Tuesday, July 15, 2014
Mini SP500 Intraday, Monthly Chart Updates And Comments on: Individuals Pile Into Stocks as Pros Say Bull Is Spent
It never stops amazing me when I count waves and I figure a correction is coming, that I read news flashes that say that individual investors are piling into stocks. Even with 1000's of new wave counters online in the last decade or so, showing extremely bearish Cycle,SC and GSC degree wave counts, the little guys love to buy high. This happens all the time and has happen throughout all stock market history.
The majority are all taking their cues from economic fundamentals as these fundamentals keep improving everyday.
Markets behave exactly the opposite of fundamentals and every wave analysts should also know this.
Everybody was running from stocks in 2009 selling as fast as they could, and even the majority of wave experts were bearish as well. In March 2009 all the bearish experts ignored all the insider buying, the VIX and they ignored the fact that the solar cycle was about to begin a 4-5 year up cycle.
If it is one idea that I can give to readers and that is never ignore the solar cycle bottoms or tops with any wave analysis. The sun cycles will kill any wave count we can create and is the biggest fundamental reason why stocks go up and down, or trend. If we end up at another major low in 2021 or so, and everybody is bearish, including wave analysts, then it is time to do the exact opposite again, just like the 2008-2009 bottom. The roaring 2020's are still ahead of us, which I think may be Cycle degree wave 5.
As of April 2014, solar cycle #24 has peaked but that does not mean the stock market will instantly crash. There can always be a massive stock up cycle during the solar cycle decline, much like what happen from 2002 to 2007. That was also a great 5 year cycle.
The cycle that started in March 2009 has been a very challenging one to say the least, and it also has traveled 5 years or so.
The last major top was July 3 2014 which should get passed if the bullish cycle is to push higher. My wave count has little room to wiggle before it fails again and must not reach new extremes. The Russell 2000 seems to be a leading indicator as it has completed a top already on July the 1st. Well over two weeks ago. Most of the wave action contains inverted "ABC"s which is to be expected in and ending type of a market. These are usually diagonal or ending diagonal waves that stretch and extend. Players that play short too early will always get into a trap, and this causes fast and furious counter rallies.
Much of the news repeat stories about the worst recession since 1932 or they always compare back to that era. If we have the worst stock market crash since 1929, would it not be logical to have the best stack market move since that time as well? Steven Jon Kaplan forecasted exactly that, and he was right on the money. Everybody thought he was insane for saying that but Warren Buffet was saying the exact same thing. Yet all bullish buy signals were ignored. I figured the markets would retrace about 80% and even that was exceeded by a large margin.
There is a crazy bump that developed in 2010-2011 which does not fit into an impulse all that well but, 5th waves can be diagonals and that is what I am going with in this wave count. Any start to a decline, I look for two basic waves to develop, small 5 wave structures or difficult 3 wave structures that have overlapping waves. Any start to 5 waves, then this is pointing to much further down cycles, but when choppy waves materialize then "ABC" patterns would be forming. Any Intermediate degree decline could be a 4th wave, so choppy waves will eventual have to show themselves.
I am a sequential wave counter, which means I follow an idealized 5 wave script, specific to the degree I think I am in. In my case I follow 5 waves in Cycle degree, which has a wave zero start to it back in 1932. I cannot say that Cycle degree wave 3-4 or 5 is finished at this time.
I think we have been brainwashed by the big degrees as nobody is counting stock markets with wave three being the longest. This compresses all the degrees, when in fact we have to uncompress or extend all the wave counts. This forced all the wave counts to where we still are in Primary degree wave structures with the potential wave 3 in Cycle degree still ahead of us.
Eventually 2021 could end up being a Cycle degree wave 4 bottom. That is still 7 years or so away, so lots of shit can still happen until then. Diagonal 4th waves can go very deep, and I can't see the decline lasting much longer than early 2015, as years ending in 5's have been very bullish in the past.
Even 1915 turned very bullish in the spring, as well as 2005 was bullish.
I use 38 or 40 % as a correction for a 4th wave and this alone could drop us down to the 1200 price level. We are also very close to hitting SP500 2000 so that can also be still achieved. Markets love round numbers and 2000 is about as "round" as we can get.
Summer months are also the best times for market peaks, but the 2007 peak never came until Oct the 8th.
When the main steam media (MSM) has been blowing it's horn how good the fundamentals are, than who is going to come in next so all the mom and pop investors will see a gain? The problem is all the gains are created from margin borrowing and those players are in a bull trap already.
Gold's recent crash came after gold hit a brick wall at our bearish trend line. The top line is the bearish trend line, and I have mentioned that gold has to perform and produce higher lows for it to prove that it is in a much bigger bullish phase than what we think. Another bullish phase started in early June 2014 with a bottom price of $1240, and gold cannot fall below that as higher lows are created by "ABC" patterns. Higher lows is a more conventional way of explaining a bull market but in EWP they can also be big bear market rallies. On the bear market side these "ABC" patterns invert themselves, and this has been the case since the peak in 2011.
The recent gold spike which peaked on July the 10th is now in a "C" wave and the $1240 gold price level would have to be breached to confirm this. Since June 2013 the gold bulls have returned rather quickly and gold tried to breakout several times but failed each time. We saw that happen several times in 2012 as well and look what happened.
The pattern just does not reflect a higher degree that I was chasing, and this morning we are only $110 from making new bear market lows. Of course once gold reaches another triple bottom support line at $1180, it may not hold. This would be a downside breakout situation with a potential target to the bottom bullish support lines. Yikes! That would give us a potential target of below $950, with a spill over effect pushing gold a bit lower.
I am working gold as a potential triangle in Intermediate degree, but it can be a diagonal "A" wave just as well. Gold bottomed at about $1292 this morning and looks like it is set to rally again, but $1315 may be a resistance level again.
All we need now are the stock bears to infect the gold stock bulls with bear fever and we have a recipe for a mini crash.
Most all other metals also have commercial net short positions, and those are not extremely bullish indicators. The only thing that has not supported a super bearish outlook on gold
is that I have not had any reports of gold stock insiders selling out.
Monday, July 14, 2014
Just like most of the other indices AAPL has also charged higher. Apple has had a fantastic run that should be due for another correction. We are coming up to a double top, which in 2012 also had a very small gap open, all this time. Apple's stock price is about 3 dollars away from closing this gap. It is a big test for Apple's staying power, as it could be in a 5th diagonal wave. Apple has several big gaps open below and over time those gaps will get filled, if my present bullish trend lines hold. For any trend line to hold is a crap shoot at best, because most of the time we can draw line across tips that don't belong together.
There has been lot's of news out regarding Apple's stock price, and analysts keep upping its target price. $110 is the last target price for Apple. Insiders have been selling not buying so clearly analysts estimates must be taken with great scepticism. What they will never tell you is what will happen after Apple's price hits these forecasts! I am sure no main stream analyst will tell you, "Oh BTW once Apple reaches my target then it will crash to $75".
Apple has been under attack from some groups like the Chinese, regarding privacy issues. Many of these stories are purely attacks with no facts. I think the Apple ecosystem has a great future, but production delays may present problems.
Apple has done more to protect your private data, than any company I know of, and it will only improve over time.
The Nasdaq has made new record highs along with the DJIA and the SP500, but the Russell 2000 is still in a funk and has not played well with the other three indices that I cover. The move today has left another open gap it it's wake, and I am sure that gap will get closed within a week or so. There are many more open gaps in the mini Nasdaq and I am sure many of them will also get close, if not this year then maybe early 2015. On any trip down if gaps start to open up, then I would be starting to look for a bullish wave count again.
Every time a new high is reached I look for a correction, which could take us back to the support bullish trend line. We are still far away from identifying lower highs as the exact opposite has been the case. Some report can come out, where the MSM reads more into it than what it is and stocks could drop dramatically. The VIX has a huge gap above that opened up so in order for that gap to close the markets must experience a "fear" attack.
I have two potential large degree wave counts and both of them have a 3 in them. If a wave three top in Intermediate degree is still in the cards then a corrective decline must confirm it. A Cycle degree wave three top would produce a very big correction, but many other indicators do not confirm that just yet. I could see it if commercial traders were extremely net short, in all the markets, but they are not at this time.
Markets have overdosed on margin again and that alone can force many to sell in a panic when they don't want to.
There is no shortage of NG used for electricity production to keep the air conditioners running. I have a friend that is a top salesman for Future Shop, and he mentioned that air conditioners were flying off the shelves this Sunday.
We have had a hot spell in BC as well which has ignited our forests. Of course that is what is expected when we hit the peak summer season. On Feb 2014 NG spiked with a price at $6.49 BTU. It has now backed off considerably but may not be completed, if we have a 4th wave in progress. NG would still have to match the August 2013 low of $3.12 BTU and end on a good spike if NG is still going to exceed the FEB 2014 top.
Commercial traders are net long but nothing to extreme. Inventories are said to be well balanced going into the winter season for 2014, and I would have to see if the commercial traders add more long positions in the next few weeks. That FEB 204 spike was only a few months away from the solar cycle peak as well. Many switch to NG electricity production, but this will not kill the coal fired plants that quickly.
Fundamental are really not my thing as weather or climate change can have a dramatic effect on NG prices. Even extreme cold temperatures this spring did not force NG prices up, but NG peaked with the coldest part this winter. If we get more of a clear cut "ABC" crash ending with a spike then I would say NG will still exceed the Feb 2014 peak.