Monday, July 6, 2015
It looks like the US dollar can still go higher but with this wave count we will run into resistance if my suspected inverse "ABC" still needs to play out. Mind you that can happen real fast as markets tend to surprise participants when ending spikes are concerned.
In line mode the US dollar has its real top where my arrow points to, so this is where I will try and see if an impulse is in progress or just another trip down to an "A" wave bottom, which might be a Minor degree.
Over all I believe the 2008 bottom was a fake and that in the future the US dollar will implode and break that 2008 low one more time. Of course we can wait for the next ice age for that to happen, but in the meantime we have to keep confirming inverted "ABCs" and inverted impulse waves.
Inverted impulse waves are just part of the bigger corrective waves and what degree I end up counting them will need to be carefully examined and reviewed when it is important to do so. If I have a choice of two degree levels for the 2008 bottom then if we are at a Primary degree bottom, and any 5 wave sequences I do get cannot be larger than a Minor degree run. The only way I can have an Intermediated degree 5 wave run is if I have a single corrective wave.
The required 5 wave runs for any correction are clear shown in the little blue book, so it is easier to figure out the degree by using idealized wave counts.
Recent news with the horror of the Shanghai Index crashing it has prompted them to stop new IPO's and now brokers are willing to spend 100s of billions to stop this decline and turn a bear market into a bull market.
This will only work if the Shanghai index is still in a bull market but will never work if a bigger bear market is in progress. What they are doing is another form of buying on the dips but it is also another form of trying to manipulate the markets. JP Morgan did that back in the Panic of 1906 but he acted just like the FED would act.
The news did sent the Shanghai north but only time will tell if the index will hold at present levels. When we look at the bigger picture we can see that the Shanghai topped out in a big bear market rally so a continuation of a big bullish phase seems low on my list at this time.
If the index goes sideways for a few weeks or just refuses to develop good clean impulse waves, then we know that a resumption of its bear market is inevitable.
When you follow the link you will get to a gold sentiment chart produced by Mark Hulbert. It is the HGNSI in red that I want to comment on, which contains a wave count. It is the wave count line in red that I think is the key as they contain multiple "ABC" crashes. We can wait until the cows come home for the sentiment index to dip like it did in 2013. With a potential flat in progress the gold sentiment index has lots of room to travel up, but little room to travel down, (if you trust "ABC" patterns)!
I have no special insight why gold goes up or down but I sure do not blame any gold decline on manipulation. Gold will always compete with stocks and since the 2011 peak it has been doing exactly that.
Saturday, July 4, 2015
Even though the Euro made a strong bottom in 2015 its rally so far seems to be more diagonal in nature. That is not a problem if we are in a potential "D" wave in a triangle.
Either way the Euro should have no problem in breaking out past the 1.15 price level as it was repelled from just below that three times already.
If it keeps hammering against that triple top then I am sure it will breakout given enough tries at it. With such a big sideways pattern in the Euro this all still smells like a big correction. It's not a SC or GSC degree correction as the majority of wave analysts seemed to love the big degrees.
I have followed the big degree trap and I know how easy it is to get caught in it but physical size has very little to do with the psychological mood that may be present at any given time. From the 2014 peak the Euro plunged right along with crude oil and even now seems to be on a rally following crude oil.
The news may all be about Greece but it is France and Germany that will take the hit if Greece decides not to pay and default. Under the worst doom and gloom news for the Euro it still has started to rally and I think the rally is far from over.
Friday, July 3, 2015
Most wave analysts switched over to the HUI once it came out as it fitted impulse waves much better than the XAU did at that time. Trying to force the XAU into pure impulse waves was a nightmare but its pattern is what is important just the same.
Since the 2001 bottom just about every wave overlapped some critical point and the only way to fit that into a larger picture is that the XAU displayed a diagonal bull market with an expanded "B" wave which I have labeled as a single expanded flat.
With this wave count the XAU does not have to make a 100% bull market retracement at this time, but what we would need is a "C" wave bullish phase with a 100% bear market retracement. This would all end at my "C" wave in Intermediate degree and a diagonal 5th wave in Primary degree.
Even thought there is always some more potential downside, but a reversal or turning should be near. There are may gaps open in the XAU bear market and all the 2014 peaks would get retraced to fill just the first of these gaps. The next gap should be above my wave 2 peak which would give us about an 80% retracement.
The US dollar has not been displaying your typical corrective waves as they are borderline impulse waves at best. Even with overlapping wave structures I can show you a very bearish US dollar depending on where I draw my trend lines from. The US dollar is pushing up against the top trend line so if this trend line has any weight to it at all, the US should repel to the downside next week.
The US dollar needs to clear up its potential bigger path that it wants to make, as we need a sustained decline in the US dollar to help push gold into a rally. Numbers for physical gold buying will not do it as smart money is always buying when they think the price is low enough. Oil is the same, as China bought lots of oil as its price was crashing.
When US consumers go shopping they think they are buying something but in reality they are dumping the US dollar into the street.
If billions of cash coins were in our piggy banks and we dumped it for any reason we would see a rise in the gold price. This happened just after 911! It is the velocity of the US dollar that will cause any inflation or deflation, not the amount that is printed.
What I am counting in 5 waves can be easily converted to a triangle wave count and only time can clear up this wave count.
Any asset class can give us a surprise move and gold is no exception as I can have sever alternate wave counts at any given time. When we go back to the April 2015 gold peak I can count out 5 waves, but after that it falls apart, but this can fit into an expanded pattern very easily. All inverted "ABCs" have now been retraced by 100% or more but this week we may have bottomed on another "ABC" which has been going for 3 months already.
My Scalene lines are very bullish as asset classes can make dramatic moves after they complete. I sure can give still paint you a very bearish picture but many are doing that already, besides it's not any fun if I have the same boring bearish wave count as every other wave analysts has. Every wave count I try is to run it long enough to help to confirm or trash it. Next week will decide if this weeks trend reversal will hold.
Either way, even if it still takes some time, gold will exceed the $1232 price level. If gold will do that for the rest of the summer will be the million dollar question.
This is the August crude oil contract and not the cash contract which will give us a few dollars difference in price. Even though I talk about a certain price level, from my Elliott Wave perspective price has little to do with it. The majority of the EWP does not cover prices or ratio, it is the present day wave counters that are obsessed with prices and ratios.
I think it is virtually impossible to forecast accurate ratios or retracement levels if our degrees are out. All it takes is being out by one degree and basically Elliott Wave Technicians would be out by a mile. The 2009 bottom in stocks was a prime example of this.
Even now with oil, we have the same situation as some wave experts think that oil is going to $10. From my perspective it is all about what type of a pattern is being formed and not the price level it may stop at. Yes, at some certain price levels a wave pattern is broken, and with crude oil we are approaching a limit soon. That does not mean that a new round of bearish crude oil moves is just around the corner.
Since the beginning of May 2015 (the $64 price level) crude oil has been in a funk or displayed bearish moves, but when we look at these bearish moves they contain overlapping wave structures. From my perspective these are corrective waves in a potential 4th or equivilant wave position. When crude oil breaks my price level then it turns into a diagonal but eventually it still must break the $64 price level. Hopefully it will still do it this year.
Crude oil could react like it did in Feb/March 2015 and plunge to a new low, but eventually it would still would have to clear that $64 price level. (Wave 3 in Minuette degree) The gold/oil ratio with this August contract is just a bit above 20:1, which still keeps oil on the cheap side, when compared to gold.
What type of pattern that gets displayed on a small degree level has the same meaning as the pattern that is displayed over a larger weekly chart. The difference is from where we count from and what we call a 5 wave sequence.
Updated later in the day with a weekly chart
I can have a wave count that technically no longer fits a certain wave count but once I switch that same chart to a weekly chart it still fits very well. On this weekly chart the crude oil drop now shows a very nice spike which is typical for a potential ending correction.
Over all I can still make the crude oil fit into a diagonal 5th wave which would require some sort of zigzag as a 5th wave. Any crash usually ends containing a "C" wave and if we check our little blue book we know that all "ABCs" get retraced by 100% or more.
Since the mid 2008 peak, crude oil has created two of these "ABC" crashes so over time both peaks should get retraced. I have never read about a world oil glut taking a recess for a few months and then come up with yet another world glut?
From the world oil glut in late 2008, it took 7 years before another glut appeared in 2015. 2008 was another 9 years after the 1999 world oil glut so there are many years between oil gluts.
Thursday, July 2, 2015
This gold cash chart gives us a prime example of a previous inverted "ABC" (bear rally) has completely retraced the previous $1162 price level. Since the $1230 peak gold has now done this two times. Two more times and gold will break a new bear market low targets of about $1162 and $1132.
It looks like gold has created a sharp bottom so a correction could be in progress. If the next sequenced degree is due then gold could jump above my top trend line by next week sometime. Even though there is further downside to come it's not going to happen at once and chances are good diagonal waves will be involved to frustrate any attempt to pick another major bottom. The late June gold rally is not in a good enough position to be another zigzag down, as it fits better into a 4th wave at this time.
We have just passed the full moon date and will also run into two sets of important holidays so markets can move violently due to lack of volume or any other Greek/Portugal Porto Rico reasons. I am sure we can come up with a much bigger list of countries that all are prime default countries.
Tuesday, June 30, 2015
What many have called a bull market in gold stocks, (higher highs) has now been proven in correct or far to early. At best we are 3 points away from a downside breakout and how gold stocks will behave after it makes a new bear market record low will be just be a guess.
I am sure gold stocks will continue to frustrate us, but we are also looking at a double bottom like pattern. Many times we have seen reversals just after the end of the month so this sure can be setting up for another reversal.
Any rally never showed great looking impulse waves so we now see the results of 3 wave rallies. Even when we create a new record low any rally could be a bearish rally again, but the only difference will be it could travel much higher than any rally we have had in the last 4 years or so.
Since the early March top just about 4 months ago we have had as many as 16 gaps open and eventually get closed. In the last few days we had another strong drop but in its wake the Nasdaq also left an open gap. The odds that this gap will get filled before the markets resume their southward direction are too high to ignore.
In order for the gap to get closed the Nasdaq has to make a pretty strong counter rally and the VIX has to decline in response. The pattern starting out looks corrective so the markets would have to rise in a choppy fashion before it resumes its southern path.
The present rally can fit into a wave 4 so a small 5th wave could still happen before another surprise bullish phase explodes. We need the markets to show consistent higher lows, and preferably containing some very good looking impulse waves, otherwise we are heading down to another potential letter, like an "A" wave bottom.
Right now we have a major double top that still needs to get sorted out on which side it belongs to but time should answer that.
Monday, June 29, 2015
At the speed that the markets dropped it produced a very sharp spike by the end of the day .
As much as I hate to say it this still has all the characteristics of a correction in progress or a correction about to end soon. In the last month we have had many overlapping waves which is also and indicator that a corrective force is still in play.
As I have mentioned many times that from my perspective price has little to do with any market move but pattern is everything. The VIX also exploded opening a gap in the process so the VIX can see a dramatic reversal in the next 5-10 days.
With a full moon and potentially split holidays we could be setting up for a reversal that will surprise the majority of players. After all, would it not be logical if any Greece problems were to get fixed, that stocks could also rally?
Every bearish bottom produces maximum bearish news, the problem is it is much harder to sort out when smaller moves are concerned. We can go back to Oct 2014 and see how deep that drop was, and yet that entire drop was completely retraced!
It is amazing how one little country can produce such hype that the entire world gets affected. Many were already expecting a decline so any news that supported this decline is actually irrelevant. Any news that is hyped over and over becomes irrelevant very quickly because if you have not acted until now, you are far too late.
It is not the decline that is a big surprise but it is the counter rallies that surprise most analysts. No trend lasts and there is a big change that a counter rally will develop this week into early July.
I would be looking for resistance at my top trend line and anything more would make this decline just another correction. It will take the next week or so to help confirm this as the decline has been very choppy so far.
The VIX has shot up in response leaving a massive open gap in its wake. This gap should get closed in the next 5-8 days before another run north will happen. It will be important to see what type of a pattern the VIX makes on the way down as an "ABC" will tell us that the VIX will push higher.
If the classic impulse wave starts to form on the way down we know that a stock rally may be bigger than anticipated. With the full moon and holidays getting in the way we could have sporadic movements into the early part of July.
Since Nov 2014 the HUI has displayed a pattern that looks more like a crab or a spider but in reality they are distorted potential 4th waves. It is the Nov 2014 bear market bottom that is only 5 points away from being broken, which means that a new bear market low for gold stocks could yet be established.
Arguing with such a fine line does not make a clear enough case that gold stocks are in or have yet been in a bull market since the 2011 peak. In short all rallies in the last 4 years have been bull market fakes. Once the HUI creates another new record low, then a new pattern should emerge.
It will be important to figure out as soon as possible that a pure impulse is forming otherwise we have another fake bull run on our hands, and it just can be a bigger fake run than what we had in the last 4 years or so.
There is still a lot of volume in the August crude oil contract. Any decline plays well into the oil bears hype as any slowing economies reduces supply and demand. Nobody can tell us the exact reason why oil shot up $15 in less than two months but they have many reasons why the price of crude is going down.
The consensus analysts always come up with good reasons why something goes up or down, but they also get surprised when an asset class turns and goes the opposite way.
One reason for this is that they pay no attention to pattern but only price has any meaning.
From my perspective price has little meaning but pattern is everything. For the last several weeks crude oil has declined but in its wake no clear impulse wave has formed. In other words we could be staring at another "ABC", which means the entire decline for the month of June could get completely retraced. I am working crude oil as a possible ending diagonal 5th wave so it should not travel as far as some expect.
The crude oil ratio is sitting around 20:1 which still makes oil cheap when we use gold as money.
I cannot update at regular times but I will update when I can. We got our small spike in the US dollar which can all be blamed on Greece's problems. Shutting down Greek banks because there is a run on the Euro in Greece is just as extreme as shutting down US banks in 1934. When they no longer can keep the ATM's filled then you have a major problem.
Still, I don't think the Greece problem is nearly big enough to cause overall damage. China may be the bigger problem!
Just like any other bear market it is always hard to pin it on one good reason why!
We are getting close to the end of the month and a full moon is just days away. Combine that with the holiday we can have the recipe for a reversal.
My wave count would have to slow or stop close to the 95 price level with 94.600 being a make or break this impulse price level. In other words the US dollar "cannot" touch anywhere into my wave 1 in Micro degree.
Since I show a potential "ABC" decline from the June top, this "ABC" should get completely retraced before a new leg down in the US dollar would develop. Any forecasting is only as good as the identification of the patterns that have developed and many times I have 2-3 other alternatives. Finding a potential "ABC" in any direction is the key as there is nothing in the EWP book that says they don't. Even triangles all get retrace, and they can have 5 "ABCs" in them.
Saturday, June 27, 2015
This chart goes back to the 2009 bottom of the stock market. The contrarians always buy when the VIX is high as they know to sell when the VIX is low. In the last year the VIX has also displayed higher lows but violent moves can still kill that rather quickly.
What did happen is that the VIX closed the gap at the $12 price level and then blasted upward. Hopefully this will supply a support level for another VIX bullish phase to come.
It will not take much for the VIX to run into resistance at any price level above $21-$30. The VIX would have to charge through my top trend line to show us that there is more to come. This all looks like a wedge and they can produce some pretty dynamic moves.
This is the Goldman Sachs commodities index with many added bars and works out to a very stretched daily type of a chart. It takes us back to 1999 where I believe a 4th wave ended and of course a 5th wave stated. For all of this to stay in sync I cannot wander off from any degree larger than Intermediate degree.
No matter how big or distorted the waves are from the 1999 bottom, my wave count degrees must always be less than primary degree. If I do make changes then the entire wave count going back to 1980 has to be redone. Being lazy and not doing the work will put you into bigger and bigger wave degrees, where finally we end up with a high degree that will never work.
Many wave counters are already in SC or even GSC degree but yet they have not confirmed a single 5 wave sequence in stocks but we do have a few in the commodities sectors. The question is what degree of a 5 wave sequence do we have? Counting out of sequence is very easy to do so it has to be constantly checked and reviewed!
The 2008 - 2009 crash may have ended on a 4th wave but then the pattern falls apart rather quickly as we approached the 2011 peak. Actually it started to fall apart in early 2010, as the rally from 2010 to 2011 is part of the counter rally.
Then after the 2011 peak we entered a bear market that defies a definition but once you look at again, I can fit that into a 5 wave sequence that only works in a diagonal much like the Shanghai Index did. The last plunge down into 2015 is typical of a 5th wave in a diagonal so at this time my bearish bottom should hold. Once I look at crude oil again I am sure it will fit just as well as there is not much of a difference between the two.
In order for crude oil to achieve most bearish status (below $10) how low do you think the GSCI would have to go this year? If it does not happen this year then it will be the first time that a world oil glut is taking a recess?
This GSCI is well worth keeping an eye on it as it will give us an alternate opinion from the doom and gloom the oil experts have been hyping.
The Shanghai index and its crash has been front page news lately. I don't have the time to keep wave counts on many asset classes, but it is a good time to have a look to see if the index is in a big bear market rally or just a true bull market correction. There is a big difference between the two and the support ranges it may produce.
It also depends on where we count from but the super fast run up in 2014 and 2015 has all the characteristics of a "C" wave bullish phase. As we can see these "C" waves can produce powerful moves in a very short period of time.
From the 2005 bottom the Shanghai Index also made a very powerful move which looks more like the DJIA Roaring 20's stock market before it crashed.
Once the Shanghai peaked in 2007 it crashed very deep and I counted 11 waves on the way down. 7 or 11 waves are corrections so from 2007 to late 2008 we know eventually has to get retraced. Then from 2008 we had another robust 5 waves up which fell apart dramatically after one set of 5 waves were completed. From mid 2009 to about mid 2013 the Shanghai turned into a bear market before it woke up again.
I see the entire move from late 2008 to 2015 as one big bearish rally which technically should all get retraced. In other words the Shanghai should fall below 2008 price levels before cranking up again.
The pattern it will make on the way down will be the key as another "ABC" can develop as part of a "C" wave in a triangle. Even though anything can happen, I don't see the Shanghai crash below 2005 price levels at this time.
Friday, June 26, 2015
The Hui has added another small move down which puts it about 7 points away from breaking another record bear market in stocks. The $146 price level will do it. All the contrarian bullish hype has not materialized, but that does not mean that they are wrong it may just mean they are too early.
Besides what I see in the action of the patterns most contrarians only look at higher lows that should be forming. Well,these higher lows have not been forming when we are dealing with just 6 points.
Even then the Hui can crash and produce a new record low just before it turns and blast upwards. What type of pattern it makes on any bullish move will be important to analyze as we still could end up being in yet another fake bullish phase.
The $146 price level matches the gold stock crash of 2008 and the majority hated gold stocks at that time as well. It only took a few months and the majority were back loving gold stocks again. Investors only love stocks when they are going up so I don't see any great enthusiasm into gold stocks until they have rallied for sometime.
The three attempts at a rally has created a pattern for a double bottom, and which looks like a crab or a spider. A violent reaction usually ensues and when it does it should break the top trend line with ease.
Since the early June bottom, gold has created what now looks like a double inverted "ABC" which can be part of a triangle. This could force an "E" wave on us, but I am not going to push the triangle for very long, as at this point I have little room to play with.
Since I have at least one inverted "ABC" which means, that go;d still has to fall below the $1163 price level any rally higher would still be a bearish rally. The $1200 price level has little meaning when it comes to futures contracts as there can always be a few dollars difference between months.
Wednesday, June 24, 2015
This morning the VIX has closed of one big mother of all gaps and has bounced off the $12 price level. What this means is that the VIX now has more freedom to move up than it has to move down. We are approaching record lows for the VIX at the $10.50 price level so it is going to be hard pressed for the VIX to sail past that $10.50 price level with ease.
This also means that stocks will eventually decline as the path of least resistance in the VIX is up! We could still play around until the end of the month but markets have a strange habit of changing directions during and monthly change.
The SP500 has now ended at the 2130 price level and it would still have to crash deep to help confirm that this is all she wrote. It would be better if the SP500 crossed the 2135 price level as then it would set an all time new record high as well.
Wild last minute spikes have been known to fix that problem, so by the end of the day will tell us more.
Tuesday, June 23, 2015
Once I looked at the Dec crude oil contract it was the busiest month by far. It also produces a bit of a different wave count but it has not changed me into a full blown bear just yet.
Let's say the crude oil can still crash to $58-$56 and then make a super comeback as the bears push crude oil to far south. The five waves I do have I see as a diagonal and crude oil should exceed $66 one more time.
Even then crude oil could be running into a higher degree "A" wave. For all this to be completely wrong Dec crude oil would have to crash well below $52 on this Dec contract.
After all, the experts are saying that crude oil and gold are going to $700 and $10.
All this works out as a gold/oil ratio of 70:1, Good luck with that forecast, as that is an extreme piled on to another extreme by any stretch of the imagination. This is a Harry Dent forecast so he is no green horn at making forecasts.
Right now we are sitting at a gold/Dec oil ratio of 19:1 If this continues and gold/oil gets close to 14: or 12:1 then crude oil may get into a bull trap.
Around June the 4th and 5th the US dollar exploded in a three wave pattern. This pattern has been completely retraced to the downside. If this move is actually part of a bigger zigzag like a wave 1-2 then the US dollar has to retrace that pattern as well.
At a minimum this would take the US dollar to 97.800 and further. This will not happen overnight as other patterns can also still emerge.
This Russell 2000 cash chart has pushed to new highs, and hopefully it will be the last time it will do this. It still may take sometime to finish off as we have a full moon on the 1st of July. We have topped at 1292 so far but the Russell 2000 could still break 1300!
Back in the beginning of 2015 the Russell 2000 sure looks like it had a triangle moment as it went sideways for 8-9 months. After that the Russell 2000 broke out of its form and a new pattern emerged heading north.
All good things must come to an end as the 5th wave has some over lapping wave patterns which can fit into an ending diagonal or just a plain diagonal 5th wave.
It may still take all of June to play out but the end is getting closer all the time. How many times have we said that as the markets come right back and prove us very wrong.
Eventually every bull market starts to wear out like a pair of socks would do, and once you have too many holes then it is time for the markets to change directions. The markets will always keep us guessing so the signals are never perfectly clear.
Monday, June 22, 2015
This is still the May solar cycle so it has not been update since then.
I wanted to point out that in the last two years they have claimed each year as being the highest on record. The scientists that have jumped on the global warming trend must have "every" year in the future become the hottest in history, otherwise they will be proven to be false or have manipulated the data. If suddenly 2016, 2017 or 2018 does not create any hottest year on record then we know the world is actually cooling again.
With the Pope getting on the climate change bandwagon, he simply blames it all on the rich. Pope Francis urges 'decisive' climate change action - Technology & Science - CBC News
If all this climate change has been caused by man then should it not be fixable by man?
I have researched how desertification is turning good land into deserts but many countries have recognized this fact and have started to create Green Walls. The great Green Wall Of China and the Green Wall of Africa clearly show how this global warming problem can be licked. Most climate change has been created by farmers that are eating their own seed corn or letting thier herd of goats and cows run free. Chopping down every tree to burn for charcoal and not planting a single tree does not work in the long run as well.
Ever wonder why you have flash floods in the desert one day and then the next day it will all be gone and the women still have to walk hours for water? Many countries are starting to get into water harvesting again where they capture all the rain water in the desert with check dams or rock walls on contour.
Brad Lancaster from Arizona has demonstrated how to capture rainwater and bring down the local temperature. Israel and Jordan also have rainwater harvesting or desert reclamation projects in the works.
Maybe the Pope should take of his white robes and start digging in the desert to slow all the monsoon rains down because talking about it is not going to do it. It is not a problem of the rich it is a problem of the poor who have no basic farming skills and no education in water harvesting techniques. This is all changing once good instructors and demonstration sites are being established.
It takes as little as 3-5 years to see dramatic results after trees have started to get planted!
When I first saw the results I was impressed how green the desert can go once the water gets harvested properly. In every case that I read about farmers increased their wealth and created a better life sending their kids to school and producing water closer to home.
Much of this is just my own personal opinion but the Internet is full of examples where climate change has been reversed with very little money being spend.