Dec 14, 2014

Long term

I have wrote already something about the long term when I have posted a chart of EEM. Here are several more charts with a little bit more thoughts. At the end of the year to step back and look at the big picture where we are.
Short said I expect deep correction something like 15% for 2-3 months before final blow off.

- some thoughts - it looks to me like a "controlled market". I am not buying it that the economy is doing great. When will it peak? When they lose control - huge final blow off or it is time to let it go - start raising rates. The world is drowning in debt and if they raise the rates it is game over. It will not happen unless the market force them and the CBs lose the battle against mother nature:) or you can believe that the economy is doing great....
We are not there yet and any weakness will lead to a countermeasures from the CBs.

- Elliot waves - from the charts bellow it looks to me that any move lower will be just a correction, from higher degree but a correction. DAX looks like flat to me, Russell 2000 similar pattern, EEM wave C lower expected, DJT wave 4 expected. The major indexes SP500 and DJ does not have so clear picture, but when I look at other indexes they all say the same to me - expect corrective move of a higher degree.

- Cycles - they can not tell you we hit a top, but they are telling us when we see a top the move lower should be of a bigger degree. Given the huge weekly bar I would say the current 20 week cycle has topped out. This is the third one of four 20 week cycles for the 18 month cycle. It is too early to say the 40 week and 18 month cycles topped out, but when I look at the other indexes there is high probability that it already happened.

I am not a long term trader so if I am wrong that will not hurt me, but to have a complete road map lets see what are the other options if I am wrong:
- this is the top of the bull market - what we see on the DAX and Russell 2000 is topping pattern similar to 2007 the SP500 and DJI are stronger but they top too.. some kind of a wedge. This scenario will not be so bad because you are on the right side anyway.
How to make difference between the two scenarios? - the difference is time. The corrections in a bull market are sharp but short living 40-50 days, the first move after reversal lasts longer 70 days or more. If we see a bottom in March or before that it is just a correction. If we see a bottom in May or later I will bet that a bear market has begun.

- final blow off has begun - the correction in October was probably wave 4, DAX and Russel200 finished their corrections with the first a-b-c lower. Than we should see max 50% retracement to around 1950, corrective move some kind of wave 2 and another huge rally.
In this case watch closely how the indexes move lower impulses or three waves and you have to be flexible to switch between short/long...

DJTA - it shows clear impulse for me. RSI divergences at the end of wave 3. Support and 38,2% Fibo point to the same area around the low for the previous wave 4 of 3... everything fits perfect.
Cycles - the red arrows are 18 month lows with length 60-70 weeks and blue arrows 40 week cycle lows. Currently we are at week 46 or roughly 3/4 of the 18 month cycle is behind us. It is logical to expect the last 1/4 to be a move lower.

The DAX have 3 waves lower 3 waves higher. Is it an impulse? - no. 3-3-? which pattern is this? - flat correction 3-3-5 impulse lower should follow.
Cycles - week 40 of the 18 month cycle - average length 60-70 weeks. The 18 month cycle has reached roughly 2/3 of it's length.

Russel 2000 the same pattern as the DAX. The first move lower is corrective 3 waves. We have either finished correction or it is part of a bigger corrective move.

EEM has already begun wave 3 lower. It think we are nearing the bottom of wave 1 of 3. Wave 2 of 3 on EEM and some retracement on the major indexes during the holidays will synchronize the moves.

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