Nov 4, 2015

Intermediate term

The indexes continue to climb, SP500 retraced more than 90% and I think the intermediate term pattern has changed. I was expecting the move higher to reach the previous highs even make new highs but I thought it will take more time and it will be more choppy double zig-zag(it does not feel right any more). With this retracement I think other patterns are more probable. The cycle charts with the patterns updated below.
The longer cycle 7,5 years - we have already second leg for a flat(90% or more retracement) so the pattern which will "eat" time is triangle.
The shorter cycle 7 years not a zig-zag instead a flat.

I thought this shorter cycle 7 years with a zig-zag(now flat) has less probability... until you go through different markets. Look at China, emerging markets, precious metals - either my analysis are wrong or cycles/EW patterns of different markets are synchronizing for an important bottom early next year January-February.
For me all this smells like huge inflationary wave hitting the markets next year. I do not what the trigger will be.... the USD finishing its wave higher and EUR/USD hitting massive 15 year cycle low? Another QE?

The good news is both patterns are different and it should be easy to find out which one is running - a flat needs an impulse and a triangle only corrective 3 waves. Pay attention to emerging markets and commodities they should outperform the major indexes.

Taking into account other markets it does not have higher probability. This scenario is still possible. Maybe commodities and emerging market sniffing the coming inflation first and the major indexes following a few months later.

With the current retracement and in the light of the other markets I like this scenario

China - the pattern has not changed, but it will take obviously more time and synchronize with emerging markets/commoditoes

EEM - I posted a chart long term ago(where the circle is). I do not follow EEM, but it is a pleasant surprise to see that it follows the scenario simply perfect. It works for a long time so no need to change it. One final push lower will be great.

Gold - I have adjusted the cycles to the Hurst nominal model. It looks like the bottom will be earlier in Q1 instead of Q3 2016. Some gold miners probably made a bottom and many look like will finish a huge EW pattern from the top with one final push lower... so this cycle count looks good to me.

Silver - similar picture, interesting is that both 4 year cycles are running steadily so far with average length 63 weeks for the 18 month cycle (67+65+59)/3=63,6 and (53+73)/2=63. Many think that the bear market finished in Summer, but I do not see a reason why the last 18 month cycle should be only 39 weeks and not something like 60-65 weeks.

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