Jul 15, 2016

Long term - update

It is time for the next long term update and after that I am taking a break for a few weeks. The next update will be in August probably 07.08. Until than you will have to navigate the markets alone:)
P.S. The indexes reached the targets which I have posted. I am not comfortable on the long side anymore so I am out.... out on vacation:)

Since the last long term update I would say the markets moved in the expected direction no surprises - stocks higher, bonds higher, emerging markets outperforming, commodities with important low.
Last time I wrote - "trend changes are expected in 2016 based on my analysis of cycles and EW patterns."
Stocks made an important low and reversed, but the big questions are - Is the bond bull market over? Is the commodities bear market over?

What to expect in the future....
- Bonds major top of the bond bull market - 2012 for the 10-year treasury note and now for the 30-year treasury note, bold call but this is what the charts are saying they look very ugly for the bulls.
- Stocks - after the current mess is over continuation higher with the strongest wave 3 of the impulse probably fueled by money exiting the bond market.
- USD should finish the consolidation phase (probably a triangle) in the next 6 months with 3 year cycle low and start the final wave higher
The difficult part - is the bear market for commodities over after such impressive run?
- Gold miners look like an impulse, for gold/silver there is a lot of room for interpretation of the waves. For the next 6 months( before the next update) the rally should pause and correct. When we see the first move lower after this rally we will know more.
- Crude oil/Natgas - only three waves corrective move so far. If we do not see another leg higher for an impulse the energy sector is in some kind of corrective structure.

I had two scenarios - 7 year cycle low in Q1.2016 or October.2016. A few weeks after the February low I switched to the first one because the move was too strong and few months later we see SP500/DJ with new ATH. We have impulse higher and corrective move so more to the upside is expected.
Currently I expect the next important low for long term trade in October. I do not expect the end of the bull market before mid 2017.

The emerging markets had a strong leg higher as expected(because of commodities) and currently are in a correction before another leg higher.

I was expecting a move higher, but it is something completely different. I have found charts of the 10/30-Year Treasury Bond on one of my trading platforms... and now with the new information I am not surprised that I was wrong. The moves higher were not complete, but now the charts do not look very good for the bulls. I see only risk and profits which are not worth the risk anymore.

30-Year Treasury Bond two legs higher with correction in the middle A-B-C. Two 18 year cycles currently year 16 of the second one. Divergences on the monthly chart and price hitting the upper trend line. This is not something I would buy.

10-Year Treasury Bond - the same story EW,Cycles, TA indicators with the difference that the second leg higher C looks finished as an ending diagonal. We have an impulse lower already(a or 1) and zig-zag higher(b) for 30 months trying to retrace the initial sell off. It looks like double top to me.

TLT the same story huge ending diagonal hitting the upper trend line with divergences. Currently 2,5 years from an average 3,5 year cycle. Sorry bond bulls, but it is time to take profits.

30-years treasury yield - the average cycle length is between 5-6 years with only one outlier 7 years. So I thought in 2015 we have 6 year cycle with a nice low in the middle for half cycle, RSI extreme... well I was wrong it does not work perfect always. Now we have a cycle with 7 years length and divergences on the monthly chart. This time I do not expect surprises we should see strong rally higher and if the bond bull is over the next low should be a higher low somewhere in the support zone.

EUR/USD and DXY are corrective mess for 15 months already and it looks like a triangle. When it is finished we should see one final surge higher for the USD before a long term move lower.

For the DXY it can be an A-B-C for wave 4(we saw lower low in 2016), but the EUR/USD looks like a triangle and the next 3 year cycle low is in roughly 6 months so I think the consolidation phase should continue.

EUR/USD looks like a triangle and we need another year at least to finish 2,5/3 year cycle and the 8 year cycle(purple). The RSI trend line has been broken, which means the move higher from 03.2015 is reversing. The broken trend line should be tested for wave E of the triangle before the final plunge lower begins.

Last time I have shown cycle analysis of the tops for USD/JPY with clear 8-9 year cycle length. The topping cycle was in year 9 so I will not be surprised if the top is behind us. The move lower is deeper and longer as I have expected.
Now cycle analysis using bottoms - we have again 8-9 year cycle length and it looks like the yen is headed for a 4 year cycle low. After that one final move higher is expected for an M pattern followed by long term move lower.

Important low as expected and impressive rally for the gold miners. I find the precious metal sector the most difficult to predict. I lot of room for interpretation of the waves at the moment. We will be sure if a bull market has begun when we see the first leg lower.
Take more "practical" approach - I think the time for correction is coming so time to take profits. Than if we see corrective move it is bull market and load up again at lower prices, if we see something ugly it is bear market and you do not hold the bag... even can enter short at the right time. No need to guess at the moment.

The low came a few weeks earlier, but we have our important low. Gold entered in the resistance zone (cluster of highs between mid 2013 and mid 2015) and it is testing the down sloping trend line. I expect a top in the next few weeks and correction lower.

Everybody very bullish on gold, EW guys counting wave 3 to the moon..... I have shown on the chart all three possibilities which I see.
- The most bullish 1-2 (green count) and 3 to the moon - I do not think this is the right count.
- Impulse higher is finishing with ED for wave 5 (the yellow count) and correction should begin soon - this count looks ok (preferred at the moment).
- Bearish count A-B currently in C (red count) with new lows next year - it is possible if yields/stocks/USD make impressive run higher and money moves out of safe haven(gold). I can not predict this in advance with my knowledge and my system:) I need to see the leg lower first.

Silver with vertical move... the last article I saw was that the target for silver is 675:) Ooook at the moment I see only corrective A-B-C higher. You do not want to see such moves at the beginning of a bull market that is bad , but who knows maybe I am wrong and it continues vertically higher:)
It is not a problem to see gold with impulse(see above) and silver with corrective zig-zag. In 1999-2001 the previous important low exactly that happened - gold made higher low and silver lower low.

Not very clear count.. It is more likely that we have an impulse and correction will follow.

Important lows as expected and impressive run, but the moves higher are only three waves so far which is corrective.
The current move lower - we do not see impressive impulsive reversal from the ED(wave c), the XLE index looks like an impulse higher and corrective phase running, the same for the Emerging markets, a lot of energy companies with impulses higher, USD/RUB with impulse lower so after a pause the RUB should continue higher against the USD. The signs at the moment are for a corrective leg lower from a bigger corrective structure higher.
And the question if this is a new bull market? Like precious metals no need to guess a year in advance just let the moves play out than we will see.

At the moment we have two legs higher with the same size and the second leg looks like ED. The odds are much higher that we have corrective leg a-b-c than impulse.

At the moment the red bearish count looks more likely. The waves and cycles fit better. It will not be a surprise to see crude oil rising into 2017 and than plunge lower one more time in sync with stocks.

NATGAS surprised me with one more leg lower, but this did not change the big picture. The 18 month and 4 year cycle just came a few weeks later.
The same story like crude oil - so far we have only three waves higher and week 18 it is time for a pause and correction.


  1. Jules---
    Thanks Krasi for the update! Congrats on the baby :-) a future chartist and trader
    Enjoy the vacation! we will survive this crazy pattern forming and yes, things will become clearer in the weeks to come.

  2. Hello. I hope that you're having a good vacation away from the markets.

    I was wondering where we stand with the DeMark Indicator. It seems like we should be close to the point of upside exhaustion. I just don't know how to calibrate it accurately.



    1. Hello, it is really nice not watching the charts every day:) nothing interesting anyway.
      If you mean the proprietary DeMark indicators I do not have access to them.
      For DeMark Sequential - on the daily chart there is a sell setup finished and today if we see close below 2173 a price flip will occur. On the weekly chart we have 7 from a countdown and 11 for a combo...
      The market is waiting for FOMC tomorrow for a direction.

  3. I can't wait till August 7th. I feel like I am flying blind without you :)

  4. I too am looking forward to your comments and charts. I do a lot of work with oscillators, but I appreciate the visuals of intelligent charting. Thanks,

  5. At home for a few hours... the update is posted and now I will drink a cold beer and relax:)