Intermediate term view - when it is finished the high should be an intermediate term top followed by a correction for 2 months. We have the small pop higher to finish wave iii now wave iv is running. Nothing new, the analysis stays the same. Waiting for the current move higher to be finished and the top should be an 18 month cycle high followed by a correction for 6-8 weeks. On the daily chart I have changed the red count. To be honest now with the strong leg higher the move since Feb.2016 counts better as two zig-zags compared to bullish 1-2 1-2... I will just wait and see what happens in March and April. TECHNICAL PICTURE and ELLIOTT WAVES
Short term - wave iv should be shallow sideward move 20-25 points. If we saw the top for wave iii the measurements for wave v are roughly 45 and 70 points.
Intermediate term - changed the diagonal count(red), SP500 moved too high. It still counts very well as two a-b-c waves higher, but you need to change the place of w1 and w2(red). There is two support areas - in the bullish case w4(green) should move to the area of the previous wave iv, in the bearish case w4(red) should overlap with w1(red).
Long term - no change, waiting for the wave from Feb.2016 to be finished.
MARKET BREADTH INDICATORS
The Market Breadth Indicators - many indicators did not move higher despite the strong move, they ignored it - a red flag. The big picture is bearish with divergences, now waiting for the indicators to turn lower and sell signal.
McClellan Oscillator - lower again, making lower highs.
McClellan Summation Index - buy signal.
Weekly Stochastic of the Summation Index - buy signal.
Bullish Percentage - buy signal.
Percent of Stocks above MA50 - around the overbought level, again lower high.
Fear Indicator VIX - more and more tight BB, the question is not if, but when it will explode higher.
Advance-Decline Issues - it just refuses to move higher despite the strong leg up.
HURST CYCLES
Day 17 of the 40 day cycle. Expect mid-cycle low(the small numbers on the chart) on day 18-19 with the low for wave iv.
Week 5 of the last 20 week cycle..... waiting for the 18 month cycle high.
Some readers are bearish and other just irritated by the never ending bull market.... so here is what I think. Such strong final phase is typical for the end of a bull market. If I compare the previous tops 2000/2007 with now and look at EW counts/cycles/market breadth they suggest the same scenario. I expect the same topping pattern with three tops before significant sell off - top with strength(now), one more higher high with weakness, test of the high(lower high). I think it is too early to be very bearish and make big bets on the short side. There is no point waiting 6 months or longer for the big short. Currently the indexes are where the green arrow is. We should see 6-8 weeks correction for the 18 month cycle low. Higher high for a finished pattern. First move lower to the MA20 followed by test of the high and then the sell off should begin. Do not expect a plunge before seeing the price below MA20 - see the red arrows.
Hi krasi,
ReplyDeleteExcellent analysis. Thank you as always. For my learning, I noticed you changed your small wave 4 as shallow one compared to before when the wave would hit the bottom trend line. Any reason?
Thanks,
Kali
Just to show that it should be some kind of a sideward move.
DeleteI appreciate those extra comments "Some readers are bearish and other just irritated by the never ending bull market.... so here is what I think....."
ReplyDeleteI'm one of those who is irritated and didn't act on the reversal day after the election and who sold out way too early in late February expecting a retest of the low.
Thank you Krasi. Any reason Friday's low could not have been small wave iv? It is only 3pts from your low :)
ReplyDeleteIt could be wave iv. You never know with such small corrective waves. They are difficult to forecast. We have a small zig-zag, if it continues higher or turns one more time lower for a flat... no one knows.
DeleteHi Krasi,
ReplyDeleteGreat analysis, thank you. One question I have is what book on EW analysis would you recommend? I'd like to study the subject in more depth. I'd appreciate. Thank you.
Krisarnold
The classic is "Elliott Wave Principle: Key To Market Behavior by A.J. Frost and Robert R. Prechter".
DeleteI think I read this one "The Basics of the Elliott Wave Principle by Robert R. Prechter" because it is short, just the most important you need to know.
I think you can find them on Internet.
The thing with EW is you do not need to know in depth some complex theory you need practice counting all the time every day chart after chart. In the books the patterns look so clear in the practice they are not so clear.
In fact the theory is simple a few videos in youtube and you are ready:)
Hi krasi,
DeleteBeen trying to practice my Elliot wave count on xbi. I can't seem to figure it out. Looks like a corrective wave ending in February. Then looks like expanding diagonal then a triangle. Are these all zig zags? Are the sharp moves consistent with a-b-c pattern? What is your view on current count?
Much appreciated.
Kali
GDXJ today...wow! You may get your deep retracement after all! This seems super impulsive though
DeleteI assume that XBI will continue in the same direction like majors. In this case XBI looks to me like W-X-Y. An A-B-C from Feb.2016 to Sep.2016 / X in Oct.2016 / Y - A in Nov.2016, c lower March/April with the major indexes to finish B and C in summer to finish Y.
DeleteYes, GDXJ looks impulsive. It is difficult to count it as a correction. In this case we will see more to the downside. The cycles are showing a low in March obviously it is playing out:)
DeleteThank you krasi
DeleteKali
Big sell off in miners today.. Krasi, do you see the retest of Dec16 lows in Miners and PM before the cyclical bull market resumes?
ReplyDeleteThanks
Neel
I think the bull market has already resumed, but it will not take off before the summer.
DeleteWhen I look at cycles I see important period in summer June-July-August - stocks/USDJPY top and Gold/Bonds bottom. Currently for PM/miners I expect higher low and some kind of sideward move until the summer. The scenario from the last "Long term update" is working so far so no need to change something.
The miners look like an impulse lower... we need a few more moves up and down for confirmation. In this case I think this is wave a with waves b and c to follow for a test of the Dec.2016 low with higher low.
If I am wrong we have a huge double zig-zag from the top in August.2016. This up leg was wave X and the second leg lower is already running with a low in summer lower than Dec.2016 GDXJ something like 22-23
hi krasi
ReplyDeleteDow Jones had surpassed 21000 mark and the market seems to go ecstatic about it. Can you explain in simple layman terms if this market is overbought and the correction will kick in soon ?thank you
It happens very often, moves higher/lower end with such buying/selling climax. This is just a buying climax and not a break out higher. Today the price action confirmed it.
ReplyDeleteI am focused on charts and in this context overbought means indicators or market breadth hitting crazy levels. Indicators - RSI hit 85 which is very high so the next move is lower. Market breadth - is just weak. If we have overbought conditions this will mean strength, but now I see only weakness.
There is very high probability that a correction has already begun.