Jan 2, 2018

Long term - update

Happy New Year!!!!

I hope you had pleasant holidays and recharged the batteries. I wish you successful year and great trades in 2018:)

From the last update the main ideas were - stocks are in a bull market higher, corrective move up for Bonds, corrective move lower around the end of the year for PM/gold miners, finished wave B for Crude Oil, USD waves 4 and 5 lower missing from 16 year cycle high.
Stocks the pullbacks were more shallow than expected, USD it takes longer to play out, Crude oil with a low earlier than expected.... but overall the ideas are playing out.

The current view for the next 6 months:
- Stocks - correction wave 4 and higher. There is a scenario that we are close to a major top, but even in this case I expect something like double top.
- Bonds - I expect the corrective move higher to continue.
- USD - should finish waves 4/5 and we should see the bottom of an impulse lower from major top, then a move higher for a few months is expected.
- Precious metals/miners - should move higher for a few months, but I do not think this is a major bottom.
- Crude Oil - wave C higher running.... move lower expected and there is high probability that Crude oil is finishing a zig-zag from the Feb.2016 low.

I think from the low in 2016 we have 1-2 i-ii count plus fifth wave extension v of 3. This is my EW weak spot:) the result is I have predicted the tops(March/August/November), but I did not know what kind of correction to expect and how high the index will move. I think I know the answer now - Fibo measurements projecting iii using i (1,618 Fibo) and 3 using 1 (2,618 Fibo).

So the bull market is not over. We should see soon the top of wave 3, then wave 4, followed by wave 5, first decline and test of the top.... overall I think 2018 will be a sideway year. Cycles are pointing to important low late Q2 early Q3 and in 2018 the 4 year cycle should start turning lower, this should cause a topping process. I can not project exactly the path, but it should be something similar to the shown on the chart below several up and down moves.

My view is that the mega bond bull market is over, we saw the first impulse lower and now corrective sideway move is running.
In the last 6 months we saw corrective move as expected. I think it will continue for a few more months.

Looking at the monthly chart the cycles says to expect a few more months until the next important high.

The pattern looks to we like a triangle for wave X and zig-zag higher to finish the pattern from the low in March.2017.

Like RUT(and all international indexes) the DXY chart disappeared from freestockcharts.com, so I will use EUR/USD which is not much different. For JPY the Philadelphia Japanese Yen index because it is easier to correlate with precious metals.

The USD made major 16 year cycle top early 2017(EUR/USD bottom) and should move lower for 7 years. The next important low for USD should be the 2 year cycle low sometime in Q2 or early Q3 2018. This is EUR/USD chart which is showing inverted picture. In the next few months EUR/USD should finish an impulse from the last low and 2 year cycle high followed by multi month correction(USD higher).

The pattern from the low looks like an impulse which is still not finished. If you look at cycles,JPY,PM you need more time ideally until mid-2018. The pattern which will do it is triangle for wave 4 before the final leg lower for USD(higher EUR/USD). Alternate it could be a flat for wave 4(red) or ED the top of w1 currently. The idea is the same - corrective waves since the top in September and one more high before a reversal.

XDN cycles show 2 year cycle high mid-2018. The move up in 2017 is very choppy and I do not see a way to count it as impulse. I suspect another zig-zag up until mid-2018 followed by another plunge lower.

If you look at the mirror picture USD/JPY we had an 1 year cycle low(as usual), but the first 24 week cycle toped out very early at week 8 which is bearish so I think we have one more leg lower c to finish wave B next year before another strong surge higher for C.

The expectations were for an intermediate term low around the end of the year and I think this is exactly what is going on. I see an intermediate term bottom, but I can not see major low. Gold/Silver/Miners have different patterns the common is it is some corrective mess. I suppose some W-X-Y.... with so many corrective waves you can only guess. The PM sector should be higher for a few months, trade accordingly then we will see what happens.

Gold made 4 year cycle high in 2016 followed by sharp sell off and since then choppy move up. I think we should see a few months higher for a 2 year cycle high which is confirmed by the JPY. The pattern from the low late 2016 looks corrective to me so I do not expect major move up.

Silver monthly chart the same story - 4 year cycle high in 2016 and a few months higher for 2 year cycle high(yellow).

I have already shown HUI, I think GDX has the same pattern.

GDXJ weekly - a low was expected at the end of the year.... it looks like we have the 1 and 2 year cycle low as expected. Now we should see a move higher for a few months.

CRUDE OIL - a low for wave B and higher was expected, but timing was bad.... I do not know, it could be bad cycle model or just an exception.
I can choose to trade what I see(first chart) or try to fit the pattern to model/analysis(second chart). You should always choose to trade what you see.
So I expect a move lower an impulse to confirm the first chart and if we see only an a-b-c correction for a few weeks I will switch to the second chart.

Looking at the chart I see A-B-C... and if you look at Brent Oil or Heating Oil the pattern looks even better. Crude Oil leaves some room for interpretation, but not Brent Oil.

This is if I try to fit the pattern to the cycle model... it is not impossible, but I would not bet on it until I see a corrective test of the break out around 53-54.

NATGAS - the correction has continued as expected. Long term we have leg higher(March-Dec.2016) followed by a correction(2017) and we should see one more leg higher with important top in Q4 2019. Top-to-top cycle analysis looks consistent and NATGAS makes important tops every 2,5-3 years.

Now the problem - is the correction over? We have several corrective waves which means several different possible patterns and trough-to-trough cycle analysis is not working for NATGAS. Technically it can be over, but I think the correction needs more time because I do not see a nice finished pattern and in a few months we should see 18 month cycle high. I think we have either a triangle or some complex W-X-Y like gold miners(see GDX above).
Intermediate term we have finished a-b-c from the top in Mai so we should see a move higher for a few months. After this move we will know what pattern we have and if the correction is over or not. Again I think the correction needs more time and it is not over.


  1. Krasi, happy new year! Thanks for your update. Appreciate it! What do you think about HSI in Hong Kong and SHCOMP in Shanghai? thanks. H

    1. HSI should correct to around 27500 and make another higher high.
      Shanghai looks like huge bear flag since the low in 2016 which should break lower eventually. Best guess one big W-X-Y.... one more low to finish a correction from the top in November then one more higher high to finish the bear flag.

    2. Thanks Krasi, how would you do the wave count for HSI and Shanghai? To me, they are not clear. Like HSI, it looks like it is wave 5, but this wave 5 is a very long extended one. and there are many extensions already. The importance is that if it is not wave 5, it must be wave 3 and it can still have a lot of upside. But if we look from 2008 low, the low in Feb2016 represented the start of the last phase of the whole bull run. Given length of wave 3 cannot be the shortest, the wave up from Feb2016 should not be higher than 31000, which is only 200pt away. So, I need your help to tell me the wave count. Thank you very much. Once again, appreciate your analysis and sharing. thx. H

    3. From the low in 2008 I would count it as A-B-C. Currently C is running with 4 and 5 missing to finish the whole pattern.

  2. For gold miners daily chart, do you think it will retrace lower to test MA20 and begin the impulsive intermediate term up? Thanks. SPX is still hanging higher... Any potential direction?

    1. Gold miners look like the top of wave 3 at the moment so 4 and 5 higher then bigger pullback to MA20/MA50.
      The indexes will look much better with one more high. I do not see a reversal pattern.

  3. Hi Krasi!

    Happy new year!

    Waiting for that xbi drop!!

    Thanks for your excellent updates.


  4. Can we see top is here?

    1. Yes there is such possibility.... but it is only a guess without a confirmation

  5. Strange H2535 your comments are not posted I just see an mail.
    ACB.TO looks like the top of wave 3. Internal waves and Fibo looks right so w1 Nov.2016 -> w2 June.2017 -> w3 now internal waves count very good with iv as a triangle in Dec.2017.

    1. Thanks Krasi... this has happened once more before too, that is Strange :) Thanks anyway for responding to my post . Appreciate it :)