Short term - the bulls see i-ii iii of 3 of 3 to infinity what else:) nonsense of course. I see only three waves higher and decline which is not finished with target MA50 daily at least.
Intermediate term - we have two zig-zags higher B(red) or with some creativity you can count an impulse(green). Looking at the indicators and market breadth 3 of 3 of 3 is clear fantasy. RSI is saying a wave of bigger degree is running.
I will love to see a drop to MA200 and the trend line connecting the lows from Feb.2016(yellow) for a crazy pattern - expanded ending diagonal.
Long term - I was not very bearish for the long term, but now with the price moving higher more than 2/3 of the time it is more likely that this is wave III. Strong divergences MACD/RSI so the indexes are close to important top. Strong decline to purge greed are common in a bull market. Since 2009 we had twice 20% corrections after 2-3 years rally higher.
In the case of B wave(red) the decline will be too short both price and time testing MA200 and 0,236 retracement and wave II was already some expanded flat(EW alternation rule). The green scenario will look perfect - alternate pattern zig-zag, 38,2% retracement to support and the trend line, just on time for the 4 year cycle low. This is the preferred scenario for the long term.
MARKET BREADTH INDICATORS
Market Breadth Indicators - weak could not move into overbought territory and divergences. The difference is this time they are reacting to the move lower and I suspect they will drop lower with the indexes making one more higher high and market breadth with clear divergences signaling reversal.
McClellan Oscillator - heading for oversold levels.
McClellan Summation Index - sell signal with divergences.
Weekly Stochastic of the Summation Index - in overbought territory expecting to turn lower.
Bullish Percentage - turned lower.
Percent of Stocks above MA50 - turned lower.
Fear Indicator VIX - divergence... expecting multiple divergences with the indexes making one more high.
Advance-Decline Issues - this time it is reacting to the decline. I expect to see lower low and broken trend line followed by lower high and divergence with the indexes making final high.
HURST CYCLES
Day 17 for the daily cycle. Another three weeks or more before an important low.
Week 10... With the old model in September/October 18 month cycle low was expected, but instead weakness we are seeing strength. This fits with my initial model with shorter 18 month cycles so I switched back to it.
DJ the "crazy" pattern is better visible. I have never seen expanding ending diagonal, but who knows.... it will solve a lot of problems with synchronization between different indexes and some shares which I watch for guidance. If we see a zig-zag lower to MA200 with very high probability this is the pattern.
Hi Krasi. Thank you for sharing your analysis. I have to admit I am a bit confused by your wave III assumption. In this case how would you qualify the big correction in 2015? Secondly if we get 30% correction, doesn’t that signify the end of the whole cycle 2009- 2019 ( expected drop) ? I understand that we are in a secular bull, which means that we can have a couple of cycles within the trend interrupted by those corrective resets. One example is 1982 - 2000 secular bull which experienced 2 interruptions, 1987 and 1990, significant resets in the long term secular bull run. Which means we had 3 bull cycles during that time. If we get what you have shown in the long term chart, to my understanding it will mean the completion of one cycle... with a potential of the secular bull resumption of the trend into its second cycle. Please correct me where I am wrong. Thanks. Kris
ReplyDeleteThe correction in 2015 is wave 4 of III.
Delete20%-30% correction is 38% Fibo retracement to test the trend line from 2009.
1980-2000 and now are waves of different degrees. I do not think that two interruption between 1980-2000 means the current bull market is over. I do not see the connection.
I looked at some shares and indexes and one more high will look better so strong move lower to purge the greed is more likely.... worst case double top.
I was trying to compare the cycles of the same degree. 1982-1987 is one such cycle. 1987-1990 is the second one and 1991-2000 is the third one. 2009- possibly 2019 should be a cycle of the same degree. Same as any one of the three cycles mentioned. The second thing I wanted to point out is that a drop of more than 20% should mean the end of the cycle, so 30% correction would indicate such event. So if we get a correction of less than 20% it would mean that we are still in the current cycle but if it is 30% the current cycle is over. I go by the conventional understanding that a stock market drop of more than 20% indicates a recession. Going back to your point suggesting a 20-30% correction: it would mean the end of the cycle and that wave V is behind us. It is of course possible that we might be still riding wave III but 30 % drop would negate such claim. A 20% drop and subsequent new high could confirm it. According to this you can’t have a 20-30% correction and claim that this is wave IV. That’s what I was trying to say. Thanks Krasi, I always appreciate your feedback.
ReplyDeleteKris
Just to clarify one of the last sentences: a 20% drop and a subsequent new high could confirm that the correction was wave IV.
ReplyDeleteI can not follow.... 20% or 30% definition for a bear market, recession, finished cycle?? this has no meaning for me.
ReplyDeleteRight translated cycle 4 year cycle the next one will make higher high simple.
Krasi, eur/usd 1,20 for Q4 2018?
ReplyDeleteAnd 1,08 for Q2 2019?
I can not say how a correction will develop. It is too early. From the first leg so far I expect MA200 daily to be tested 1,19-1,20. What happens after that and how fast I can not say. It is possible that this a-b-c is part of something bigger.
DeleteLooks like new high approaching. Any updates to the short term charts? Thanks Krasi.
ReplyDeleteNo, correction for a few weeks and intermediate term low most likely in October.
DeleteHi Krasi, Just to clarify, are you saying you don't expect a new high before the October intermediate low?
ReplyDeleteYes, we should see a lower high. I can not predict the next 10 points this is not the point. What I mean is the next bigger move is lower. I do not buy the bullish case iii of 3 has just begun and multi month up.
DeleteUnderstood thank you
DeleteHi Krasi, do you have a shorter term view on TLT?
ReplyDeleteI do not follow bonds closely, but I think one quick lower low and higher.
DeleteThe next leg lower may have started now. Bravo Krasi.
ReplyDeleteIt does not look bad:), but we need confirmation next week.
DeleteHow about gold/miners/DXY? It seems gold should rebound more and dxy should go down? But very hard to say about miners since as stock it could be down?... Thanks.
ReplyDeleteGold miners should move higher for at least several weeks. I think one more lower low with divergences will look better for a complete pattern, but I bought some shares just in case if I am wrong.
DeleteUSD should correct lower for a while.