Long term update

Happy New Year!!!!

I hope you had pleasant holidays and I wish you a very successful year 2016!!!

Six months later is time for the next long term update:)
Nothing really new, which is not a surprise because the trend changes are expected in 2016 based on my analysis of cycles and EW patterns.

The news is FED is raising rates.... the question is if a new rate hiking cycle has begun and how long will it last.
I doubt that we will see more than a few hikes. They can not afford it. All this mountains of debt can not be served. My analysis tells me the market will call the FED's bluff.

The trade for the last year and longer was Europe is engaged in QE and lowering yields(which are negative) FED will raise rates and there is no QE -> the consequence yields climbing higher/bonds lower, USD higher JPY and EUR lower, commodities lower, stocks... no QE sideway move for a year.
Most of this is already priced in. For example as I wrote early 2015 expect EUR/USD bottom and since March 2015 the pair is in a range. This trade is extremely crowded and despite more QE from ECB and FED raising rates EUR/USD is a few cents higher.

It will take time 3-6 Months the bias to change, but I think this will happen despite looking crazy at the moment. The charts(cycles and EW patterns) are telling me at the moment that this trends will change next year - the stocks should make an important top soon and we should see the down part of the 7 year cycle with bottom October/November 2016, EUR/USD should make a major low(DXY high) June/July 2016 and commodities should make major bottom March/April 2016 (or even earlier).

I do not know what will cause this major trend changes..... my explanation is plunging stock market will scare the CBs, FED will start again QE and probably stop raising rates(or even lower them) which will eventually cause inflation after years of pumping liquidity in the markets. The big boys know such things in advance and a few months earlier we should see the USD making major top and we should see an accumulation in the commodities sector which is very depressed at the moment making major bottom.


- STOCKS
The forecast stays the same - bottom of the 7 year cycle late 2016 and another move higher. So far I do not see signs that something different is happening.

If I am right about the USD and commodities the EM should outperform the major indexes. At the moment they are depressed because of the plunging commodities.

- BONDS
No change - I think yields will move higher for a while, but than we should see one more low before this mega bond bull dies.

TLT - it looks to me like a giant diagonal with 3-3,5 cycle.

The move lower is corrective and the move higher looks like part of a bigger correction. All this was expected - so no changes so far.
Choppy action the last 4 Months. It is either some kind of a triangle or diagonal which should finish soon followed by move higher. Than I expect final move lower.

- FOREX
Choppy moves since March 2015... I do not see an impulse in the opposite direction so far and there is no proof for a major top. It will be a surprise if it behind us.

I think there is one more higher high left. Either we are still in wave 4 or wave 5 is running as a diagonal.

EUR/USD - here is how a diagonal should look like with cycles. This should be a major low 4/8/16 year cycle low. The alternate scenario is a triangle if we are still in wave 4...

The trend line is respected. Everybody still talking about parity. Even if wee see it do not fall into the trap and take a contrarian position.

Moving sideways for seven months. One final thrust higher to finish the cycle will look great.

- GOLD/SILVER/MINERS
Intermediate term low in Summer as expected, but the rally was disappointing... I was expecting something stronger.
If my cycle count is right we are in the last 20 week cycle and I expect one more low. The EW count is not very clear, there is a lot of room for interpretation, but based on Silver and cycles it should be a corrective pattern. It is time to watch closely because a low can come in a few weeks....

Silver has similar cycle count but the EW pattern looks more like a correction.

GDXJ looks like a huge double zig-zag and final wave C from Y running. One final move lower to finish a diagonal wave c/5/C/Y is missing. Intermediate term we have 6 weeks sideway move it looks like bearish flag so one more move lower will fit perfect.

- CRUDE OIL/NATGAS
Move lower as expected, but I think we have a different pattern. Cycles are not very clear, but I suspect we should see an important low like most of the commodities. May be not an explosive move higher for a while because of over supply.

It looks like a diagonal.... one more 20 week cycle and waves 4/5 of a diagonal will look perfect for a major low.

I wrote a month ago about NATGAS... it looks and feels like we had the expected major bottom a few weeks earlier.
The alternate scenario - the plunge is wave 3 and this is wave 4 with one more low to come. The next low no matter higher or lower is a buy.

Weekly preview

Short term view - a pause for a day or two and than higher again.
Intermediate term view - I expect a few weeks higher.

A rally on low volume which is typical for this time of the year. Nothing new, I think we will see a few weeks higher. Worst case scenario which I see at the moment - the choppy overlapping moves lower are some kind of a diagonal and we are now in wave 2 to around 2090-2100.


TECHNICAL PICTURE
Short term - at least the upper trend line should be tested. Than I think we will see the price continue higher(green).

Intermediate term - I think the indicators need a few weeks to reach overbought levels and revers.

Long term - bullish candle formation... good for a few weeks higher.

MARKET BREADTH INDICATORS
The Market Breadth Indicators - look like we have a correction behind us. No divergence, but reversing higher from near oversold levels.
McClellan Oscillator - higher after a divergence.
McClellan Summation Index - buy signal.
Weekly Stochastic of the Summation Index - still sell signal, but in the oversold area.
Bullish Percentage - turning up.
Percent of Stocks above MA50 - turned up from levels close to oversold.
Fear Indicator VIX - moving lower... massive long term divergences.
Advance-Decline Issues - turned up from oversold levels.


HURST CYCLES
A low exactly on time for a 20 week cycle low. I think the next 40 day cycle is running.

I think the next 20 week cycle has begun....
P.S. another bullish candle formation inverted hammer followed by strong move higher.

Here is one more chart - monthly SP500 with MA and technical indicators.
What do you think is it bear market or not? So far the bears are much weaker compared to 2000 and 2007. The oscillators are moving lower and reseting exactly like in 2000/2007, but the price is moving sideways... no clear push below MA20 with weak bounce for 2 months and staying below it.

Weekly preview

Short term view - bottoming and reversal higher.
Intermediate term view - higher for a few weeks.

Reversal on Monday and strong rally as expected, but followed by a plunge for 2 days so far..... at first glance very bearish, but I am watching the chart and I see an overlapping mess running for 6 weeks. Look at the second chart - all I see is a surge higher and a bull flag, corrective overlapping waves, cycles in the timing band for a bottom, indicators and market breadth reseting after strong rally in October. So the forecast stays the same that we will see one more move higher unless the price continue to plunge lower without a pause.

The last chart - I am trying to find some bearish scenario. The usual bearish 1-2 1-2 or a diagonal. Next week we will have the answer.


TECHNICAL PICTURE
Short term - the move from the low on Monday looks like an impulse so there should be more to the upside. Waiting for a confirmation on Monday.

Intermediate term - I see a bull flag and indicators reseting from overbought levels. The impulse scenario is out because there is overlapping which is good for the bulls. Watching the preferred count one more zig-zag from wave B of an expanded flat.

Long term - no change.

MARKET BREADTH INDICATORS
The Market Breadth Indicators - I think they are pointing that the indexes are near to a bottom. Confirmation is still missing.
McClellan Oscillator - lower closing price for SP500 and divergence for the indicator
McClellan Summation Index - sell signal
Weekly Stochastic of the Summation Index - sell signal, close to oversold levels.
Bullish Percentage - in the middle of the range.
Percent of Stocks above MA50 - almost touching the oversold level.
Fear Indicator VIX - long term massive divergence pointing lower for the indexes. The question is if one more move higher(SP500) is left.
Advance-Decline Issues - lower closing price for SP500 and divergence for the indicator.


HURST CYCLES
Day 82 which is the average length for the 20 week cycle.

Week 17... waiting for a confirmation if we have a bottom.

Trying to think like a bear....
- very bearish scenario the bears "evergreen" 1-2 1-2 which I listen every time when we see a correction and never played out so far. If this is what is happening we are in wave 3 and the price should continue lower for 1-2 weeks without a pause.
- the other option is diagonal which fits much better with corrective overlapping waves and the seasonality. In this case we should see a lower low to trap the bears and reversing higher for the next 2 weeks for the holidays.

Weekly preview

Short term view - deceleration and bottoming for a few days.
Intermediate term view - I think this is a zig-zag correction and 20 week cycle low.

Choppy move lower as expected... until Friday. Now it looks like the alternate pattern simple zig-zag correction from the top early November. Friday feels like capitulation and the pattern looks like expanded ending diagonal... there is a reason to call it ending:)

I see three wave corrective moves.... this is A-B-C for me, 20 week cycle low right on schedule, market breadth and technical indicators pointing to a mature correction the indexes mildly oversold, but no signs for a bottom and reversal so far, pushing prices lower before an important news is usually a sign that the big boys want to buy and want cheaper prices.

All this makes me think that we have a correction and the next move will be higher. Of course we need a confirmation and we need to see some deceleration and bottoming action before FOMC which should give the excuse for a rally for a few weeks.
If I am wrong we will see only a pause for a few days and FED will disappoint causing the indexes to plunge lower... I have problems with such scenario because the suspected wave 3(from the December top) which should the strongest is an overlapping mess and a move lower usually starts when market breadth/technical indicators reset higher and not when they are close to oversold levels.


TECHNICAL PICTURE
Short term - the move this week was five overlapping waves lower which looks to me like expanding ending diagonal and a diagonal appears at the end of a move not at the beginning.
I think it was wave c of C of 4/X. In this case we should see a move higher to MA50/the upper trend line and a higher low to finish a bottoming process before FOMC.

Intermediate term - we have a channel now. If I am right this is only a-b-c and a rally should start from the lower trend line.

Long term - no change

MARKET BREADTH INDICATORS
The Market Breadth Indicators - last week there were no signs that we are close to a bottom and the VIX for example was way to low for a bottom. Now it looks much better the indicators are close to levels which we usually see around intermediate term bottoms... only some kind of bottoming is missing.
McClellan Oscillator - hit oversold level.
McClellan Summation Index - sell signal.
Weekly Stochastic of the Summation Index - sell signal.
Bullish Percentage - in the middle of the range.
Percent of Stocks above MA50 - close to oversold levels.
Fear Indicator VIX - hit 25 which is typical for intermediate term corrections.
Advance-Decline Issues - hit oversold level.


HURST CYCLES
We have now three shorter cycles and we are in the timing band(80 trading days) for a 20 week cycle bottom.

Week 16 right on time for a 20 week cycle low.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Buy setup at day 5.
P.S. look at the histogram - I can not see a difference with any other a-b-c move in 2015 two troughs with a reset in the middle close to the zero line.

Update

I was asked is it possible the market to move lower to 1990 and how it will look like.... I looked closely the charts and there is possible pattern shown on the chart below. It will play out if the big boys want to sell the news FOMC next week.

Corrective patterns mutate all the time and there is many combinations at the moment I was talking about a triangle this weekend and below you can see an expanded flat and ending diagonal.
I would not focus on a pattern rather on price action before FOMC. If the big boys want to sell they want to sell high and will push the prices higher before 16.12 and the opposite if they want to buy they want to buy cheap and will push the prices lower before the news. Than we will see which pattern is playing out and what to expect after that.

This is a speculation how a bearish pattern for the intermediate term could look like.

Why not a diagonal for example....

Weekly preview

Short term view - I suspect a move lower to finish a triangle.
Intermediate term view - move higher for several weeks when the current consolidation is finished.

The short term pattern is changing constantly... with all the up and down I think we have a triangle at the moment. Intermediate term nothing has changed as I wrote a month ago I do not see a reason for a serious sell off in December. The pattern looks like a correction/consolidation (we were expecting 20 week cycle low) with one more leg higher to follow.

The pattern for the DAX which I see needs one move lower than higher for a few weeks and synchronizes perfect with the US indexes. So if I am right we should see a boring week with prices moving slowly lower to finish a triangle and preparing for the next move higher before the FOMC meeting next week.


TECHNICAL PICTURE
Short term - we have a corrective pattern so we should see another move higher. Again you can count it as an impulse or zig-zag but at the end we will see the same outcome.

Intermediate term - the price is trapped at the moment between the broken trend line and MA50. It does not look like reversal pattern to me rather a triangle.
It is important to see how this move higher will look like. If it is an impulse than the whole move from the August low is an impulse and in this case there is a possibility that the bull market since 2009 is over.

Long term - I still expect the 7 year cycle to show it's teeth and to see one more leg lower next year.

MARKET BREADTH INDICATORS
The Market Breadth Indicators - are pointing rather to some kind of corrective/consolidation phase than an important top.
McClellan Oscillator - below zero...
McClellan Summation Index - sell signal, but not like we have a top... just weak.
Weekly Stochastic of the Summation Index - sell signal the indexes are in a corrective phase. The next swing higher should star in 1-2 weeks.
Bullish Percentage - looks like wave 4 consolidating below overbought levels.
Percent of Stocks above MA50 - moving between 50-80... some mild correction
Fear Indicator VIX - too low for a bottom.....
Advance-Decline Issues - in the middle of the range.


HURST CYCLES
I think we have three shorter 40 day cycles which will finish a 20 week cycle and we need one more leg lower.

20 week cycle bottoming as expected... waiting for confirmation where exactly to put the bottom.

DAX - three waves lower, three waves higher and with high probability an impulse lower (one more wave lower needed) to the support level add to this expected 20 weeks cycle low. All this screams intermediate term correction expanded flat. The US indexes have different pattern, but with move lower and than higher European and US indexes will be in perfect sync.
The alternate scenarios is move lower has begun than we expect wave two with target around 11000 and we have H&S pattern. We will watch closely the next move higher corrective or impulse to see what exactly is going on.

Update

Last time I wrote that an impulse is the obvious choice, but a zig-zag lower and than another move higher will fit better. Looking how the DAX reacts today after the ECB meeting and SP500 struggling to rally above 2090 for two weeks I think the preferred scenario has higher probability.

The white numbers are the short term cycles. I suspect that instead of two 40 day cycles we will see three shorter daily cycles which will finish a 20 week cycle.

Here is the impulse scenario. I think it has low probability, but lets keep an eye on it.
If the prices find support around MA200 the 2060-2065 area and turn higher there is still a chance for this scenario.

NATGAS

After my last post the indexes fall a sleep... SP500 is in a narrow range for 7 trading days already so no change (see the previous post).


NATGAS is another commodity which everybody hate, but I think there is a huge potential for profits when we see long term bottom.
My previous analysis was pointing to an important low soon, but I was not following NATGAS closely. Now I have decided to look closely what is going on and I am posting my analysis because there is interesting observations. First cycles are pointing to important low like other commodities/precious metals even the same time frame for the low and second interesting findings if you use cycles.

The big picture - at first glance the cycles look random there is 3/4/5/6/8 year cycles and there is no enough data. It is confusing, but the solution came from the DAX. I had similar problem with the DAX, SP500 looks almost perfect roughly 7 and 14 year cycles, but the DAX - the current cycle looks like 7 year cycle the previous one was 6 years long the one before that 8 years.... obviously there is some cycles, but they look random. So I have decided to search for long term chart and I have found one starting in 1959. The cycles are again 6/7/8 years long and look random BUT if you make one step back and look at the bigger cycle you have perfect 14 year cycle like SP500 and within there is alternation 8+6 and 7+7 years. Since 1959 the cycle for the DAX are 7 | 8+6 | 7+7 | 8+6 | 7 running. It is astonishing 14 year cycle like a clock and it alternates 8+6 followed by 7+7. Now it does not look random at all. It is not a surprise that the current one will be with high probability 7 years long.


Now with this information NATGAS has the same long term 14 year cycle like SP500/DAX, but it is 8+6 years like the DAX and this explains the shorter cycles 3/6 years. We are close to major low 18 year nominal cycle which is 14 years long. Expect at least mean reversion to around 5.

Closer look of the 4 year/18 month/20 week nominal cycles shows that we need one more 20 week cycle(running at week 6 at the moment).
The low for the current 20 week cycle should be the low for the 18 month/4 year/9 year/ 18 year nominal cycles(14 years long as I explained above).

Even closer look says we need one more 40 day cycle to finish the current 20 week cycle.

And elliot waves says we should be in final wave 5 of C which confirms what cycles say.

Update

I am busy in the next 10 days so no posts this weekend and the next one.


The indexes moved higher as expected, but now the move lower from early November is confirmed corrective only three waves which opens the door for different combinations. To add more to the confusion the move higher so far is three waves too, Russel2000 looks more like impulse lower and correction higher and the DAX looks like huge impulse from the bottom in September which is finishing and correction should be expected.

Intermediate term I can not see very bearish scenario which is expected given the bullish cycle and seasonality.... and reversals does not start with corrective moves. Below are two charts with all possible scenarios which I can see at the moment.
- The "bullish" scenario - simple impulse or ending diagonal. It looks simple and the obvious choice.... I saw it already on many blogs. Such an impulse will finish wave 3(or even 5) or C from the bottom in 2009. If you are a bull you do not want to see this "bullish" scenario because you can argue that there is a finished pattern and the bull market is over. You want to see the indexes to continue with the corrective mess and when it is over we can say without doubt we have a corrective pattern running for 1,5-2 years the 7 year cycle has bottomed and this is definitely wave 4 with more to the upside in the next years.
- The "bearish" scenario - we have zig-zags up and down and this is either expanded flat or triangle. This patterns look "exotic" compared with simple impulse higher. On the other side if you remember the long term cycle charts, which I have posted, one of the scenarios was 7,5 long cycle with expanded flat/triangle and if we want to see a synchronization with Europe/DAX we should expect move lower and than higher. So in the end maybe this idea is not so exotic...

The impulse looks obvious, but I think the expanded flat is the pattern which will fit perfect.... not so important because eventually all patterns should make higher high around 2160-2180 (exceptions is triangle, but I think it has very low probability). The important implications are for the long term pattern.



The bullish scenario impulse or ending diagonal. The price should move above resistance 2090 and continue higher if this is what is going on.
You can argue where to place wave 1 and which pattern is running, but it does not matter at all, the outcome is exactly the same.... ok the high 20 points higher or lower, but it is the same for me.

If the price could not rally above 2090 the move higher will be only three waves and than the possible patterns are expanded flat(green) and triangle.
If we see another zig-zag lower with the same size the price will hit support and 50% Fibo retracement at 1990. This should finish wave B probably from expanded flat alternation is the move to continue lower which should be wave C of a triangle.

Weekly preview

Short term view - bounce higher for a few days.
Intermediate term view - the correction to continue for another 2 weeks followed by a deep retracement.

The indexes turned lower as expected.... not a surprise when you watch the right pattern:)

Nothing new since last week. I think the correction is not over, but we should see a bounce higher soon for a few days.
When it is over and we have finished structure - impulse or zigzag, we will know which pattern is running. For the moment the flat has highest probability.


TECHNICAL PICTURE
Short term - move below support 2080-2085, test of the broken support level and MA50 and continuation lower. Classical reversal and technical analysis.
Now RSI is oversold and the price far from MA50.... so I expect a bounce higher to begin soon.
Intermediate term if flat is the right pattern we should see an impulse similar to the red path.

Intermediate term - preferred pattern is flat (red). In this case we should see a wave 1 lower. Alternate if we see higher high probably much larger expanded flat.

Long term - no change

MARKET BREADTH INDICATORS
The Market Breadth Indicators - turned lower and issued sell signal. Many of them were flashing "problems ahead" for a while so it is not a surprise.
McClellan Oscillator - in oversold territory, bounce higher?
McClellan Summation Index - sell signal.
Weekly Stochastic of the Summation Index - sell signal.
Bullish Percentage - sell signal.
Percent of Stocks above MA50 - in the middle of the range.
Fear Indicator VIX - as I wrote last week narrow BB(low volatility) precede strong moves higher.
Advance-Decline Issues - heading lower...


HURST CYCLES
Day 34 of the 40 day cycle.

Week 12 of the 20 week cycle.

Tom Demark SEQUENTIAL AND COUNTDOWN - this technique spots areas of exhaustion.
Price flip on the weekly chart and setup at 6 negated. On the daily chart setup at 6 and high probability that it will be finished. This is bearish.... confirms so far the idea for wave C of a flat.