We have strong move higher as expected.... but something bothers me. We have 3 up and 3 down, B wave for the SP500 retraced 90%, NDX 123% and now impulse is running.... this are textbook flat patterns. This could be 1/C, but it is very long or it cold be the whole wave C. Pullback for 2-3 days and rally to 2900 for wave 3/C does not fit much, I see some shares which need one more leg lower. The second option makes more sense to me. What I am saying it is very likely that we have a flat correction in November and another sell off to follow in December to test the January/April lows around 2550. We have to watch very closely how the move lower develops after the current impulse is finished. I will definitely close my longs, I do not want to be caught riding a sell off.
TECHNICAL PICTURE and ELLIOTT WAVES
Short term - this final fifth wave made only half a point lower low and I thought we will see another 20-25 points lower on Monday to trap the last bears, but the indexes just gaped and continued higher. The move up is an impulse and still has a day or two to finish the fifth wave.
Red is the flat pattern and another sell off. We will watch the pullback if it is a zig-zag or impulse.
Intermediate term - the final wave of the impulse will hit resistance - MA50/MA200. The pattern looks more like retest of the broken MAs and such retests seldom have bullish outcome. RSI trapped between the two trend lines soon it will pick a direction and confirm what is going on.
Long term - one more sell off will test important support - the January/April lows and the middle trend line. We can only wait a week or two to see if my suspicion will be confirmed.
MARKET BREADTH INDICATORS
Market Breadth Indicators - turned up and look positive, most of them in the middle of their ranges.
McClellan Oscillator - above zero.
McClellan Summation Index - buy signal.
Weekly Stochastic of the Summation Index - buy signal.
Bullish Percentage - buy signal.
Percent of Stocks above MA50 - in the middle of the range.
Fear Indicator VIX - lower highs, but elevated levels.
Advance-Decline Issues - turned up in the middle of the range.
HURST CYCLES
Day 23 of the 40 day cycle. It does not look bullish - very deep retracement in the middle instead of steady move up for right translated cycle.
Week 5 of the 20 week cycle.
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Hi Krasi,thanks for your analysis. I ask you a comment on the Dollar cause i think Is a important driven.
ReplyDeleteCorrection and higher in Q1 2019 for important high then lower for a year Q1 2020.
DeleteThanks Krasi. Technically this is not a flat because the B wave didn't get to 90% but ~80-85% which would better fit with double zigzag picture. This move from February to now is too long to be a minor correction from 2016 lows and the wave structure doesn't fit with anything that has happened since 2016. This is likely a higher degree 4th wave. I think we will see a large sell off >500 points Starting in later part of December going into early next year.
ReplyDeleteWrong the B wave for a potential flat retraced 90% so it is a valid pattern.
DeleteWho says this is wave 4 from 2016? Not me - complex correction lasting in 2019 or ED than wave 4 was January-April and with the deep retracement the ED is dead and removed as an option.
Wrong about >500 points sell off starting in December. Indicators and market breadth will reset first before we see such sell off and this will take months not to mention that many shares need one final wave lower for a finished pattern. Lower in December and higher for the most of Q1 in 2019.
hey Krasi,
ReplyDeleteNew reader here! Thank you very much for your analysis. It's very helpful and useful.
Question for you, what is your count for the super cycle degree on the Dow? Since 1800s, I have my count as we are in a super cycle wave 5 of a cycle wave 5 of a primary wave 4 currently. And the Dow will top around 40K. Here's a screenshot of my count https://www.tradingview.com/x/15muIOST/. What do you think?
I do not have such counts they are useless for trading and too much room for interpretation.
DeleteI follow the 4 year cycle - we should see big correction next year for 4 year cycle low wave 4 form 2009 and another rally for 2 years DJ 32-35k looks more realistic than 40k.
bigger gap up than I imagined , but still waiting to see if the Nov 8 highs hold .
ReplyDeleteIf they do , we still have a decent chance of a Dec decline - much like December 2000 , where I see some similarity .
Thanks Krasi
If it is a flat correction there is no problem to move a few points above the previous high... this will not invalidate the bearish pattern.
DeleteUp up and away
ReplyDeleteOr it makes a high to finish a correction and plunges to the January lows....
Deletejust like january 2016
DeleteMore like September-October 2015.
DeleteI want to apologize. I recounted my waves and you are right. I thought we were in primary wave 4 since 2009 bottom, but actually we are still in sub wave 4 of primary wave 3 still. We will still have a drop but not >500, it'll probably test the 2500 zone before We make one more high and then we have a significant drop. Thank you.
ReplyDeleteyour expecting this in december
DeleteI am not EW expert, I adjust the long term picture often. For example I could not predict how 2018 will develop or if the next move higher in 2019 will make higher high or not(the weekly chart).
DeleteThe intermediate term forecasts are completely different I am using market breadth,indicators and cycles which show me the direction and I check which EW pattern fits. 2018 is a good example no clue about the pattern, very complex with a lot of turns, despite that not a single swing caught me on the wrong side.
I have explained it once - following the market step by step. It works for me, my goal is trading not great forecasts years in advance.
What I want to say do not let your long term EW counts be influenced, maybe yours are better... I do not make EW deep dive.
My thoughts - market breadth hit very oversold levels and has not recovered. The two scenarios - another leg lower with divergences or if we see >500 points sell off this will mean third wave and market breadth/indicators like in 2008 - the indexes in crash mode. The 4 year cycle should make a low later after mid-2019.
So gauging the probabilities for me the first one is more likely than a crash.
Long term if it is a of 4(from 2009) or iv of 3(from 2009) I can not say for sure.
Probably January for the retest of Feb lows, I'm waiting for 78.6 retracement of the October drop before the next leg down. The next wave up after that may not be a new ATH but it could be a double top because there is significant fib confluence there.
ReplyDeleteAlso this is a disclaimer, do not take my opinion to do trades, do your own research. Anything I say or express should not be taken as investment advice.
DeleteAt the moment I see it the same way.
Deletei dont take anybodys decision every decision is my own im just asking
ReplyDeletew bottom should see higher into end of year
ReplyDeleteIt is not that simple. The pattern does support such development. The tech sector NDX made lower low with zig-zag corrective wave which means there is no bottom there is bigger corrective pattern and this W bottom which you see is in fact M - flat pattern and one more leg lower in December.
DeleteWhat an astute observation about the NDX. I had not noticed that since everyone was calling for a W bottom.
DeleteTransports led us up with a nice abc that fell just short of c=a . Now looks to be doing the opposite and helping to support the red path so far...
ReplyDeleteBe nice to get the first leg down done by next week , so Santa gets his b wave rally , but time will tell.
It feels like reversal... not that I am surprised:)
DeleteIt makes sense... slightly below 2600 mid December, Santa rally and final leg lower in January.
S&P made a perfect symmetry with today’s low at 2701 and matched the low from oct 11 to form a W. if it does not rebound now and head higher I think it will go lower as you predicted Krasi...
ReplyDeleteThis is not the price action you want to see when you expect break out from inverted H&S.
DeleteI agree, the sudden acceleration to the downside surprised many I guess. Nonetheless, it stopped at that inflection point... one could argue that the correction is over and it should go higher now..we’ll see tomorrow how it develops.
DeleteI think your white line to the upside may be followed by s&p now.
DeleteThe white line would be fine if we see zig-zag... with impulse lower it is dead. You want to see inverted H&S(not for the first time:) and ignore all other signs. Look at other indexes and shares you will see clear zig-zag and sharp reversal with impulse. I do not know how to spin this bullish.
DeleteWell, it’s another confirmation that I H&S does not always work...
DeleteThink this gap will be short lived today & we rally into tomorrow. Hedged my shorts to lock in the 100pt+ dip & if that plays out will un-hedge after the retrace. I have support around 2665-70 so we'll see what the day brings
ReplyDeleteThis should be the fifth wave to finish the first leg lower and Fibo target was hit at this levels 5=0,618(1to3) so I think the probability is high to see open lower and reversal for the day. If the market crashes... I can not predict it:)
DeleteHi Krasi, what is your view on DXY? possible for it to hit 100? Thanks
ReplyDeleteIf we talk about the next few weeks I do not think so... I am not sure what kind of pattern we have, but I think Gold should make one more low next year so most likely USD should hit 100 late Q1 in 2019.
DeleteThanks Krasi, Vs most of the G10 currencies - with the clear exception for GBP and Eur, USD seem to have topped out. But as you pointed out, the pattern is not clear. Share your view on Gold, the pattern since Jul-2016 does not look complete
DeleteGreat Call Krasi!
ReplyDeleteIf you look at the NYA and SPX there the initial drop started on Sept, 24 and some people are calling this wave 1 and 5 waves total from late Sept to Oct. So should we expect 5 waves now also from Monday's high. I wasn't sure if you are expecting the C wave to be a Zigzag or just a 5 wave impulse. Thank you.
I was wondering exactly the same today - zig-zag lower or impulse... I do not have an answer:)
DeleteNYSE 5 waves, SPX you can count 3 or 5 waves, DJ with 3 waves... I do not know which one is right.
I will watch time when the targets are reached, other indexes and single shares to decide which one will be. If we see the second leg lower developing fast in second half of December it is more likely wave 3. If it takes time and develops slowly nearing the January.2018 lows in January.2019 it is more likely wave c.
Well I managed to hedge my shorts 40 pts too early.....now a bit long , but expecting Krasi to say we still have waves 4 & 5 to come before a serious lift :)...
ReplyDeleteNot this time, this leg lower should be over:)
DeleteSo you think the leg down is finished and at least we should expect some kind of B wave? Thanks. How high would it be? Thanks.
DeleteI would say 38% retracement closing the gap 2690-2700.
DeleteOh... it has already closing the gap... within one day, what's next is really tricky. From hourly chart, not look like finished pattern?
DeleteThat was the minimum after such fast plunge... yes it is tricky there is a few options, but the question is how high before the final move lower starts. I do not see an important bottom.
Deletemaybe a retest then ...!
ReplyDeleteSuch short term forecasts are usually not reliable, currently looking the 10min chart I would say there is a chance to test 2640.
DeleteIs a tradable bottom more likely this week or next week? We went up for 6 days and now we are going down for 2-3 days. The time symmetry would make me lean toward Tuesday or Wednesday of next week. any reaction?
ReplyDeleteIt depends on the time frame which you trade. Short term bottom is today, intermediate term from the September high there is no finished pattern.
Deletewow gap filled
ReplyDeleteYou and SC should wake up the direction is lower. Impulse lower was finished and we have retracement nothing more.... volatile as the decline, but the damage is done.
DeleteThis is a sideway pattern from November and we will see another leg lower. We can argue if it has begun or not, but there is no bottom. Best case wave C to 2850 which will be the best Christmas present to short. Of course you do not want to see the charts and you will load up again when you should dump your longs.
Krasi i trade i bought that bottom did you I am here to make money not to hold till dust settles
Deletei agree that the market could see 2850
DeleteLouis pull up a weekly candle chart on SPX,RUT or NDX or even short term charts...there is nothing bullish about these...there are hundreds of points to go to even touch the uptrend line from 2009..If 2600 and then this year's lows break, which I think is possible, I see 2340ish as next support around 200wk MA
DeleteI hear ya but I think next year not during christmas
DeleteGood morning Krasi, Thanks for being here when shit hit the fan this week. You're a great source of comfort, your confidence and incredible accuracy in those moments is remarkable :) Seriously I mean that!
ReplyDeleteMy question is, I don't understand your last comment.. Louis pointed out that today's gap was filled, and the 2680 gap you mentioned a while back also got filled, so all options open now, so I thought this was a terrible long or short entry. I was looking to short at 50% retracement around 2720ish but would be reluctant if you think that unwise, this is a much faster moving impulse than we've been accustomed to in recent action, so just trying to understand your view -> 'the direction is lower', 'this is a sideway pattern from November' and 'you will load up again when you should dump your longs' is what is confusing to me?
Very volatile market with sharp reversals... I am surprised that my analysis works so good:) usually you can forget riding such crazy corrective swings.
DeleteIntermediate term the direction is lower. We have leg lower, sideway move November and we need one more leg lower.
Loius is biased with big long position and excited on every jump higher starting with the top in September and all the way lower on every big candle up. He is commenting on another blog and now very bullish again. Even if I am wrong and we see 2840-2850(bigger flat pattern the chart tomorrow) the pattern is still bearish.
Now I understand, thank you for clarifying! Much appreciated :)
Deletep.s., your red pattern is almost playing out like clockwork on the st chart
ReplyDeleteHi krasi! Well done, and thx for your analysis..... was wondering, the million dollar question... in your view, and despite the fact that these corrective move are highly unpredictable, how much of this down impulse the market will retrace? We could have a retracement burning option premium for a couple of week till expiry, going nowhere, but still, could we reach 2800 for a lower high, or lower in your opinion?
ReplyDeleteThx!!!
Probably 61,8% around 2740 even 78% is around 2760. Another options - bigger flat 2840 next week and lower again, triangle burning time something around 2780.
DeleteAnother 1-2 days to see how the move develops and we should know more.
Is today's down move expected? How to explain it? Thanks.
DeleteYes, it was expected. Higher today would mean continuation from yesterday and reversal with the possibility to invalidate my analysis and this has not happened.
DeleteYou can not predict corrections exactly at early stages. Because of the strength yesterday I was expecting 50% retracement and another leg higher to 2740. Now it looks like 3 up and 3 down with the same size so probably higher to 2710 for flat correction.
The shorter than expected retracement higher yesterday and Friday AM (<50%), could it not be interpreted as a wave 4 of this impulse lower with another low for 5 early next week? The daily and weekly IWM chart looks very nasty, a lot of them do in fact
Deleteso 2620 to 2740 or so was good move i doubt they clock market for christmas just saying
ReplyDeleteNice rally for short term traders, but it is not changing anything. I would not rely on Santa Claus:)
Deletei agree we are going lower but thats not gonna stop me from trading
DeleteKrasi, you're doing nice work. Kudos.
ReplyDeletefor as long as we remain below 2700, the jury is still out for me .Taken off most of my hedge longs on the payrolls spike ...today could be dull as ditchwater , which would make a change
ReplyDeletenot so dull ... hedged shorts again to lock in the dip & see if we get a higher high above 2708 early next week.
ReplyDeleteGood luck with the update Krasi!