Game Over Start Of July

Many charts and indicators say equities finally topped out at the start of July.

1. European stock indices peaked out at that time and have since made a lower high and lower low.

4nov3Source: Stockcharts

2. US small caps and the Dow Jones World index show likewise:

4nov21

3. Whilst Dow Industrials shows a megaphone formation since then, Dow breadth and Vix (inverted) reveal a similar decline since the start of July.

4nov44. The SP500 shows a megaphone too, however its breadth followed the same declining pattern since the dotted line. NYSE advance-decline volume and the high yield to treasuries ratio also reveal the start of July peak.

4nov95. Ditto the Mclellan Summation Index and the trend change in put/call ratios:

4nov7

6. Nasdaq breadth significantly diverged at that point.

4nov8

7. Oil took on a deflationary track at the start of July and leveraged loans made their peak.

4nov18

8. And lastly, the Sornette bubble end flagged on the SP500 at that time:

Screen Shot 2014-11-04 at 08.00.44Source: Financial Crisis Observatory

Why the start of July? It is the mid-year geomagnetic (inverted) seasonal peak, falling close to the June 27 new moon (2 trading days away) and the first such double optimism peak following the April smoothed solar maximum. If we think of the idealised speculation peak being the triple confluence of solar, geomagnetic (inverted) and lunar peaks, then 27th June would be the closest to that.

4nov15

On which note I’d like to point out the increased recent actual geomagnetism which has caused a declining cumulative geomagnetic trend over the last couple of months, aligning with action in most of the above indicators and indices. Here shown with the Dax:

4nov16

In short, the ‘red herring’ is the higher highs in price in the SP500, Dow and Nasdaq. They appear to the untrained eye to still be in bull market uptrends, but analysis says otherwise.

By various indicators, November 2014 should be equivalent to the two monthly arrows shown in the last two major SP500 peaks here:

Screen Shot 2014-11-04 at 07.53.54

The previous month in each case was a large hanging man candle (long-tailed). November should be a down month in price and the large price megaphones in large caps resolved to the downside.

Bullishness and allocations are back to their invisible limits at this point:

4nov19 4nov1Whilst it is mathematically possible that they could both reach further extremes, these levels – which are absolute historic extreme levels – have so far acted as a cap, so the next move in equities should be down.

We can add to that the diminishing fuel over the last few months from put/call ratios and NAAIM exposure (a smart money indicator), as well as the number of stocks that are serving to rally the markets and the number of stock indices participating, plus the risk appetite proxies such as junk bonds and cyclical sectors versus defensives, all suggesting the rug is being gradually pulled from underneath stocks.

Friday’s gap up in price was a potential exhaustion gap. Add to this that Nymo reached over 80 for the second time in 5 days and previous instances from recent history that suggest a reversal should be swift and decisive. Yesterday’s candle has the look of a reversal candle too. The second chart below shows such combinations of exhaustion gap plus Nymo>80 from 2011, and what happened next.

4nov2 3nov1Stocks should roll over this week. Then November should be a big down month. This really should be game over for the bulls.

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146 thoughts on “Game Over Start Of July

  1. Excellent analysis, thanks John. Things are not as chaotic as they look after all, order amidst chaos.

    McHugh has a target of 2040 – 2050 on the SPX before it comes down BELOW the Oct. 15 low, as there is a smaller megaphone forming since June 14. Parabolic rises increase the odds of a strong decline or mini crash.

  2. Thanks John,

    I’m still very much behind you. Your analysis is mind-boggling to those whom still do not understand your work….like me.

    Kind Regards,
    Mat (Aus)

  3. Brilliant John and agree on every point. Most definitely appears to be a megaphone pattern emerging in major US indices but Europe has failed to make new highs as has R2k.

    To those that are convinced gold is finished if deflation takes grip and sends markets hurtling lower I can only suggest that you study the 2000 market peak and ensuing collapse and what ocurred to gold gold stocks and the USD.
    This is not a repeat of 2007 when gold stocks had just completed a major upmove into that time frame and thus sold OFF with the broader market.
    Gold stocks have over the last few years been sold off on market strength and risen on market weakness. They are currently making new lows due to new all time highs in the broader market. If the market tanks gold and gold stocks will mimic 2000 and launch into a new bull trend.

    Finally Daily Histogram levels on all US indices are at extremes not seen for nearly a decade and NYMO is SCREAMING sell!
    The VIX is about to launch toward 90 minimum in the months ahead.

    See you next article.

    Cheers
    PS lets please stop the bickering.

  4. Banzai! Anyone else notice that the Nikkei closed last month at the 88.6% retrace of the decline from 2007 – a wick only above so far this month and diving again. Plus, if you want to talk about textbook Elliott waves…

    Thanks, John, for all your hard work.

  5. Allan, glad you’re back.

    Allan, you are convinced central banks were responsible for lifting up the indices. Others mentioned the PPT (when you sell financial newsletters always handy to have someone to blame for your own mistake or stupidity, yes McHugh comes to mind). Take a look. I can’t load up a chart, but I can give you dates.

    The S&P 500:
    Start january 6, 2009, as I recall the most overbought point of the whole crash. That’s a brutal spike up, is it not? Count 366 TD forward = June 21, 2010, again a spike up, + 8% in 13 CD; + 371 TD= december 7, 2011, not exactly a spike up, but even so + 9 % in 12 days isn’t bad; + 364 TD= may 22, 2013, a spiking top. So, around every 367 TD we witness the same movement, in most instances after a slump. May 22, 2013 + 367 TD= around november 3, 2014.

    Furthermore, we already had october 31, 2007, lower high + 822 TD= may 2, 2011 top + 822 TD= october 31, 2014 and may 1, 2012, the last lower high of the top in this timeframe + 315 TD gave the august 2, 2013 top + 315 TD= october 31, 2014.

    That in itself, plus the above, are a few reasons we went up so fast in such a short time. At least according to my interpretation. Cyclewise the market should tank here, could happen any day now (take also a look at the november months in the past, 2007, 2008, 2011, 2012, all big turning points) fitting John’s overall analysis based on numerous other indicators.

    And yes, I agree: no more bickering please.

    Eclectic,

    Puetz encountered difficulties to frame the crash of 1929. The market deviated from normal by topping one year after the sunspot cycle. And deviated from normal by crashing one year ahead of the theoretical panic cycle peak.

    Peter.

  6. Allan, glad you’re back.

    Allan, you are convinced central banks were responsible for lifting up the indices. Others mentioned the PPT (when you sell financial newsletters always handy to have someone to blame for your own mistake or stupidity, yes McHugh comes to mind). Take a look. I can’t load up a chart, but I can give you dates.

    The S&P 500:

    Start january 6, 2009, as I recall the most overbought point of the whole crash. That’s a brutal spike up, is it not? Count 366 TD forward = June 21, 2010, again a spike up, + 8% in 13 CD; + 371 TD= december 7, 2011, not exactly a spike up, but even so + 9 % in 12 days isn’t bad; + 364 TD= may 22, 2013, a spiking top. So, around every 367 TD we witness the same movement, in most instances after a slump. May 22, 2013 + 367 TD= around november 3, 2014.

    Furthermore, we already had october 31, 2007, lower high + 822 TD= may 2, 2011 top + 822 TD= october 31, 2014 and may 1, 2012, the last lower high of the top in this timeframe + 315 TD gave the august 2, 2013 top + 315 TD= october 31, 2014.
    That in itself, plus the above, are a few reasons we went up so fast in such a short time. At least according to my interpretation.

    Cyclewise the market should tank here, could happen any day now (take a look at november months in the past, 2007, 2008, 2011, 2012, all big turning points) fitting John’s overall analysis based on numerous other indicators. As of today or tomorrow I will happily short this market, based on the cycles I follow. It’s the second time i will join your bearish stands.
    And yes, I agree: no more bickering.

    Eclectic,
    Puetz encountered difficulties to frame the crash of 1929. The market deviated from normal by topping one year after the sunspot cycle. And deviated from normal by crashing one year ahead of the theoretical panic cycle peak.

    John, I hope you hang in there and thanks for the analyses you offer so frequently.

    Peter.

  7. thanks John! Great work.

    Noticed the megaphone you referred to looks like a smaller fractal of the big megaphone the S&P is tracing out since 2000. Would guess this has wider implications. The bigger megaphone line is around 1625 which the gold bubble analog has us busting over the coming months.

    Else noted that last weeks mega sun spot was the biggest in 24 years so the impact on markets could be explained (especially the impact on the Japanese central bank).

    Also read somewhere global debt to gdp is now 35pct above levels of 2008 and is now above 200pct.

  8. My experience is that megaphones are very good predictors of reversals if they are volatile and symmetrical, esp volatile. there are a lot of sideways movements that look like a megaphone in uptrends that are continuation formations. Gold’s top in 2011 was not symmetrical but very volatile. A megaphone in EW terms is a 3-4-5 3 of lesser degree followed 4-5 of larger degree. Hence, a good correction should follow back to the 4 of lesser degree 16400 for the DOW and 1900 for the S&P.

  9. Speculators seem to be chasing markets and sectors searching for undervalued assets. There are none left after 6 years of buying dips, everything is over-invested. Nowhere to go but down. Not sure what will happen with Japan, but it’s bound to be volatile.

  10. Thank you for another great post John. As always, very clear and well written which makes it easy for laymen like me to follow.

    Here’s an article re the current Solar Cycle. I suspect you’ve already seen it, but just in case you haven’t, I’m posting the link below. It has a graph that projects how the current cycle will continue to play out based on SC 1. If it plays out that way, the current Solar Cycle will not peak for another 6 to 9 months, maybe longer. If you’ve already looked at this, then you must be giving this scenario a much lower probability than the person who constructed the graph, right?

    http://notrickszone.com/2014/10/10/ipcc-models-fail-abominably-in-projections-of-northern-and-southern-hemisphere-temperature/

    1. I hadn’t seen that, thanks. The SC24 line has now dropped back to 60, so we’d need to see a sharp upturn in sunspots from here to keep that analog going. As I’ve said before, the highest prob is the solar max is behind us when we combine solar scientists models, most previous solar cycles and all those stock market indicators. But we have to allow for an anomaly and keep cross-referencing.

  11. Peter, Solar eclipse Nov 1, 1929. Lunar eclipse Nov 17, 1929.

    Crash window (6-weeks earler = Oct 6, 1929; (a Sunday) or Oct 3, 1929.

    Not perfect; off a month from the actual peak; but….

    ???

  12. Gone very small short dow. Stop at 100 points. If I’m stopped out think I’m going to sit out until we get the declines and then go long hopefully near the bottom. Won’t be as profitable as staying short with the declines but at least I won’t be scared to death every day of central banks announcing more printing.

    1. reasonable – I was just doing a review of my numbers to determine the lower target

      you can trade the Vol OsC and cover shorts when it gets down to around the -80 level…

  13. Great stuff, John. I am still concerned about the year end rally. I work in Asset Management and I know that there are programs that minimize taxes as year-end approaches. This will mean selling is deferred on gains until Jan 1st. So SPX could rally and GDX could tank even beyond stretched levels. Unfortunately, those programs do not have emotions that can be affected by the sun, and they are quite real with real money.

    1. Not to mention those asset managers who are lagging their benchmarks – they may provide a source of demand as they endeavor to make their year-end bonuses.

    1. The market can stay irrational for much longer than one can remain solvent.

      Why did volatility collapse?

      Why are we hitting new all time highs?

      Divergences, shmivergences – these can go on for many months before trend breaks.

      Lower oil prices should stimulate the economy, this holiday season could be very profitable since folks will be spending $$$ that they saved on gas. Said but true.

      The news overall are pretty good. The economic numbers are not bad either!

      I say we can have another year easy, until next summer or fall before this bad boy stalls out.

      SPX 2100-2300 looks reasonable to me and not too far out there. I would like to see some sort of mania from the important top. We have not seen it yet.

      This is not the top yet. Higher we go – this is my conclusion.

      1. thanks for the hackneyed platitudes shot from a scattergun

        markets top on good news chart employment data and the SPX and look at the correlation of tops to “reported” full employment…

        1. again – offer something real and authentically derived instead of the canned wit gleaned from your trolling of other sites.

        2. oh, and I am solvent – note that my “suggestion” to go short is WHEN THE TRIGGERS ACTUAL DO TRIGGER – can any of you idiots read

        3. John’s blog is the only blog i follow since amalgamator times. His work is excellent even though i often disagree, but i do pay attention.

          Your emotional reaction is confirming my views – more pain for the bears. Their time will come. But this is too early. The window of crash opportunity has closed in my opinion.

          Up we go.

        4. emotional! lol I am just sick of posers poking me with their hackneyed phrases like
          “when the tide goes out you see whose swimming naked” I guarantee you like to use that one StinkyFish…

          And the continual assumption that I am a bear is beyond belief when I post BUY SIGNALS AND SELL SIGNALS.

          Emotional! ha

          I could can less about my long term view when I am looking at the indicators to trade.

          solvent my arse

      2. I concur completely. Oil prices are now falling from under $80 and will soon be at $70. Possibly by year end. This really boosts the economy and prices are falling for different reasons such as reduced demand, increased OPEC supply and the realisation that the U.S. and Canada have healthy proven reserves. Then there’s the geopolitics of the situation. Lower oil prices alone are underpinning current valuations but that is not to say we can see another correction into the end of November and December.

        Many posts on here focus on unfair central bank manipulation and fair enough. But I think we have to accept that this is a given rather than an underhand menace. Central bank intervention is here to stay now as the countries all around the world are suffering worsening financial cancers. Japan is just the start of a new driver of a global war of currency devaluation. 2015 is going to be very interesting. Sterling is looking very weak into year end. This is critical in terms of sentiment as it has been the ‘go to’ safe haven of the past 18 months. There is a shift happening and we will start to see this take shape into the end of 2014 and throughout 2015. Watch out this Friday!

        I don’t think we can isolate stock markets and forecast price movements in their own isolation. Currency flows are the key drivers of these markets and this is what I’ve maintained for months now. European markets are weaker than American markets and this will become even more telling into next year. Capital is quite simply leaving Europe. These are the early signs. Bond markets and real estate have been the honey pots thus far and it remains to be seen if stock markets contribute going forward.

        But whether we believe interest rates will rise is immaterial. They are simply more likely to rise in the US than anywhere else and that is enough to attract capital. It may only end up in cash accounts, treasuries and real estate. But what if……?

        That’s the question.

        1. http://stockcharts.com/h-sc/ui?s=$WTIC&p=D&st=1983-05-02&en=2014-11-02&id=p99562011200&a=374809728&r=1415128637672&cmd=print

          just did a quick study to show that oil prices fell significantly in 01/02;07/08 and that the market fell with them or oil fell with the markets. 2010 and 2011 was the same

          one would have to do a much more in depth study of why oil fell in the equity bears recently (including the truncated bear of 2011) AND WHY oil was positively correlated with equities during the “bull” recoveries…

  14. Eclectic,

    Don’t get me wrong. I think Puetz did an great job to define a window in which a crash most likely can occur. The crash of ’29 is within his ‘widened’ window, or as he calls it, ‘second best’. The charm of it is also it’s weakness, for the lack of a better word. For it provides a false sense of safety when the window is closing.

    Today, the 4th of november, my medium crash cycle on the Dow arrives. I could not resist a short, although I know I have to allow for a few days -cycles, youn know, contracting and expanding- and the central banks, in a concert effort to make our paper money worthless, make me nervous. So not a big chunck of shorts until there is more evidence of a downturn.

    As for the Nasdaq 100, here is my take:

    From the top january 23, 1997 it was 1432 TD to the bottom october 8, 2002.
    From the bottom october 8, it was 464 TD to the bottom august 12, 2004.
    From the bottom agust 12, 2004 it was 1429 TD to the higher bottom march 9, 2009, 3 TD less than the previous 1432 TD.
    From the higher bottom march 9, 2009 it was 286 TD to the top april 26, 2010; the relation to the 464 TD (october 8 2002-august 12, 2004) is 1.62.
    From the top april 26, 2010 + 1429 TD -the same length as the previous 1429 TD-= november 7.

    So: 1432-464-1429-286 (1.62 of) and now:

    -Should there be again a divsion of 1.62, than 285 : 1.62= 175/176. Counted forward from november 7, 2014 =december 24/25, 2014 as the next potential turning point.
    My suspicion is though this won’t be the case. Why? cycles often halve themselves. Half of 285 TD = 142,5 and 144 TD before november 7 we did indeed made a low, on april 15, 2014. This makes a top around november 7 more likely.
    Counting 142 TD forward from november 7 nevertheless= beginning of june 2015. To keep an eye on in the future.

    Which one it is? Just wait for the reversal candel. Trading cycles without conformation just won’t do.

    Peter.

  15. one more thing BIGTUNA, the AD divergences that are showing up are NEW and have not shown themselves until now. These divergences ALWAYS preceed a top. That doesnt mean the market cant go higher, but it DOES MEAN the AD divergence will have to burn off and the AD lines will have to make higher highs if price is to continue higher.

    SIMPLE AND ESTABLISHED METHOD

    stay solvent my arse

  16. V-type bottoms are rare, & that’s what we saw on Oct 15/16th. Typically what happens is a decline into an “emotional low” – Jeff Saut

        1. the same thing happened after the Fed V bottom where price didnt actually advance above the January high until it “bottomed on may 27th

    1. BBE my understanding was that bottoms are ‘usually’ Vs and tops are ’rounded’. However I’m still learning so WTFDIK. eh?

        1. I clearly dont agree with Saut most of the time BUT he is a good source to use in nut rich environs like this

  17. BBE in ‘what way’ must we be using his advice please? This on the face of it appears to be a political diatribe….but I may be mistaken because its getting late in the UK and my reading comprehension suffers because of the equivalent of too much WCCG.

    1. he is of the opinion that when the Republicrats get the senate there will be a quick bounce that will be sold

      again I dont agree with him or use that kind of analysis but his understanding of how V bottoms work is accurate

      1. Thanks for the guidance. I’m struggling with getting a grip on the markets without trying to also get a grip on US politics. Ha!

  18. OEX-hedgers predict, the indices will close in positive territory. If that happens we can forget about the nymo extremes stat and only acknowledge that we are in an extroardinary situation, that will probably lead to another step higher after a very short sideways consolidation.

      1. I said “if” and I’m glad, it didn’t happen, as I’m trading on a November pull back, which should offer an excellent entry point for an ensuing multi month rally consistent with presidential cycle seasonality and other compelling stats, i.e. what usually happens after the first break of the 200 ma after a comparable long period and a comparable strong advance.

  19. SPY at-the-money put/call skew (this is where Soros plays) shows interesting anomaly for 201 strike with SPY at 201.1.
    – Nov has pos skew, price calls > price puts by 5%, but
    – Dec has neg skew, price puts > price calls by 10%.
    Indicates expected higher Nov then lower Dec.

    1. Thanks for your sharing. Yes, i’m looking for a top on Nov 21 (Bradley date) how coincidence it’s in opex week.

      Important tops normal on opex week or lunar new / full moon.

      SPX target 2047 level.

      Good luck

    2. I don’t know SKEW, maybe need some time to study later but i have read many blogs writing on SKEW and this normal provide you some clue and edge in trading and if you believe the market are always being manipulated and well planning by banksters.

  20. epicenter of the bubble Biotech weakening and $/Y holding last significant Fibonacci (113.75) keeps bias bearish.

    Looked more closely at the Gold bubble analog in 2011. If the double top gets confirmed the market has another 10 days to gradually drop to 1925 before a 3 day crash down to 1675-1700. Would be in line of some of the Fibonacci targets mentioned above.

  21. Closed dow long from Friday for 110pts lost a fair bit at first, but held.

    Iv set auto shorts at 1973 and 1949 on SPX with 100 stop.

  22. Today might be turn for USDJPY (down) and Gold (up). Both seem to finish smaller degree fifth waves.

    But gold better start rallying immediately from 1150 level because otherwise it may crash before recovery.

  23. If gold does not recover soon I can see many gold mining companies going bust.

    Prob the reason why the ftse is lagging so much, as it’s full of gold and oil shares?

  24. Just entered sized long on ftse100′ at 6493 no limit for now

    Stop set at 6323

    ECB meeting tomorrow, Mario may follow BoJ

  25. The ECB is far more limited.

    Gold looks dead in the water and
    now the GOP control the Senate,
    exactly what markets wanted.

    If you are short then it’s a sell the news day
    with fingers crossed.

    1. Yes and agreed your thoughts.

      Should grinds higher till Friday with the expectation on a better than expected non farm payroll and sell the news.

      It’s a full moon day and also a T day in my astro report.

  26. Interesting quote in The Trader column in IC under S&P500: “In a letter to investors Paul Singer of Elliott Management Corp said, ‘nobody can predict how long governments can get away with fake growth, fake money, fake jobs, fake financial stability, fake inflation numbers and fake income growth’. The S&P 500 hovers at record highs nevertheless.

    DAY TRADER: Short at 2014; stop above 2035. First target 1950.

    POSITION TAKER: Short at 2014; stop above 2050. Target 1900.”

    So not everybody is convinced by the perennial end of year rally.

  27. Both gold and HUI have been trading in a slightly downwards sideways channel since start of May 2013 to the present. Gold is in a $250 wide channel and HUI in a 90 point wide channel. On Oct 31 HUI hit the bottom of the channel near 150 and bounced, but gold only declined a bit below its previous low of $1180 and got nowhere near its channel bottom of around $1075 (this week) and dropping by about $5 with each passing week.

    Well the bounce appears to have lasted just all of two days before both gold and HUI sold off from its highs yesterday. Now in overnight futures gold is off by over $20 for a sub-$1150 print. This likely implies that gold will now make a rapid descent towards its channel bottom at least to around $1100 in Nov 2014. If so then this also implies that HUI should break out below its 150 bottom channel today (Nov 5) enroute to a rapid descent to low 100’s Maybe it does not make it that far in Nov since the net number has already been decimated from over 500 in 2013 and similar percentage comparisons historically might be in order now instead of using net numbers. I think 120 is very realistic at this stage.

    Some words of advice. Be careful of potential bullish divergences as gold reaches negative climax. Example might be a day when gold declines $10 or $20 to establish a new 52-week low and suddenly you see HUI stop dropping and even begin climbing. Also, the window from Nov 20 to early Dec exhibits the potential for sudden bullish reversals, not saying it will happen but it could. Nov 19 is FOMC meeting and also if USA happens to go into overdrive after Nov 19 then such a strong rally would likely temporarily end by Dec 5.

    I don’t know about you guys getting your knickers tied up in knots over a potential 15% crash scenario in USA stocks. But gold miners have a real shot of a 60% crash in possibly just four months from the start of Sep 2014! Even if HUI declines from 150 to 120 in Nov for a -20% decline, you are looking at +60% returns in triple leveraged inverse ETF’s such as DUST or JDST in mere weeks and also measured from its 52-week lows presently.

  28. Feldman I can at least partly answer that –
    until the business cycle turns and earnings
    begin to compress .

    At current levels markets need earnings
    to support valuations and CB’s
    cannot abolish recessions longer term.

    I miss DP at the IC , although enjoy reading NE.

      1. yes please further elaborate for HK.

        By the way, anyone who traded Nikkei market please note there are resistance at 17238 to 17378.

        The reason why was 2 years before on 2012 Nov 13, it lows before the printing machine was 8619 and now it’s almost double so 17238 is the first target and if you apply Gann then it is 2×1, 2 year to run a double of itself.

  29. Net short from mid November looks
    highly dangerous to me, unless Ukraine
    develops in to full scale war or
    the perception of global growth dramatically
    weakens.
    Ebola as an outlier.

    If the ECB does surprise on the upside
    tomorrow then a parabolic move is underway
    with ATH’s blown out of the water imv.

    I expected a 2-4% retrace given the velocity of
    recent gains, a guess on my part,
    now unsure if even that will occur.

    1. It does look like the parabolic scenario may play out. I’m leaving this site for the time being as John’s analysis is so convincing it tempts me to short which makes me lose money! I always thought of 17,000 dow as a major level and I’ll only be convinced of a market fall if that is breached so will be back here once that happens. Good luck to all anyway. I’ll be back soon I hope but never know with this irrational market.

    1. A bounce is not the same as a reversal. Even on the above chart back in Apr to Jun 2013, the first BPGDM at zero coincided with GDX at around an initial bottom of 27 and it still declined to 22 within three months or nearly another -20%. Both gold and miners have broken key technical levels after a lengthy 18-month sideways channel and probability resides towards another impulse continuation move mirroring the move that preceded it before the formation of the sideways consolidation.

      However, if there is little to no further downside in the next two weeks then perhaps it can then be labelled a bottom, because there “should” be another swift move down within a week and possibly in just days.

      1. Also, the formation of the next down leg after breaking out of the sideways channel should likely exhibit a more meaningful bottom in GDX/HUI, before any significant reversal occurs, that dates around the late-April to mid-May 2015 time frame.

        That coincides with the 6.5 month window that it took for the 2012 down move to penetrate the top of the consolidation channel at HUI 300 (in mid-Apr 2013) with the present equivalent being Nov 5, 2014 exiting the bottom of that channel at HUI 150. It also coincides with the 9.5 month window measured from the top starting mid-Sep 2012 with the present equivalent around mid-Aug 2014.

  30. John,
    Thanks for your hard work; lurker first time poster..
    The miners look very stretched to the downside, sentiment is horrendous.
    On monthly charts I use the 65MMA as a reversion to the mean. On stockcharts I use PPO (1,65) and this provides the % below the 65MMA; the price is currently at. a % reached 2 or 3 times since 2001. In a similar manner I use PPO (1,30) on weekly charts because it matches up well with stage analysis and finally on daily charts I use PPO (1,50) for the % stretched from the 50DMMA.

    All three of these charts indicate price is extremely stretched to the down side.

    As an aside, another piece of the puzzle for me is that on an EW count I find that wave 1 on the miners ended on $HUI 519.68 (early 2008 top) and we have now traced out an A down (150.27) B up (638.59) and now are trying to hammer out a C down to end wave 2. I know this view is not main stream and that is why I like it. In this count wave 3 (or minor waves 3) are not the shortest and waves 4 (or minor waves 4) do not infringe on wave 1’s.

    GLTA

    1. ZZ, re your EW count, whilst it’s not something I follow, and only vaguely grasp, I wondered what your count would be expecting in the short, medium & long term please. Thanks.

      1. I am not a EW purist either. The main stream thinking is that wave 1 ended at the top in 2011 and we will be in correction mode for much longer. They cite the current 5 waves down and I am sure they feel that it is an A wave down (close to completion) with a counter wave B up then a final wave C down.

        My count indicates wave 1 up concluded in 2008 (roughly 7 years up) and we have already completed wave A down, B up and should have wave C done imminently and then we start wave 3 up. Interestingly with this count the correction of wave 2 is roughly 7 years or equal to wave 1.
        As I indicated earlier the monthly chart with a 65mma supports that this current bottom is very severe; equal to the start of the bull market even exceeds the 2008 low.

  31. Republicans retake control of the Senate.

    First component of market meltup by 2017 complete (1921-1929 vs 2009-2017 analog). Also known as von Mises crack-up boom.

    Requirements:
    1 – Republicans retake control of the Senate – check
    2 – Euroland implements full QE (with or without Germany), probably requires 40% correction in DAX for Merkel & Co to agree
    3 – Republicans retake Whitehouse – probably Bush III
    4 – Massive corp tax cuts – see John Mauldins proposal for 15-20% rates

    1. Fabian Calvo on Greg Hunter’s channel made some interesting points regarding the markets:
      1, Real estate being set up for stimulus in next two years with no money down loans 2, Money from around world seeking yield coming to US
      3, Shadow banking at $70 trillion and climbing so plenty of money to chase stocks
      He is bullish on US real estate expecting a bubble in prices within 2 years. He wasn’t clearly stating US markets would continue to climb though he implied it.
      As counter to previous indicators as this may be (Shemitah cycle reset, market bullish for 70+ months, Schiller PE warnings, Charles Nenner’s dow 5000, sun on decline) it is difficult to enter the bullish 18 months of the decade cycle being short the market. I plan on using some combo of lunar edge, seasonals, declination, and paid market timing services to surf this over the next 18 months, only going short on intraday basis, or when seasonals, lunar edge, and declination are negative.

      1. As bullish as this market continues to act and also taking into consideration input from Lunatic Trader’s analog and Mahedra’s forecast (he’s nailed this market for the last 2 or 3 years), I’m leaning towards the outlier Solar Cycle scenario that has the cycle top 6 to 9 months out, even though John gives this possibility very low odds. We recently saw the formation of the largest sunspot in two solar cycles. Seems odd that we’d get this if the current cycle has already peaked.

        http://time-price-research-astrofin.blogspot.ca/2014/11/ar12192-biggest-sunspot-in-two-solar.html

  32. Just to give you a sense of how much the rubber band is stretched (I.e bubble conditions) the $/y broke 3 major lt trend lines and 3 major fibinaccis the last couple of weeks just being held back by a rising megaphone pattern. Else suspended in free air.

      1. Funny, fwiw

        web bots said all markets would reverse on 11/5

        said biggest change will be in bonds – that something would be missing

        i think it will be missing us treasury bonds – no collateral anywhere to be found

        junk better look out, tlt to the moon

  33. That didn’t take long

    Federal Reserve already came out and warned congress not to mess with it

    “I think it is very dangerous to tamper with the institution.”

  34. Notwithstanding all the up and down of the day, at the end yesterday’s extremely clear prediction of oex-hedgers will have it right again I suppose.

    Yesterday’s comments reminded me of Jeff Saut and that I should always take notice of what an experienced and honest prof like him has to say. He just recalled that V-spikes like this usually run about 17-25 days before they top and 6 to 8 weaks until they complete the possibly slightly lower double bottom, which they build in most cases, but not always. So we are just following the usual course.

    I assume Avi Gilburt will be right in that the SPX will touch 2040 on Friday, day 17 or 18. Consistent with Armstrongs computer predictions that should be the intermediate top, followed by a volatile decline until December.

    John is putting together valid arguments for a longer term top, but also arguments, that are untenable. F.i. the NAIIM investors cannot be considered as smart money. That becomes very clear, when you take notice of the correlation between market bottoms and an extremely low investment grade of this group.
    Further: Yesterday a financial sense article presented charts, that are showing how early cyclicles like consumer discretionaries and financials topped out before the broader market in 2000 and in 2007, while they reached new highs lately.
    And last not least don’t forget: Negative divergences, that aren’t playing out over a longer time frame finaly use themselves up and become meaningless.

    Mid October Jeff Saut wrote: „This is not the time to sell stocks.“ Bears can be glad, if a double bottom offers them a second chance to close their shorts.

    1. Friday early morning is likely the best exit for longs at ATH since the probability weighs towards the reaction to non-farm payroll numbers to be bullish. However, it is also likely it will be met with massive profit taking and drop after a gap up open.

  35. Within touching distance of a new ATH on
    the SPX.

    DAX beginning to gain traction on this upward
    move.

    The crash widow has firmly closed for 2014,
    now it’s a case of any even mild retrace before
    a likely powerful year end move.

      1. Betafish, Thanks for all your comments I learn a lot. Can I ask you why Dec 24? I am asking because historical pattern I follow suggest weakness in SPX around 15-18 Dec.

        1. Dec 24 is last day before Christmas. Wealth effect of nominal price of market effect consumer psychology so would expect seasonal strength at least until that date. By the way, Dec.21 to Dec.24 are the only days of lunar edge, declination, and seasonal positive coordination for the rest of the year. When all three of these match up there is usually very good price moves. Usually 15 to 18 Dec. are weak seasonally kind of a breath before the xmas rally.

    1. Yes, James, the paper price is disconnected from the physical demand, and that is why people who advocate wildly low gold/silver price targets at this point, are either:

      1) Complicit in the fraudulent futures paper market

      or

      2) Willfully ignorant.

      1. how can paper price be disconnected from phys demand? If it’s disconnected, demand would overwhelm supply and the price would start going up. If it’s disconnected, futures traders would start taking delivery and then selling the physical. That’s not happening.

  36. I’ve said it several times on this board, and have to say it again that i am not able to argue against any of the solid points John has made. I think he is the gem that we on this board are so lucky to find. I don’t doubt John at all that the markets will crater and fall from here. It’s been a longtime coming, but it is coming. Just a little more patience.

      1. Completely understood purvez. Cash reserve no doubt is my number one issue as well. Risk management is prudent here. I am suffering the same pain being short.

  37. Hi John, I hope I didn’t confuse things in my last post saying that you are on the right track meant the 2nd chance peak is near. Yes, I expect a correction very soon (i.e. as soon as next week; after the full moon).

    But from reading your some of your recent posts you’re not looking for at large 10+% correction before more new highs. You’re still looking for the beginning of a new bear phase. OK, I respect that but, I’m not convinced. I don’t dispute the evidence you present I just take into consideration others views that are maybe not considered part of traditional technical analysis.

    Rather, I expect that after this next plunge, we will see at least a test of new highs first (i.e. at least 2nd chance peak) and then maybe new highs before the bears come out of hibernation, probably early next year. It’s just my view, it’s not meant to mean anything else. And of course, I could be wrong and you could still be right. Predicting the future is difficult to say the least but, that’s what makes markets.

  38. anybody trading us/yen? better trade a very small position relative to your account. this thing is going nuts up and down. how does one go to sleep if you have an open position? i guess you don’t or close out.

  39. I think John will ultimately be proven correct. The move down starts tomorrow on Armstrong’s turn date. Whether or not there is one last blast higher between now and then who knows, but we are very very close. Bulls will be lucky to squeeze through the exit when this goes down.

    I also believe the Fed’s won’t save the day this time around in retaliation for Republican victory. We’re looking at 25% down in S&P within the next year or so, before the uptrend continues.

    1. Yes, Republican will ask to audit the Fed and no more rise of debt ceiling also cause turbulence to markets. Obviously US market has been overpriced for so long with Fed intentionally inflating the market and now it is time to repay.
      But I think they will make it below 20% which by definitely still bull market.

  40. You need to define what ultimately proven right
    means.

    Ultimately there will be a new bear market and this
    bull will roll over and die, we all know that.

    Timing is the key in this case as a measure of
    success or otherwise.

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