The Big Picture

Financial markets are the function of swells and shrinkages in buyers and leverage, brought about principally by demographics and sunspot cycles, additionally with the latter influencing the former.

The big theme in demographics over the last half century has been that the major nations have largely experienced similar swells and shrinkages in key age groups due to the post WW2 baby boom. As a swell of young adults they produced inflation in the 60s and 70s, which then turned into a middle-aged swell producing stock market and real estate booms post 1980.

This chart shows the ratio of middle-aged to all population in the major nations. This ratio experienced a major peak in each of the countries between 1989 and 2011 producing the according stock market and commodity major peaks.

5sept1

First Japan’s demographics peaked out, producing the Nikkei and Japanese real estate tops. Then the US peaked in 2000 with the resultant biggest ever stock market mania. Next UK and Germany peaked out with the 2007 stock market and real estate peak. Finally, China peaked out and as the world’s biggest consumer of commodities, the commodities index accordingly delivered a major top.

Since then demographics are united in a downtrend, which is the main reason why 6 years post financial crisis we still have ZIRP, QE and easing as the dominant central bank policies worldwide, and why the world economy is under such deflationary and recessionary pressures. Ultra low rates helped give rise to the stock market mania of 2013-2015, but otherwise we have to turn to solar cycles not demographics for the driver.

Each of the sunspot maxima in the era of globalised, free markets produced a peak speculative mania. Between July 2014 and May 2015 we saw commodities, junk bonds, leverage, breadth and stocks peak out, following the smoothed solar max of April 2014.

5sept30

That lag is not dissimilar to that in 1929: a slight overthrow beyond the solar max. In both instances breadth peaked out at the same time as the solar max but nominal stock prices didn’t top out until a year later.

Drawing on Q ratio valuation for the big picture we can see that solar maxima typically produced high extremes in valuation which then mean reverted. Meanwhile, low extremes corresponded to major commodity or gold peaks.

5sept15

Draw together both the solar cycles and demographics above and we get the projection of the black arrow, namely that stocks should wash out to undervaluation levels by around 2025, the next solar max, and gold should rise into a major peak then. What’s key is that there is no demographic relief in any of the major nations between now and 2025 nor a solar maximum (they are roughly every 11 years). Therefore, I expect a long bear market in stocks in this window, like these examples from history:

5sept40

If I was to narrow the projection a little further, then the solar minimum of around 2018-19 is likely to mark the first major bottom within that. That means a bear from now of around 3 years, similar to those historic cases above. After that stocks ought to continue to languish, perhaps sideways Japan-1990s-style, whilst gold rises to dizzying heights to a peak circa 2025. But that time frame is a little to long to be anything more than speculative, so let’s keep the focus on the first major cyclical move, which I consider to be a bear from May this year to last some time and take valuations sub-mean.

The question mark is over central bank response. They won’t stand by and watch this occur but are likely to turn to increasingly unorthodox measures. The reason demographics and solar cycles work is because the markets are globalised, free, instant voting machines that therefore capture major collective trends. If central banks ban shorting, restrict capital flows out of the country, penalise people for not investing in government bonds, penalise savings, or other such policies then the markets environment will become more distorted and we will have to adjust accordingly. So far, however, central bank distortive measures haven’t been able to override the collective demographic trends, as evidenced here in global inflation and economic trade.

5sept7

Source: Gavekal5sept5

All that stands between outright global deflation and recession is the wealth effect of the stock market. So let’s turn to that.

In 2014 we saw around 40 different topping indicators aggregate in the US stock market. From mid-2014 we saw multiple divergences in breadth and risk, whilst commodities and emerging markets broke down. In 2015 developed nation stock prices arched over, topped in May and snapped in August. Now, we see washout levels in commodities, emerging markets and various stock market measures such as sentiment, breadth and risk.

In the big picture, US stock market valuations have declined from their peak but are still highly levitated.

5sept6

II sentiment and Rydex allocations either show a major unrepairable pop of the stock market bubble, or a healthy washout from which stocks can now in due course resume bullishly.

Screen Shot 2015-09-04 at 22.27.15

Source: Yardeni5sept51

It’s clear that the mania or the last 2 years depicted in these two indicators is about as crazy as it gets and odds are much higher that that recent bursting of the bubble is likely to have ushered in a period of mean reversion. Effectively it has broken the collective complacency and the record leverage deployed in the markets is now likely to shy away from its peak. Without the demographic tailwind, leverage has been the main fuel for this bull, through both margin debt and buybacks-via-borrowing.

Regarding buybacks, this fuel source is likely to continue through the end of this year as companies execute their purchase plans. We can see how something similar transpired in 2007.

Screen Shot 2015-09-04 at 17.31.11

At some point, the leverage in the system will unwind in a disorderly way, producing a crash. What I am wondering is whether this may occur again once both buybacks and margin debt are declining in a more united way together (like in 2008), which would likely be once 2016 hits. Just speculation.

In the meantime, the August breakdown in stocks has likely done enough damage to cement the bear and kick off the negative feedback looping that will produce escalating trouble from here on. ECRI leading indicators and Bloomberg financial conditions have both slipped negative.

5sept13

Screen Shot 2015-09-05 at 08.28.15

Source: Bloomberg

Turning to the near term, this is how the SP500 looks:

5sept60

Prices are consolidating after the August drop. Breadth, Trin and volatility show similar washout readings to 2011. Nonetheless, the historic pattern is that stocks ought to retest the August lows and at that point bulls should be looking for positive divergences. An absence thereof likely spells lower prices which in turn increases the odds we are in a bear market.

If we are in a bear market then this doesn’t prevent ripping rallies. In fact they are common. What’s important is to see a pattern of lower highs and lower lows. So, should we push upwards from the current oversold/overbearish short term readings then we should stop short of the August breakdown point. Should we break downwards we should take out the October low and initiate the lower low pattern. On a longer term view, the bear market should very gradually eliminate the dip buyers, until all hope is truly lost.

My tactics then are: hold short (Biotech, R2K, Dow), add short if we go higher, wait for August lows retest, check for positive divergences and bottoming pattern to judge whether to take profits. Cross market to gold, I am long and holding, looking for gold to cement its higher low than July and build out its rally. Were gold to break down to new lows, then it would be a warning.

Lastly, a note on washed out emerging market stocks and non-precious metal commodities. Oil has dropped from $100 to sub $40 in a short time and emerging market equity valuations are historically very low. Are they a buy?

5sept11

My perspective is that we have experienced something similar to 2006-8 whereby markets crumbled in order. Then, real estate fell first, then equities then commodities. This time, commodities and emerging markets fell earlier than developed equities. When developed equities have eventually truly washed out then there may be attractive risk-reward on emerging and commodities. But between now and then I expect a bear market and global recession, which would keep the pressure on both asset classes.

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320 thoughts on “The Big Picture

  1. Brilliant…Stunning…!!!

    I can almost hear HARRY DENT and his demographic presentations of the past…his failed mutual fund at AIM/INVESCO Funds…and while he was right, but very early…the books of MEGATRENDS and more…

    That, the reverse is happening, few folks have postulated…great work…

  2. Interesting thoughts as always John. Good luck with the shorts.
    No time to add some thoughts right now, other than re your comment:

    ‘The question mark is over central bank response.’

    It’ll be government driving the central banks (especially if we go down the quasi-communist route for a few years). Have pity for ALL central bankers, they will be the patsies for the failure of socialism & big govt. Of course, demographics mean the voters will vote for more gravy train. They’ll get what they deserve. Reality biting.

    PS re the Euro and its central bank, worth a read of this and a think:

    http://www.ecb.europa.eu/press/key/date/2002/html/sp020509.en.html

    To answer purvez from the previous post, the answer re *who controls the ECB* is in this link. It has nothing to do with economic production or assets at all.

    ‘The architects of the Treaty also understood that a single currency can only fulfil its monetary functions and its role as an integrating force so long as it retains its value. Therefore, they drew up a solid monetary constitution to protect those functions and its stability.’

    1. GM thanks very much for the link. Like others here I’ve been reading up on the Euro to better understand what you see as ‘different’ about it.

      Whilst I understand that the ECB is independent of any one State, it is in fact now accountable to the EC. A body which in my opinion seems unaccountable to ANYONE. Least of all the citizens of europe that it purports to represent. It is an entirely unelected body of megalomaniacs who don’t appear to give a toss about their citizens and only seem intent on increasing their share of Gravy that they extract from member states.

      I agree that there are lots of fine & well intentioned words in the Treaties that created the Euro but the evidence of reality shows them to be largely overridden or irrelevant.

      If bankers and central bankers are bad then having a Super Central Bank is just furthering that trend.

      The European architects are working towards taking away independent State sovereignty and creating a unified whole. Whilst that may be a laudable goal, it, in my opinion, is not a very practical one that the people of each state will endorse.

      So I guess I’m still struggling to understand what it is about the Euro that makes it such a bid deal in your view.

      1. Hello purvez.

        ‘If bankers and central bankers are bad…’

        They’re not bad in their own right, and we need some kind of small government too.
        But the nexus between all three is the problem.

        The Euro system set up breaks the nexus. The EU itself is not a factor, the ECB is not controlled by the EU, but by the Maastricht Treaty and by its board of directors adhering to that.(You will not find a single example of the EU directing the ECB to take any course of action, in the past or in the future, they have total independence from the politicians).

        I agree that the EU is a gravy train, but once the member states are bankrupt, the EU gravy ends as well. All in good time. 🙂

        It’s not unusual to find the difference difficult to comprehend, but the next few years should provide some very fine examples for all to see.
        Have a good week.

        1. GM, I agree that this divorcing of State from the Euro is a good thing…..but if all the states go bankrupt then what good is the Euro and how can the ECB keep a stable price for it? That’s the dichotomy that I’m struggling with.

      2. If you’d divorced your better half 16 years ago, and then in the next few years she went bankrupt, what impact would that have on you? 🙂

        That’s the point of the Euro, it allows (finally) sovereigns to go bust, with zero impact on the credibility of the currency issuer. It brings market forces to bear on every entity.

        If there is rampant deflation (when banks and sovereigns are going bust), how can the ECB maintain price stability? What asset exists that the ECB could buy with trillions of newly printed Euro to keep prices stable?

        A clue: it’s yellow, shiny and is the asset listed first on their balance sheet.
        And they’ve even officially mentioned that this is an option they have always had (clever folk the euro designers, they knew exactly where this would lead).

        http://www.telegraph.co.uk/finance/economics/11235269/ECB-could-buy-gold-to-revive-economy.html

        (it won’t be to revive the economy, just to ensure price stability).

        The leftist side hate it by the way:

        http://www.theguardian.com/commentisfree/2012/jun/26/robert-mundell-evil-genius-euro

        1. Ouch GM, I’m beginning to see where you are heading with this. But in my mind the Euro must represent the collective productivity and wealth of the member states. If they go bust the Euro becomes …….well….irrelevant surely. What’s the point of having an issuer, even one with a mound of gold, when the citizens to which they are issuing are destitute.

          You seem to be implying Price Stability as THE ‘end game’. But surely Price Stability is just a means to an end. Also not fully sure what items’ Price Stability is being referred to.

          I just don’t see how the end game you are proposing makes any sense in the practical world.

          ——————–

          I wrote the above before reading the 2 articles you linked to, deliberately. I wanted to put down my own thoughts before being subjected to others.

          Neither article by the way is suggesting anything like what you are suggesting and whilst they provide further info on the Euro, are not, in my opinion, explaining anything about Price Stability and/or why that should be the end game.

          I am now getting more intrigued with your thought process than ever.

          You have a good week too, btw.

        2. Not ‘ouch, rather ‘hurrah’ !!

          No, the Euro is divorced from the member states, its value derives from the credibility of its management only. A money needs to serve the usual purposes: unit of account, store of value and means of exchange, the euro will be the best ever currency at doing all three of these, should it survive.

          ‘What’s the point of having an issuer, even one with a mound of gold, when the citizens to which they are issuing are destitute.’

          What’s the point of having trillions of dollars, if a wheelbarrow full of them buys you a loaf of bread? The point is the whole thing: an evolutionary leap forward in money itself, no longer subject to the whims of sovereigns. The gold merely adds credibility, but more importantly is likely to be the means by which the ECB maintains price stability in the future. They know already that monetarism is dead in the water, we’re about to witness the realisation of that by the markets.

          Price stability is keeping the Euro level with HICP, a measure of real things people use and consume. If you have time, browse the ECB archives of speeches, pick any one on monetary policy over the years, or pick a few, you’ll quickly see the are serious, and in fact very successful at hitting their numbers, even under the current global architecture.

          The articles just highlight that I am not making this all up!!
          The Guardian see that Mundell meant to castrate big govt. And the Telegraph link just highlights the GOMO (gold open market operations) option that can be used, or rather will be used, as a last resort in late 2017 (my estimate).

          Dive into the ECB archive, see what you think.
          Cheers.

        3. GM, you are talking of the Euro as being distinct from the people that will use it. As if, IT, in and of itself is enough to survive.

          If, as you agree, all member sovereigns will go bust then who will use the Euro and to what purpose.

          There is clearly a link in your mind which I’m not getting.

          I will spend some time digging through the archives. Do I expect to find the missing link there?

        4. GM, a corollary question please. If the ECB is independent then why are they spending time and effort buying ‘asset backed’ securities from the soveriengs? That’s another element of your thought process that I find contradictory.

        5. I suggest you read about ordo-liberalism purvez, it is the foundation beneath the euro system.

          Yes, the euro currency is totally independent in every way from what is happening in any of the member states, that’s the giant leap forward.

          If a number of sovereigns go bust, they just start again with a clean slate, markets will be a little wiser, but life goes on, people will live their lives, but no more giant leech of government on their backs. It’ll be tough for a few years, but in the long run the future would be so much brighter. I have faith in people, not in government.

          Good question on the QE issue. I believe the ECB are just ‘playing the game’ at the moment, not wishing to upset any apple carts. But the majority of the purchases involve the risk being carried by the national central banks, rather than the ECB. They have yet to announce how ‘settlement’ would take place if a national central bank took a hit on its purchases, but what’s the only asset that could conceivably be used to settle up?

          It’s a very cunning plan, taking us back to days when ‘settlement’ actually happened. Interestingly, I had a book in Dutch translated by Jelle Zijlstra
          ( https://en.wikipedia.org/wiki/Jelle_Zijlstra ).

          The book was called ‘The final reckoning’ as in ‘settlement’, and he was chair of the BIS, the Bank for International Settlements.

          http://marketupdate.nl/en/dr-zijlstras-final-settlement-gold-as-the-monetary-cosmos-sun/

          The more I have read and dug into this, the more obvious the grand plan is. Again, read some of the work put out by the BIS, they know what is coming.

  3. John, superior analysis as always. I do think adding in credit market behavior – other than the on the run ETFs like HYG/JNK, and particularly focused on lower rated debt parsed by sector as appropriate – to your set of tools will be useful going forward. The problem at least for me is it’s not easy to access these securities / pricing (e.g., CDS, OAS graphs, etc.) in real time. No BB machine here at my disposal, I’m afraid.

    But I’ll try to post on the topic when available and hope others can as well.

    P.S. Let me give a tangible real time example – I know a well-run debt fund that traffics in below investment grade credits focused on small and mid-cap companies. Not quite distressed but nearly so. The fund was down -20% at mid-year. Twenty percent!! (And it wasn’t due to exposure to energy credits.) That was eye-opening and in hindsight a clear sign things weren’t right, even though the stock market still appeared in good form.

    1. Gary, that was a very good article. Thanks for sharing. Now if only we could get the CBs to read and understand it, we’d be home and dry!!

    1. Now I see it, after getting the pointer straightened.
      Answer is – You Have Got It Right for where are and directionals.
      The only debate would be the bounce point and speed of arrival for 4 and the end point and speed of arrival for 5.
      I look for 4 to end soon at 1820ish and 5 to take the form of a diagonal triangle with and end not far above the ATH as soon as Feb/Mar 16.

  4. Hi John,

    What do you think of Martin Armstrong’s / Socrates’ theory that people will begin to lose faith in governments and this will cause a swing out of bonds and into stocks / gold? That could cause an unexpected bull market to emerge in stocks, fuelled by withdrawal from bonds.

    James

    1. Interesting angle. As it stands, the demographic unprecedented swell in the old bracket produces a model for gov bonds whereby their yields remain depressed as demand continues. In my mind, it would take an economic collapse for people to lose faith in the governments – do you have another angle how? Were that to occur then it should be the result of a stocks bear, so I see the same outcome for stocks.

      1. John/James, to clarify, Armstrong refers to the markets losing faith in govts and their debts, not people. I can definitey see that happening, same thing as in the 70s, but with a different outcome this time (dollar allowed to collapse).
        Thanks for the quick moderations today, hopefully the thread above will be of interest to some.

      2. Also John, would it not be the case that demographic trends mean that as people retire, they move from saving (into bonds) and into spending (dis-saving). At the same time more bonds are required to pay for welfare and as tax revenues decline.

        This may affect equities too, but so many have sought the perceived safety of govt debt in the past 33 years, it’s a bubble waiting to burst.
        I’m with Armstrong on this: a move from a ‘public’ wave to a ‘private’ wave is what he calls it.
        Shorting govt bonds could be an easy trade in a few years.

      3. The key about all these demographic discussions is the velocity of money and which currency is a global reserve maintaining the trade deficit for holding governments.

        Equities of corporations will lose faith too as they are viewed by masses as too influential and in control of governments. Governments are not run by people anymore.

        In the wake of such a crisis expect mass change in governments whereby people become more united and less tolerant of status quo.

        Bankruptcies will occur initially. Overtime as companies go bankrupt, they do not even bother to collect from debtors. At the cost of changes in government structure or complete dissolution.

        Equities and bonds have no chance. I see LOCAL currencies emerging along with local banks; potentially bartering, but with lack of corporate trust; utility (electric, natural gas, water) maintenance under marshal law will be too difficult to maintain.

        How did Russian soldiers react when they did not get paid?

        Demographics will increase at the gain of modern medicine having vaccinated current populous for long enough that pregnancies will escalate due to lack of birth control. Death rates will soar, but still under pace the emerging birth rate.

        We will essentially go local, revert to the 1800’s. Local laws will evolve and trading across new borders will resume ultimately leading to new trade partners and unions. While disgust in resemblance might exist, the need for survival will outwit politics of any new era.

        The alternative: NONE of this happens. The cronies see the existential threat and classify it FOUO. They develop defense plans for massive population loss under various scenarios. Economic impacts are incorporated. Central banks model the same.

        I think INTENTIONAL disinflation will be new norm and wages from earned income will be cut by explaining the value of the currency is stronger. Passive income passively as markets adjust. It will occur through job changes and bond markets bailouts, i.e. mortgage loans. Tax rates will drop to accommodate currencies becoming stronger.

        Any equity indices based on currency values of what equities are in their respective lists would decrease gradually to levels not seen since earlier time periods due to disinflation, not recession.

        To repeat: The key about all these demographic discussions is the velocity of money and which currency is a global reserve maintaining the trade deficit for holding governments.

        The post- Berlin Wall globalization model has to fail first for lack of faith in currencies to come to fruition.

  5. Excellent post, John. Thanks.

    PALS this week:

    Phase: very bullish
    Distance: slightly bullish
    Declination: bullish
    Seasonals: bullish
    Planetary: bullish

    Summary: L SPX into Tuesday, expect several percent to upside next week.

    1. Hmmmm. Not saying it can’t or won’t happen as sentiment is really bearish, however just as extreme bullishness meant little when the indices were making new ATH’s, so too it can work the other way around.

      My confusion comes from the daily patterns which are technically “continuation” patterns, ie, they should break down not up and volume is supporting this scenario as are other global indices which most, if not ALL have bearish configurations.

      Either way, I think we’re in for a really BIG move whichever way it breaks.

        1. Allan, this is short term swing trading and PALS is a guide for making short term trades on the SPX. It is not always correct, but has been in sync during the last few months for short term trading. It flips to bearish on this Friday (9/11) at close. So if market rallies by 2 to 3% will move to cash. If market craters, then will have to reevaluate.

          By the way, GDXJ has not proved profitable for me. Given post Venus Inferior Conjunction and seasonal sweet spot not moving this etf, if this a sign that GDXJ may experience a down move into 2016. Of course, your select portfolio is probably doing well but I don’t have access to that niche market.

        2. Valley, I wonder how did the PALs system perform in 2013-14, when the market was trending upwards?

          It seems to have served you well in the sideways chop of 2015, but did it cope with a bull market? Will it cope with a bear I wonder? I hope so!
          Thanks.

        3. GM, like any system it is a tool that gives probability based upon historical data and tries to fit that data to predict future price moves. Appears to outperform buy and hold by large margin, however, future may be totally different. Up trending markets have benefited from using system in past, due to seasonals and moon phase having been so effective.

    1. Stock market prices are a function of corporate earnings. Corporate earnings are a function of economic activity. Economic activity is a function of age (20 to 55 spend, 56 to 86 conserve). Average age is increasing in all markets. Therefore, stock market prices will decrease.

      1. The thing that I don’t see mentioned in most places is that stock prices (all prices) are largely a factor of the currency.

        We’ll have a 2 year bear market, to end this c. 17 year cycle, then (nominally) stocks will have a good run for 17 years. It took me a while to see how this could happen, given the mess the world is with debts and demographics, but it’s because ALL major currencies (except the euro) are about to be destroyed, literally in several cases. Hardly anyone sees the magnitude of what lies ahead, the world is ready to make the transition away from the age of the USD. (When I say the world, I mean the key powers and institutions, not people).

        Investors will have to place their funds somewhere, and it won’t be government bonds. It’ll be real assets, stocks, and top of the list: gold.

        Dow Jones to 40k+ by 2034, easily.

        1. A major move away from the USD would indeed change things. I can’t picture how all currencies are going to be destroyed, given the FX pairings (if one weakens, others strengthen relatively). If we are now in a bear and global crisis is about to escalate then I rather see at the moment tipping points would first be reached in the likes of Russia and emerging markets which are already under greater stress.

      2. John, as well as looking at currency pairs we need to consider currencies against the real physical world. I expect the dollar index will look quite healthy, but the US will still be suffering from raging inflation, as the Fed is forced to print to sustain US Govt spending (and by definition US living standards). The US govt can only mobilise its deep storage gold once the dollar has collapsed and the Fed has been dissolved, due to international treaties.

        There will be be raging inflation nearly everywhere, and then a final cleansing deflation. Euro area the exception, where sovereigns and banks will be allowed to go bust, laissez-faire market-led results finally returning to give us all some sanity.

      3. Corporate earnings have far more to do with uneconomic activity since ZIRP took control following on from Clinton’s fellatious deregulation.

    2. Things are not the same for instance there are over 2,000 brain supplements that are considered “food” by the USDA and don’t require a doctor’s prescription.

      The average America loses half their short term memory from 40 to 50 years old and by 55 they have lost half their entire mental powers yet there are brain “food” supplements that can restore mental powers back to at least 15 years ago or more. These are some of the reasons for the bio-tech rallies. Bio-tech breakthroughs are constantly being made and many more are expected including the possibility of extending human life to 200 years.

  6. The market is extremely overbought. Yes even after Friday. I will post a piece later this weekend. These conditions were seen in 1987 as well on the second chance rally. What is the advantage that a true bear has right now? 1) There are not that many true bears. 2) bullish positioning is still extreme. 3) knowing that the top is in and having conviction to go maximum short. We are currently crashing folks. Not apparent to the herd yet but it has begun. The larger waterfall lies ahead. I am the most short I have ever been. The time has come. The boy plunger is here.

    1. I agree with you BlueStar with the larger picture. I believe Mr Market is not going to make it easy for us closet bears and the true bears. It would not surprise me if the market had a sharp reversal upwards next week to clear out some of the bears before resuming down wards into the Sept 21. 22, 23 I personally looking for that upwards thrust this week, than cracking downwards on Sept 14th 15th to at least test the previous lows. All the best to you and every one else.

        1. I agree with you Dave, and am long from SPX 1925. Also agree that the week after next will be ideal for shorting or being in cash.

        2. Dave and valley

          I am with you. In anticipation of relief rally setting stage for blue stars crash during the next puetz window. Pretty nice set up. Almost too perfect to actually work.

          I’ve done a lot of reading about the Ecb. But I can’t find anything that would lead me to believe that the euro won’t be amongst the first fiat currencies to crumble.

        3. I will exit my long position late Tuesday or wed morning if we get a nice thrust upwards. I like Valleys trading idea, take off your winning position after a 2 – 3 % gain. I am expecting the markets to reverse after this thrust afterwards for a day only. Than back in late tuesday or wed morning after the reversal into the end of the week. This market is great for swing trading. Good luck every one !!

        4. Than back in late tuesday or wed morning after the reversal into the end of the week. This market is great for swing trading. Good luck every one !!

          SOOY <The above is incorrect !

          I meant to say, I will go back in LONG late Wed or Thursday morning.

        5. I can’t see the point in day trading for an odd percent or two ahead of what may be an almighty crash. If you miss it you’d kick yourself.
          Also, seems any time Zerohedge are calling for a snap-back rally, it’s a call to fade.
          I’m just going to sit tight and add more if we do see a bounce.
          Good luck.

        6. GM, I do a lot of swing trades.LOL picking up nickels and quarters. I am like Valley, picking up 2 – 3% gains on these swing trades. Putting the profit in a safe account. Yes, I am bearish over all going into the 3 rd week of Oct. The 3rd week will be Panic cycle week, LOL a week to remember. All the best to you GM

          PS, I refuse to read zero hedge or watch cnbc

        7. Specie I am in the same boat as you are with the EURO. The US dollar is going to be king for a while. ( 2 _ 3 years ) I see the US Dollar as the best of the Ugly sisters. If the US Dollar is going down, where would one want to go to? Certainly not the Euro, Cdn, Aussie Rubble.

        8. Having seen futures ramp up, I decided to take a tiny profit on my shorts on the FTSE, and will sit in cash until the end of the week, hoping to re-enter shorts at a higher price.

          Come on bulls, time to exhaust yourself with a big push up for us bears!

  7. Great article, John. I have to take issue with the bullish gold, again. Commodities peaked in 1950 and went down to 1970 , 2 solar cycles peak to peak. Then there was a commodity bull market from 1970 to 1980, the next solar max, totally ignoring the minimums. From the 1980 commodity peak and solar max it was a mirror of 1950 to 1970, a bear mkt for two cycles peak to peak, 1980 to 2000. Then another mirror bull market from solar peak to solar peak, 2000 to 2010. A continuation of this pattern would be a bear market from 2010 to 2030, 2 peak to peak solar maximuns. This is probably the cause of Gann’s Master Time Factor which also calls for a 20 year bear mkt in commodities. An intermediate bear bottom for the MTF is due late Dec this year. The rally from there looks like a 2 year sideways 4.

    1. Thanks Kent. I would take issue with the ‘pattern’. I rather see it just as demographics have fallen, hence the demographic projection forwards being the most important. However, I can’t be as sure about the gold projection as the equities projection due to the very narrow history of seeing gold perform under these particular circumstances.

      1. I see that chart as bearish for gold. It has been going down in real terms even though it is holding up relative to other commodities. Plus it is still very overvalued to the sin qua non of valuation, real estate per Georgian economics. Apparently the new supply of gold has overwhelmed the demand for gold from the emerging countries and those falling apart like China, Greece, and the Middle East. Gold is due for a rally, but typically bear markets take no prisoners. The goldbugs were touting the seasonal low in June. It fell another $100 before it rallied leaving buyers even not counting all previous losses.

        1. Well, you’re clearly on the wrong track if you think that chart is bearish for gold, and if you think *supply* in any way affects price.
          Do you know there’s c. 180k tonnes of the stuff sat in vaults?

        2. Producers hedge. More is made when they sync. Mining can virtually be mothballed whilst big money is made by “suffering” producers. Their market making counter parties need more sympathy – but they got their own scams too.

  8. Is there a “wave count” that agrees with the continued corporate stock buybacks to the end of 2015? Why, yes, there is: Delta Stocks six point long term rotation point 3 which is due in January (and brings in a late super long term point 6).

    What? Allan, you and Ron Rosen don’t agree? Well, wasn’t it the power of corporate buybacks that altered the most recent Super Long Term Inversion Window such that the usual point 14 to point 1 crash did not occur like it did in 1929 and 1987? Doesn’t it appear that the power of corporate buybacks was responsible for the Inbetween Point that resulted in point 1 being a very rare high? Don’t think so? then look at the timing of the corporate buybacks and point 1 being a high in January, 2007, exactly when it was due.

    If it is correct that corporate buybacks in 2006/2007 “caused” the extremely unusual Delta Super Long Term Inbetween Points then why can’t the same type of corporate buybacks counter the recent six point long term inversion window crash resulting in point 2 being an early low and point 3 being the high point that brings in super long term point 6 as the ATH before the Solar Cycle crash takes over?

  9. Is this believable:

    http://www.bloomberg.com/news/articles/2015-09-06/china-stock-market-correction-almost-done-says-pboc-governor?cmpid=yhoo

    I expect the DOW to trade to a new ATH –before– the Solar Cycle “crash” has its say. This means I would expect Chinese stocks to trade up to a “second chance” top or a “recovery rally” as American stocks trade to a new ATH.

    What? You mean you aren’t even considering that Chinese stocks can or must have a “second chance” top or even a more pronounced “recovery rally” before their crash really gets going on? If so, ….then what is your basis for this view that Chinese stocks can’t, or won’t, have a second chance top or recovery rally? It seems plausible to me that while Chinese stocks make their second chance top or recovery rally that American stocks will go to new ATHs.

    Note that I am not positioned in stocks one way or the other and that I am waiting to short American stocks at a new ATH…..just saying.

    1. And why not:

      https://www.washingtonpost.com/news/worldviews/wp/2015/09/06/russias-turn-to-china-a-gap-between-rhetoric-and-reality/

      Russia’s “cowboy” days of capitalism after the fall of the Soviets (military committees) is over and the second generation of capitalists are taking over the reigns of Russia’s corporations. As US stocks trade back up to a new ATH, and Chinese stocks rally up to a recovery rally, I expect Russian stocks to rally up from their four year “bowl” or “rounded bottom” to new ATHs.

      Don’t worry, I do expect the Solar Cycle to crash the markets –but not now.

        1. Apologies, it’s 30 stocks.
          You don’t tend to find rounded bottoms at those lofty levels, but as you’re not buying anyway, its a moot point.

        2. This Sunday evening Asian stocks opened slightly lower and DOW futures are up over 100 points in just a couple hours of trade. If this continues on the over night electronic trade, and, again, Monday night, then the DOW cash market could see a sizable gap opening Tuesday morning to the upside and the Shorts could get burned.

          I am going long the Ags with a weather vane at my back. After I have positioned in the Ags then I will be looking to short US stocks at a new ATH.

          I have a Plan and I am working that Plan. It may not be the best Plan but at least it is “a” Plan instead of wild headed emotions day-by-day. If you don’t like my Plan than come up with you own or trade based on your emotions as they eb and flow over time like the public tends to do.

        3. “MICEX Index is cap-weighted composite index calculated based on prices of the 50 most liquid Russian stocks of the largest and dynamically developing Russian issuers presented on the Moscow Exchange. MICEX Index was launched on September 22, 1997 at base value 100. The MICEX Index is calculated in real time and denominated by Moscow Exchange in Russian rubles.”

        4. Interesting, as that’s 3 different figures I’ve now seen for that index, one site mentioned 10, many others mention 30. Apparently one mentions 50.
          Maybe they added 20 stocks to keep its value up eh?

  10. What concerns me about this upcoming week is what happened with the US Markets on Friday. Usually with a holiday your volume lightens up which favors the bulls and you get a melt up and a positive close to the week. That did not happen and we had sell offs while China was closed. If China (and Japan for that matter) have a bad Monday while the US is closed I suspect that the odds of a down week for the US increases significantly. Plus as we get later in the week I think you will have folks exiting positions ahead of the Shemitah on the 13th

    I am short with SPY puts

    1. Given that there are probably less than a thousand people on the planet that grasp (much at all about) the euro project and system, one would expect a chart of the currency to demonstrate the consensus view that the Euro is toast.

      If your point is that markets always provide an accurate projection of the future with current price formation, then I expect to see dozens of markets in the next few years show (yet again) why the herd thinking is nearly always wrong.

      Was that your point?

      Simple question to ponder: Greece defaults early in 2016 on ALL of its debts. What does that mean to the Euro currency itself?
      I’ll bet most wouldn’t even know where to start in formulating a response, but feel free to try, let’s see if I can help you see the light!

      1. Specie/Dave Lane, please attempt to articulate an answer to my question re Greek default and the Euro, it will prove very enlightening for you and others.

        1. LOLOLOL GM I could not even hold your JOCK STRAP in a debate over the Euro. LOL I am not even going to try ! My analyze is derived by fractals, cycles. EW, astrology , charts and other esoteric means. These tools keep my emotions at bay. I come from a completely different angle when looking at the various markets. They have served me extremely well thus far. We certainly have different views on the markets. ( you and I) and that s great. that s what makes a market.

          As far as this week is concerned, I will be liquidating my longs and going short aggressively. I will not purchasing any gold until it heads under $ one thousand dollars nor will I be buying any gold stocks WHATS SO EVER.. As far as the EURO, it is a currency experiment that has gone bad.

          LOL The bull boat has one more stop, to let those bulls be transferred to the Bear boat. I am on that Bull Boat, and I plan on getting on that BEAR BOAT to safety.

          I am looking for some kind of deep retrace into Sept 14th possibly the 15th. I have not seen any of dates on any blog. So take this with a grain of salt GM

          I am looking for a retest of the previous lows at the very least within the next 7 trading days. I may be a few days early here thou. LOL,I would rather be a week early than day late. All the best to you GM

        2. Appreciate your different approach Dave, and thanks for the response.
          I did note that you wrote:
          ‘As far as the EURO, it is a currency experiment that has gone bad.’
          I wonder why you feel the currency has ‘gone bad’ given the sole mandate of the ECB is price stability, which they deliver with boring consistency?
          Are you thinking of sovereign issues?
          You realise that’s a debt issue, nothing to do with the currency?
          Good luck with your trades.

        3. GM I really don’t know what would happen with a Greek default. I reckon that a grexit would remove a weakness thus making the euro stronger. Because the Ecb is a central bank run by banksters and banksters are always wrong the fact that they are trying to avoid a grexit makes my case stronger..

          I simply can’t find any reason to believe that the Ecb is different than any group of banksters and fiat currency always always always returns to its intrinsic value. Zero.

        4. It is like the great Roman Empire about to crumble, rotting ( cancer)from within the whole economic system. Their will be revolutions against the governments around the world because of the corrupt system. The people will start to stand up against the controlling interest. It is than, we will enter upon a whole new paradigm shift in consciousness to unveil a whole new economic system, freed from corruption. I am looking forward to the new shift that will free the common man from this slavery system we are in. . LOL, Their is light at the end of the tunnel, we just need a little more time to finally see the unveiling of our new paradigm shift.

        5. Specie, re the Greek question, the answer is nothing would happen. The markets may believe it is positive for the euro for the reasons you state, but the Euro currency is totally separated from the Greek sovereign state.

          There are some comments way up the thread between purvez and me, you may find interesting.

          As for comments re the ECB being run by and for banksters, that is nonsense, biased nonsense put out by nearly every ZH-esque site.

          Rather than attempt to convince you why that is the case, I’ll just let you witness dozens of EZ banks being failed by the ECB in 2016-17, they are sat rubbing their hands, they cannot wait to get at them. (And they say so openly, go and read some of their speeches, and consider that Cypriot banks were resolved with heavy creditor losses).

        6. Dave, I agree with your prognosis.
          But that’s exactly what the euro project is all about: cutting government down to size by subjecting them to market forces. Eventually even the likes of France will literally go bust.
          But consider how many of France’s citizens live an easy life off the back of the state gravy train, so whilst you will see your vision come true, it will be via a sharp dose of reality.

      1. The way the ES is trading, I would think it will retrace tomorrow night and come back down before heading back up. I only took a half position Friday, hoping to get the other half Tuesday morning. Hopefully it does not gap up on me.

        1. I can neither agree nor disagree, as I have no idea what P4 is, or when P4 is due to come along, nor P5. But odd that you didn’t include 2,400 as a target.
          I do know the M4 and the M5 quite well however.

      1. Thanks for the link, I’ll have a read.
        I would tend to agree that a new all time high lies ahead before a brief but nasty bear, as that would seem to fit with the madness of our times.
        I’d be interested in seeing your EW long-term chart for gold.

  11. John H, it is a real pleasure to start the day/week reading such SUPERB analysis and logical deductions. Many many thanks for all your effort.

    Also some very good commentary flowing from this by all contributors. Thanks there too.

        1. Richard, The only problem is that we do not know what is going to drive OPEC to support prices. So many predictions in this space that are flat out wrong. I do not believe much that is written about financials regarding these countries. Saudi is a very rich country and they can sustain this for a long time. Understanding their motivation is very tough. One thing we can believe is that the $60-70 per barrel cost of frack oil that was soooo widely advertised is complete bunk. I have explained this in the production numbers relative to pricing. The question is this, back when oil was last in the $40s, Fracked oil tripled in production. Soooo The question is: Do producers lose money? Silly question, because we know they do not. Meaning the Fracked oil cost of production has long been much lower than widely advertised on news and blogs. Yes they continue to reduce the cost and not all wells are the same, but one thing we knew from looking at the production numbers is fracked oil was always profitable in the $40s. The Oil markets are NOT transparent and are very difficult to predict. Analysts in this area are often dead wrong, that is, unless they are accomplishing certian goals and then they are dead right for their goals but dead wrong on their public statements.

  12. Richard/GM:

    Don’t you two guys have different views on the timing of a potential gold bottom?
    Using the commodities chart posted above; looks like between 3-6 months. Some are looking for the 8-yr cycle to end around the end of 2016 at circa 750-800; while others are saying the downside is limited due to fundamentals. The Aden sisters show a projected low for this cycle occurring between 2015 and 2016 but an analysis of when the final lows occurred project an even wider time range of a low from March, 2015 (not!) to April, 2017.

    From a shorter term perspective; using the 1999 and 2001 double bottom analogs, a bullish setup exists next week from the 9th-11th should gold make a lower intra-day low but a higher London gold fix.

    1. I actually don’t believe Delta’s long term 1 (due mid-October; see Allan’s April 15 post with the link to Ron Rosen’s Delta charts) will be the low of this Gold Bear market but its long term 3 point will be the turning point low. This is because the El Nino could be the most powerful on record thus causing a super drought in India and massive Gold selling by the Indians who do hold large amounts of Gold for this very purpose.

      Someone just posted a chart showing a rounded topping pattern of the Euro and if it is correct the Euro will fall and the Dollar will rally much higher which will also put pressure on Gold to fall at the same time that the Indians unload their enormous Gold hoards due to famine/starvation. If these two fundamentals happen together then Gold could fall much further than most are expecting.

    2. Gold is not correlated with commodities, its counter-cyclical.
      I shared a link up the thread showing this.
      I don’t know when gold will bottom, but suspect at the same time the S&P has its final peak, maybe very early in 2016, that fits with an Armstrong benchmark.
      The dollar index will rise during the next bear (dollar squeeze & safety bid), but gold will rise in dollar terms also. Copper won’t, oil won’t, etc.

  13. Allan: I now think that an Intermediate Inbetween point brought in eighteen point long term point 5 with six point long term point 2 as lows on August 24; Intermediate point 1 was an early high on August 28; a second Intermediate Inbetween point called a “replacement” (replacing point 1) point was a low on September 1; and the DOW is now up to a high Intermediate point 2.

    Allan: This means the “crash” was a double Inversion Window crash and is all over with a strong rally up to Intermediate point 2 as a high. As you know, the rally will be strong because it is an Inversion window rally with no more possible Inbetween points. This also raises the odds that six point long term point 3 will the a high that brings in super long term point 6 as a new ATH before the Solar Cycle crashes the DOW down to super long term point 7 as a low.

    Allan: Before encouraging JH and others in their declared positions think wisely that Delta’s rules do allow me to be correct about the rotations meaning that JH and others are going to loose some serious money unless they have deep pockets to ride out the market turns.

  14. I’m just hoping we can get through September without the world ending..certainly if we can get through next week, may be everything will be okay.

    1. Care to elaborate? I saved Dave Lane’s long post from July, here’s a snippet:

      ‘….acceleration and heightening of electromagnetic energy from the sun and other cosmic energies that will build especially from late August into late September that will cause, circa 23rd-24th September, what he describes as a ‘frequency shift’ in consciousness. [the current and ongoing earth-facing solar CME’s and the resultant geomagnetic storms here on Earth are certainly a real-time manifestation of this’

      No world leaders have been hauled off for mad behaviour yet (shame). No major earthquakes. I’m a tad sceptical at the moment.

      1. GM – I was going through the Shemitah websites which paint a very negative picture – they are a bit -end of the world- religious but still un-nerving. this mixed in with the Spiral 515 target after 9/11…builds a worrying picture. Hopefully if we can make it to November we can discount what Dave said.

        1. Is the spiral predicting S&P to 515 within a short timescale then?
          I’ve seen 515 mentioned, but no timescales.
          I’m sure the world will survive whatever lies ahead, just another bubble bursting!

        2. The shemitah thing has hit national press and has has the four blood moons in a year with the next one 28th September They don’t seem to pin point what the “end of the world is”. I am aware that there is more money to be made when these black swan events happen.

  15. Valley, take a bow.
    Your system is firing on all cylinders, and I’m sat here thinking ‘should have gone long’!!

    No matter, I’m glad it’s working for you.

    1. GM, This is a SUCKERS RALLY !! To clear out the bears before heading down for a good size correction. Do not feel like you are going to be left behind. If you are going to be short as you mentioned, you will be one happy camper next week. Again, SUCKERS RALLY. All the best to you.

    2. Thanks GM. 4 rules in trading SPX give you most of the market moves:
      1. Sell New Moon plus 4 calendar days until 4 days prior to Full Moon
      2. Buy 4 days prior to Full Moon and sell day of Full Moon at open.
      3. Buy 6 days before the New Moon and hold until 4 calendar days after.
      4. Memorize Stock Traders Almanac seasonal daily percentages.

      If you do this with common sense (buy only if price is low, only sell if price is high relative to recent price moves) and buy early if price is oversold approaching the 4 rules or sell early if price is overbought approaching the same, you will have an advantage.

        1. This stuff really works. Wait, there is more! Look up apogee and perigee calendar. Treat from day of close day before apogee, to day of close three days after apogee as negative moon days (avg. monthly loss during those four trading days is .6% over 17 years of data); similarly treat day of close day before perigee to day of close four trading days after perigee as negative moon days (avg. monthly loss during those 5 trading days is .4% over 17 years). Now imagine, adding moon phase rule, with Stock Traders Almanac daily statistically probability seasonals, with apogee perigee and voila! you have vast majority of the PALS system. And the funny thing is, it seems to work over all time frames.

  16. It looks like to me that the Northern Hemisphere harvest lows are in for the Grains and I have gone long Soybeans. Rough Rice was the first Ag this year to turn up with only “dryness” in India and SE Asia. Should Rough Rice break to new highs it would be a very strong signal that the “dryness” is evolving into “drought”.

    In Chicago there is the saying “Oats know” and Oats look to have bottomed and turned up before Corn, Wheat, and Soybeans. In other words, Oats is agreeing with Rough Rice that weather premiums are now being put into Ags “across the board”.

    If the Brazilian Real is done making its deep spike Delta long term 1 as a low (and a super long term low point too) and turns up, for months to come, then the odds are going higher that the Ags are turning back up from multi-year lows.

    1. Dave,
      Congrats on your call of last week. You (and a few others) were the only ones that correctly predicted today’s price action in the SPX. I see this rally continuing with some volatility until Friday. I agree that this week will bring higher prices and that next week will be lower.

      1. Valley, IF this is a triangle (as it currently looks like) then the S&P shouldn’t go higher than 1970ish.

        I’m expecting a track back down towards 1920 but not lower than 1910. Then a strong move up to complete this corrective move upwards from the Aug 24th lows. About a 100 points from wherever the down move finishes.

        But be warned most of my triangle calls turn out to be rubbish.

        1. Purvez, I am also looking at your 1970 level. Perhaps a little lower thou. Longer term ( after this week, we slice thru the 1920 level. like a hot knife thru butter. Still looking early next week for the markets bears to start celebrating. All the best to you.

        2. Dave L, The 1970 level is where the triangle breaks down for me. i.e. my ‘stop out’ point. I’m not expecting it to get there although as I write it’s already near there.

          After my 1920ish call I’m first expecting the S&P to rally by about 100 points from wherever it finishes in the 1920 area.

          ONLY THEN am I expecting the drop that you are calling for.

          All the BEST to you too.

      2. Thanks Valley, we all did well. My real concern is for next week. The titanic is at port. It is about to sail again. This week, I am going to avoid day trading. LOLOLOL I have twitchy fingers that loves typing in trades. We are so close to a major down fall in the markets. Mr Market is doing every thing it can, from having the majority of traders participating on the next wave down. I suspect many bears have given up any hope that it will happen. It is at that pivotal point in time is where the bear will finally rise and slaughter the Bull. Best of luck to you Valley

  17. Great BLOG, I wish it was time stamped thou. I am out from my longs very close to the spx 1958 Waiting for another opportunity to go long. I am looking at shorting this bull close to the end of the day. This BULL is going to roll over big time within the next few trading days. Hang in their Bears, your day is coming !!

    1. Dave L, if you view the blog on your mobile device then it shows the time stamps. I agree though, it would be nice to have them here too.

      John H any chance please? Thx

        1. Thanks John H. It’s not a huge problem not having the time stamp. If I need to verify something then I can always look it up on the mobile.

    1. LOL, I am not sure what that means. I suspect that I will end up being ridiculed if I am out by 2 point from a high or a low. I am rather new at this blog, I do not want to get anybody upset, I will refrain from posting day trades and stick to the longer term trades post. All the best every one.

      1. Dave L, thank you for your contributions. They are both welcomed and well read. Our friend J is usually quite an affable character and I’m sure his ‘good’ side will show up sooner rather than later. Lol.

        He is definitely someone that I use as a ‘check and balance’. Thanks for that J.

  18. Dave, i hope you post here further every day because it’s worth reading your posts. I think i can say this for many other posters. And what others say don’t take notice and ignore them. Thanks for you contribute.

  19. US Nat Gas (UNG) floating on bottom of trading range. While I am tempted to pull some daily trades for 1% or better, I am waiting for a surprise on the weekly Thurs. 10:30 morning inventory reports. This week we have a chance to pull a surprise on lower than expected inventory injection that creates an upside and if this week fails at a surprise that increases the chance for next week. If the surprise happens this week, the gig is up and next week will adjust expectations and lower chance for a surprise. The reason for the expected surprise is for several reasons. The heat is worse than expected, the prices of Nat Gas are so good that it is the energy of choice for excess Electric Generation and Producing Fracking Wells are continuing to shrink. This could lead to temporary imbalance surprise that is a trade opportunity. I am looking for $13.5 or above for a sell. If we get a surprise down. I will add to position around $12.3 or lower.

    1. JaFree,
      I tend to agree with your analysis on Nat Gas. I am a little confused by your prices, $13.5-12.30, compared to $2.70 MmBTU. If those are international per tone, be careful, if the US ever gets it act together (stop laughing), then those prices are at risk. Buy Henry hub. What are your prices in reference to? Also, I believe that this cycle has gotten off to a good, but little volital, starting last night and today. Let’s watch how this week goes through the 14-15th. Be prepared, if there is a rally, for there to be a temporary correction of 10 days. If no correction or a shallow correction, back up the truck for longs. There is sever stress in the industry. They have managed in various ways, but increased drilling around existing infrastructure is the main way. The banks won’t let them go where little infrastructure exists. This has been going on for the last 9 months, and there is a limit to the number of available opportunities around existing infrastructure. The long term cycles clearly favor higher prices, whether solar activity, BTU price comparisons, science of foreknowledge,… If I had way more $$$ than I do, I would invest in storage then buy dips and hold. Just saying. A bad moon is rising.
      Steve

      1. Steve, I am refering to the tracking symbol of UNG, which I usually put in my statements. I am limited to the trading I do because it is all in IRA accounts, ie tax deferred trading. I agree capital is limited for frackers these days. The fracking production has been flat for about 6 months and rigs continue to drop off. The production numbers are going to start falling and this will present a trading opportunity. What trading methods do you use to trade Henry Hub pricing?

      2. Steve, One of the main reasons I am keeping longs is the wild card Nat Gas. exporting. My estimate even with all the new drivers (new finds) is a Henry Hub price of $4-5 if we can connect with world prices. This is good for the entire world. I just forgot to mention that I agree with you on the US export driver, which is exactly why I am focusing on US Nat Gas as my energy commodity of choice. While we wait for this coupling with world prices, I see a good trading vehicle that is fairly responsive to supply demand that is reasonably predictable. My favorite disconnect is the lack of the Nat Gas. Markets to read weather correctly.

        1. I hope you are lucky ike me (lol) I m also short do you think this is it and we will make new lows from here or back to 1920-30 and up again?

  20. Hi John. My game plan is for the next two weeks, ideally into Sept 22nd. Coincidentally on my Birthday.

    Start layering in my shorts for next week
    Using spx put options
    3x ETFs

    my mid term projections are as follows. sp 1750 Dow Jones 14,320
    Please note, any time from mid week next week into the 3rd week of OCT

    John, the Titanic is at port for the moment. Those who decide to get off, will be well served. The grisly bear is scratching at the front door. When the time is right, that bear is going knock that steel door down and catch a lot of unsuspecting investors off guard. I suspect a lot of bear investors have lost hope after today, which is what was needed. If the bulls do decide to stay, I hope they have stops in place

    The Asian market last night rose on very little volume, vix hardly moved today compared to last friday. I could go on and on with this Suckers Rally.

    As for this week, I do not see much more upside my self. But like any good trader, LOLOL which I am not ! I just get lucky once in awhile. One has to be cognoscente with higher prices. That is why I will be layering my shorts with slightly different levels.

    When we do start down with the market correction, I will be slowly selling out as the as it descends. I am not going to be a hero and try to get the top tick with my different investment vehicles.

    Bulls and Bears make money PIGS DO NOT

    I hope that helps John, all the best to you.

    1. Thanks Dave,

      It looks like this week wil hold and we can even rise some more maybe even a little above 2000..
      I think the next decline will start next week and it can be much bigger..than people will expect..

      Goodluck an be carefull

      John.

  21. Andrew Lo

    “The real challenge in operating in these markets is that risk management would have you cut risk in the face of losses. The problem is that if you cut risk too quickly and by too much, you may end up missing out on the rebound, in which case you’ve locked in your losses and you might be getting back in the market exactly at the worst time. So you’re getting hit on both ends”

    These markets currently remind me of 2007 on moving exponentially faster. The Algos have def changed this market in terms of RoC.

    1. There have already been two Intermediate Inbetween points as lows so this market is “crashing up” to a high Intermediate point 2. It is going to become very “painful” for the Shorts.

  22. Purvez, I am curious as to what the logic was behind your forecast of the SPX triangle falling from 1970’s to 1920’s and then rallying 100 points from that low (i.e. triangle breakout to the upside), and then subsequently declining to a lower low below 1920 (i.e. failed triangle breakout)?

    Is this following some technical chart pattern or are you using some other (not explained) reason behind this projection?

    1. Steve T, although the triangle is now invalidated by the overnight action on Sept 8/9 the following is what I was looking at:

      From the Aug 24 lows to Aug 27 highs was wave A as a zig zag.

      From there the triangle that I was then looking at would have been made up as follows;

      w-a down to 1900 on 1st Sept
      w-b up to 1976ish on 3rd Sept
      w-c down to 1911 on 4th Sept
      w-d up to 1970ish (which is where it failed because it went above w-c)
      w-e down to 1920 to complete the triangle which would have been wave B of the upward correction.

      I was then expecting a thrust of around 100 points to give wave C of the upward correction from the Aug 24th lows.

      Hope all that makes sense.

      However as I’ve said before. Triangle are rare things and my calls for them tend to turn to dust more often than not …..sadly.

  23. An alternative wave count to consider for this upward correction is a double zig zag.

    Wave A was the zig zag from Aug 24th low to Aug 27th high.
    Wave B was the low to Sept 4th
    We are currently in Wave C up. If Wave C equals Wave A then it will reach 2072 which is way too high IF this is a correction. A more likely target would be 61.8% of Wave A which is at 2009.

    Anyone else have any thoughts on where this ‘rip your face off’ rally is going to end, please?

  24. purvez,

    I’d say 2040+- for the S&P per 11 September. This is based on Harmonics, EW, turningpoints and previous support levels. To bad I can’t add an image from my system…

    Cheers,

    W

    1. Whazzup, do you still see this ‘up’ wave as a correction? i.e. Are you expecting lows lower than 24th Aug?

      If so then the retracement you are suggesting seems very deep.

  25. I’ve had a go at doing a Slater9. This image linked is of the Dax this week. There was a gap up on 7th September. Drawing the pitchfork up from that point, it is noticeable that the data stays within this channel – almost like it is done by a computer.

    1. Nice attempt Pulp. The big problem that I have with the pitchforks is something that GM touched on a while back. How to identify your starting point?

      I suspect the above was done after the event and it does show very well how the price remains within the channel. However if I’m wrong and you drew this before the move started then please will you share how you arrived at the start point and the top and bottom extremes of the channel.

      Thanks

      1. Yes, you are correct I did draw after the event. Next time I am confident about a large scale move with a pitchfork, I will post.

  26. Prospects for Japan’s corporate sector are 7.71% better today than yesterday, according the Nikkei. 😉

    How many bears will be on the train when it hurtles full throttle over the cliff?

  27. Out of respect for….well you know who you are, I would like to apologise for my offhand and random comment earlier this week – not for what I said but how it was said without explanation or context.

    In attempt to be diplomatic and not single out anyone in particular – I have said it many times to beware folks who talks as if their point of view is fact. My fundamental position is that I want everyone to make money and to protect themselves against risk – despite my badgering of Nicolas, that remains true for him too although with him it is his blase attitude that I worry will get others into trouble.

    The main reason I will no longer frequent (although I may sometimes read) this forum really goes back to the first point in the above paragraph. I became tired of engaging with people who talk with certainty on random situations, and those who shout others down when we don’t agree – as well as some liars that have exposed themselves on here. Some examples this week that prompted me to comment in a “snarky” (thanks GM) way:

    Someone claiming that following a system “allowed him to be correct” and telling Allan this with certainty and for Allan to refrain from giving advice….. This is the same person who showed us that he lied on here, who now has a new system he speak about with certainty and preaches that new system to the board. How predictable.

    There is new (kinda) person who uses a lot of LOL’s, always claims to have entered a trade very near the top or bottom of waves. Additionally he seems to get very excited when he catches a good one (don’t we all) but when things go against him then the position is no longer a single position, he claims then to always have had the plan to layer shorts. In addition he uses options to do this, in a high-volatility environment where they are very expensive. I wish him all the best, but my reason for bringing this up is not to criticise the actions just to remind the good folks on here not to put too much credibility on something when not a lot is making sense, or when you get the sense that someone is trying harder to be “right” than make money. Maintain the healthy skepticism, because if you think you are not affected by reading bullish or bearish opinions unless you make a concerted effort to see it for what it is – think again:) Also, judging by the other posts, this poster has aliases as well…..

    And just a last post on the market. It has been the best month for quite some time – have been lucky enough to catch and attack some of the price points I am always going on about. Specifically, I have SPY with strong resistance from 200-204 so I have entered a SPY short at 199.62 with a tight stop at 200.5 as I feel we might test 204 and so on if that breaks back to 210-212. I think it more likely that SPY will not breach 204 – which is about 2% away – in terms of SPX that would be 2020-2030 I guess although they don’t often correlate to that degree – I think 2040 would be a reasonable guesstimate. Again, no one knows what is going to happen so I give you a trade that will either fail or succeed. I am not going to blind you with Delta long-term point 7 or hindsight trades and ambiguity.

    Be cynical, be awake to certain posters’ and their motivations and enjoy yourselves! There is plenty of opportunity to win or lose money – I maintain this board should be about helping each other and being honest. Think about what people say and how they say it.

    When I see too much bullsh** and too much “trying hard to be right” on this forum, over a longer period it just makes me tired – and I also see that people really do not learn much in the time they spend here. I will stop by every so often to see what John has written, perhaps the balance between benefit and frustration will level out at some point in the future?

    In the meantime, good luck to all as always.

    J

    1. Hello j.
      I agree, if random anonymous posters on a stock market related blog make you tired and frustrated, it’s probably a good idea for your mental health to stay away.
      I find the comments to be useful, silly, amusing and thought-provoking to varying degrees, and mostly civil.
      We’re all adults, we all make our own choices, we all have much to learn.
      Good luck to you too.

    2. As I have said before, I have yet to meet the person that has a two headed coin in this game. Anyone showing certainty in any market moves is clearly not mature enough to know that the market humbles all, but rest assured they will soon find out.

    3. I skip about 75% of comments particularly those who wish to comment about what the mkt is going to do exactly in the next couple months…. The sun farted on my picosecond chart. Check out my ew chart of which will change in the next hr… This system created by a person to killed themselves is predicting xyz but the definition of panic can mean two dozen things… Blah blah blah blah and then next week a complete orthogonal opinion. Blah blah blah. All a bunch of dick measuring. I clearly dont know the long term thesis of many of you bc u r all measuring your dicks daily.

        1. It’s bc i dont have something to say every day. I’ve made it clear in the few posts i’ve made this yr.

          1. Accumulate gold/silver positions
          2. Await mkt top this Nov 2015 +/- 2 months, as displayed by solar cycle 16 vs 24 analog.

          I will reassess 2 if at some point after November there is a massive divergence in the solar cycles

      1. In fact Joseph, what makes you think anyone at all cares for your views on others’ posts? Either post trade ideas, or simply read and STFU, how does that sound to you? Go psycho-analyse somewhere else.

        How about we all keep the posts to the markets, and leave out the ‘analysis’ of the commenters.

        Whilst I’m getting things off my chest in this regard, I do recall jeger mentioning a 7 figure pension pot of his, and trading to earn ‘not what he needs to live, but what he’s worth’. Yeah, I know his type, and he has the nerve to crticise Allan for defending his corner as regards property.

        A fine display of pointless comments and hypocrisy from some today, all to make themselves feel somehow superior I suspect. In fact it merely displays their insecurity. Be gone.

    4. Thanks for your comments J. As GM says we are all responsible for our own decisions, however they are arrived at.

      Wish you well for the future.

  28. Enough said, I get the hint. Last post I PROMISE !! I do not want to get every body in a frenzy here. The market is going retrace downward here thru out the day. Rebound tomorrow. This week will put in a lower high before next weeks sell off. I will be buying Put options on the rebound Thursday possibly Friday. Over and out.

    All the best every one !!

    1. Hi Dave, very sadly that you leave because of the comments from other posters.
      I hope you stay here for the people who are still interested in your opinion and i am certainly one of them. Others don’t have to judge you but they have to look to their own. So, i had to say this and i hope it’s enough for you that you still post here.

  29. Following on from my earlier post about a double zig zag. I believe we completed the ‘A’ wave at the overnight highs. We are currently working on wave ‘B’. If wave ‘B’ retraces between 38.2% & 50% we’ll get down to somewhere between 1960 & 1950.

    Let’s see what the market really does.

  30. looks to me like the bounce is about over, i would expect some back in forth action for the next week before the real action starts. still looking for puetz crash window 9/18-9/30. maybe thirdy to fifta purse scent when shes all dun

    1. Specie, are you suggesting that we’ll lose between 30%-50% from ATH within the 18th to 30th window? Or do you see that as being the first leg down?

      1. Hi Purvez, thanks for the question for clarification, yes i was thinking just the first leg down as part of a larger decline over 6 to 18 months. just my wag but it’s based on 28 years of doing this for a living and mostly measuring investor emotions

        1. Aah yes I would go along with that prognosis, thx. Very short term the waves would look a lot better with one slight pop higher than the overnight highs.

          Good Luck with your trading.

  31. I previously modeled a scenario where an initial selloff occurs in late Aug, followed by a rally, and then a second deeper crash/correction in mid-Sep. But the market always follows its own path with a slightly different tune.

    First, the Aug 24 gap down was so severe that it already hit my most pessimistic downside target projected in mid-Sep. Second, that final deep selloff occurred in the overnight session plus a span of 5 minutes during regular trading hours before a vicious rally quickly resumed.

    So as it stands, I am wary of making any big, speculative bearish bets for a deep mid-Sep correction. I was short heading into that Aug 24 flash crash and despite hitting the holy grail wet dream for shorters, it left a bitter bad taste in my mouth. (I took out the trash at 9:30am EST expecting I had the entire day at my leisure to decide what to do and could not believe that I already gave up 50 points from the low by 9:37am!)

    Originally, my thesis had two possible big down days in Sep which were Sep 14 and 21-22. If Sep 14 is to be a possible crash day then the market has to sell off starting Thur Sep 10 ideally and no later than Fri. The reason being that some past historical bad crashes occurred 3 days before a New Moon during the 8th or 9th lunar month (Sep/Oct), which I read somewhere but can no longer recall. Also, it is presently a “bullish” lunar cycle until Sep 15/16, so a crash within this cycle would be counter intuitive, hence, the need for it to start by Thur to fulfill the more rare scenario.

    As it stands, I do not think Sep 14 will crash and it might even turn out to be a potential high, as a contradictory confusing signal due to the Shemitah doomer hype.

    I do have more faith in the Sep 21-22 period of it still being a potential low/bottom, but I do not think it gets anywhere close to the lows of Aug 24. Regardless, I do not look to get rich by another bear plunge but instead aim for an entry to go long for a longer time frame during this final downleg before the bull trend resumes. GLTA.

    1. Steve T, was yesterday’s down draft the prelude to your Sep 14 crash call, do you think? I’m not totally clear about this Sep 14 call. Are you saying that it should happen earlier than the 14th? In which case would you consider yesterday’s action as fulfilling that? I guess I’m trying to understand whether we should expect ANOTHER down move or yesterday completed the Sep 14 call?

      Just trying to get a better understanding of your comment above.

      Thx in advance.

      1. Valley, say Hi to them. They’ve done you proud.

        Today’s retracement is quite large – 50% of the up wave from 4th Sept low. However I’d tend to agree with you that there is still one more UP wave to come.

  32. So for all the discussion about coin flip comments, I have found the following very interesting. None of them except one would matter to me, but as a combined effort, I am intrigued.

    1. PALS has a mid Sept. peak and down into Oct.
    2. Puetz is looking for a late Sept. Crash
    3. Spiral has mid Sept. peak and down into Oct.
    4. JH in the Bear Bull supported late Sept. down
    5. Most import (to me `,~) I stated in my last short covering sale on Aug 27th (about anyway) a rise into sept. and big leg down into Oct. Based soley on my experience of past market crashes. (ie not very analytical)

    Since I do not follow all the systems mentioned here, did I miss any that had a similar time frame?

    Are some of these coincidence based on group think? or are they truly independent thoughts with the same result?

    If I misunderstood any of these as two similar systems, by all means let me know.

    My strategy remains high cash content 30-40% and trading Nat Gas. I still have a core portfolio, I do not want anyone to mis-interpret my strategy. I am looking for another panic day to do some quick trades and looking to re-invest for value if the market follows our thoughts and does in fact come down.

    1. If you were long heading into today then you should have a protective profit locking stop on the second consecutive gap up day that runs smack into a challenging resistance level. FOMC on Sep 17 this time is very, very important especially if they move on an interest rate hike and the probability of it actually occurring this time is much higher than before.

      Based on instinct I would suspect if the rate hike happens that the market initially reacts negatively to that news in the short term (few days), and then for unexplained reasons it quickly reverses and begins a new strong uptrend that lasts for months (with the typical bumps along the way).

    2. JaFree, I for one would like to think that it is NOT group think but a number of different systems aligning to give similar results.

      I’m a die hard EWer and usually have some thoughts about the market’s next move which I haven’t posted here. However I am often amazed by how others with totally different systems come to similar conclusions.

      It’s a pity Jegersmart decided to leave because despite everything there is a lot to be learnt here. MAINLY from our host but also from others’ comments. If nothing else it forces you to consider alternatives that, one’s otherwise one tract mind, would not entertain.

      You did forget to mention the Delta system though. However I personally find Richard I’s comments on other aspects of the market e.g. Ags, El Nino etc more useful than all the different ‘point levels’ that he mentions from the Delta….but I guess that must be the same for others when I witter on about Waves 1-5 vs Waves A-C etc.

  33. the next 9 trading days should be very interesting

    the best laid plans…………

    the universe might just get in the way of the feds plans

  34. Ouch!! This decline has gone waay too far than I had expected. I can’t see how we get another pop higher over the overnight highs after this….which leaves me with a quandry because I can’t find a suitable EW slot to fit this UP/DOWN wave into.

    Any other EWers care to help please.

    Valley, hope you have Break Even stop somewhere.

    1. purvez, I am not trying to be a smart “A” here but the pattern leading into this was a bearish continuation pattern and as such required respect which the longs have little of due to years of complacency.
      This will be a huge wake up call to longs if it breaks lower and will drive the nail in the coffin of any intermediate ATH’s.

      1. The worst case scenario here for the longs that held into the close and I am not saying it is a definite, however it IS a very real possibility, thet we get a gap down open tomorrow and a very large plunge.

    2. purvez,

      It is a very complex WAVE 4 (now in C wave till 11 September), which will go up to 2040-2050 imho. GL to you all!

      Cheers,

      W

      1. Whazzup, not sure I’m following your count here after today’s reversal. Are you saying that the down draft today is a smaller degree wave-b of a larger degree Wave-C? And that we now go up in a wave-c above last night’s highs to complete Wave-C?

        If this had stopped at the 50% mark then I would have agreed with you but I can’t for the life of me see this going back up above last night’s overnight highs. Although ‘never say never’.

        Let’s see what the market really gives us.

        1. Hi purvez,

          The larger wave C, that is what I meant yes. Other possibility I see: we just made wave D yesterday until tonight and now wave E begins to the aforementioned target of 2040. To count this, see the abc till 28 August. Than x till 2 September. After that the abcd is clear I guess? So again some kind of triangle it seems to me.

          Is it logical? Perhaps not… Maybe 2k is more logical however, this market is so volatile, keep your eyes open because anything can happen! Ranges are getting bigger!

          Cheers,

          W

        2. Thanks for the clarification Whazzup. The triangle you suggest would not meet with EW rules as wave-c went above the start of wave-b.

          Looking at it with fresh eyes this morning, I think we had our second zig-zag from the Sept 2nd lows as an a-b-c. Only thing is it didn’t go above the previous zig-zag’s high on Aug 28th.

          If that’s the case then yesterday’s down draft was w1 of W5 down. We should ideally get a retracement of that somewhere between 50-60% but given the severity of the down draft yesterday I’m inclined to think that 38.2% may be all we get before w3 starts. That w3 could easily be a 100+ points down.

          Let’s see what the market really gives us.

        1. pimaCanyon,

          Tell me your idea please. 😉 IN THIS MARKET ANYTHING CAN HAPPEN, I though you would see this by now. We have entered a bearmarket, 27 April here in The Netherlands, 20 May @ you guys in the US. These chops up and down tell enough…

          Also, I am a big fan of Harmonic Patterns. I see a deep crab evolving to 2040. Problem with Harmonics, it is an ‘expectation’. It is there when it is there. 😉

          Cheers,

          W

        2. Hey purves,

          What if you count a big A, B and now we are in 3.3 of the big C? This means 3.2 was made this night at 1935.

          Is that possible according to you?

          Cheers,

          W

  35. I suspect that there is FAR more going onhere than meets the eye and there may be some very big players here setting these markets up for the short side and I am talking globally.
    Asia and Europes big gains has pulled in many longs and many of those now find themsleves exposed to whipsaws and possible traps after US action today.

    If this does indeed unfold as I suggest the bears can take a huge bow.

    1. Our mate Mr Armstrong is out with a gold forecast update, and a report for 2015.
      He’s still calling it the ‘hedge against government’.
      I note HUI is testing its lows once more, a bumpy few months ahead I reckon, til gold sees some clear water.

      1. GM I know I have beaten the drum on it but I am super super sceptical of MA. As you know back in 2012 he was openly promoting gold stating that it would likely reach new highs into 2015 as high as $5k onlt to do an about face.

        Is it any wonder that he has ome in for some flack from investors? How many investors did he encourage into gold before the doing the total backflip?

        And now he has a vendetta that he keeps venting against those same investors who are likely the ones that are sending him harsh emails.

        Lastly I hate dragging up things too far in the past but do some research about his very early years in regards to his collector coin dealing. It’s a bit of an eye opener.

  36. ‘Isn’t it already a fact that market participants perceive central banks as “buyers of last resort”?

    The idea of a “central bank put” has often been raised – meaning that central banks will always come to the rescue if markets come under stress. Central banks have clearly said that this is not the case: they would tailor the response, if at all needed, to circumstances. But this does not yet seem to have been fully recognised by everybody.’

    Indeed.
    http://www.bis.org/speeches/sp150902.htm

  37. What I’m about to say is definitely on the ‘wild’ side but may be worth a thought:

    Look at the Daily NYAD chart shown below:

    http://stockcharts.com/freecharts/gallery.html?$NYAD

    Now look at the bottom right hand side. The surge up from the Aug 24th low is quite large. Since then all the other waves have been similar sized choppy ones. Since this is an upward correction I would expect to see another ‘up’ wave going above the choppy zone of at least 50-60% the size of the wave from Aug 24th to Aug 28th. That would give an a-b-c wave with the ‘b’ bit being the choppy section.

    …and that’s what makes me think that this chop fest is not yet over and Whazzup may well be right with another big move up.

    As I said it is on the wild side, particularly, as Peter_ has pointed out, that you shouldn’t use EW on NYAD but if you look at all the other waves from the ATH they are more text book than the waves formed by the S&P or the DJIA!!

    Let’s see what the market really gives us.

  38. Hi purvez,

    Thanks for the support. 😉
    That is why I use other methods as well (I am fan of Harmonics). They are all pointing (big pattern and a smaller one within the big guy) to 2040+-. I even see the possibility to 2070.

    After that, well we know what will happen… A HUUUUUUUUUUGGGGGGEEEEEEEE wave 5 down to somewhere in the end of September/begin October if you ask me…

    Only question is: why is this wave retracing so freaking high? Well, some people (the small players (90% of people)) do not see/believe we are in a bearmarket and keep buying lows…

    Cheers to you all!

    W

      1. A ends the 27th of August at 1992. B end the 1st of September at 1897.

        C will end ***here comes a switch from what I thought this morning due to extra analysis of other stuff*** around 2010+- per somewhere next week. 🙂 To be fully transparant, I am still in doubt between the 2040+- and my new insights… So one thing is for sure if you ask me, we gonna do a last move UP.

        Cheers,

        W

        1. Hi Whazzup, ok now that I understand your A & B please could you talk me through how you are counting the C? You mentioned 3.2 finishing at overnight (8/9 Sep) high – 1993ish. So what do you count as 3.1?

          I must say, that currently everything since the B low does not look anything like a SINGLE wave that I can count in EW terms easily.

        2. Hi purvez,

          Take the B low point. a up, b down, c up, d down (I thought it ended last night, but it ended 07:30 your time, 13:30 my time). Now we should be in e up of C to 2010. The 3.1, 3.2 etcetera count is not valid anymore, so that is why I am looking at 2010 for now as my preferent scenario. I see this wave C as some kind of diagonal triangle which may truncate/fail at the end and then we can finally start wave 5.1! I hope this is not to farfetched and I hope it is clear to you, else just give me a call! 😉

          Cheers,

          W

        3. Whazzup, …..OhhhhKay….but no. Sorry but the C wave you describe has a number of flaws to be an Ending Diagonal. Main one being wave-c is longer than wave-a.

          Never mind Whazzup. For what it’s worth I am now also looking for a high toward 2010.

          The way I’m getting there is :

          There is a BIG wave A-B-C.

          Wave A started at the 24th Aug lows and ended at 27th Aug highs.

          Now this is where wave B starts which is made up of a triangle in my opinion.

          wave-a ended at 1st Sept low

          wave-b ended at overnight highs (8/9 Sept)

          wave-c ended at today’s lows (10th Sept)

          We are currently in wave-d and as long as wave-d doesn’t exceed wave-b’s high then we can expect a wave-e low before a final thrust higher towards the 2010 target for Wave C.

          So in summary we are still a few days away and LOTS OF CHOP away from getting there.

          If you are a day trader then this is a dream scenario. For swing traders it can be both a dream or a nightmare.

          PLEASE REMEMBER :

          Most of my triangle calls turn to DUST. I have very low expectations of this one too. LOL.

        4. Hey purvez,

          I see the triangel! It looks good I guess. Let’s wait and see! 🙂 We go for 20xx. 🙂

          Cheers,

          W

      1. Hmmm…. Gold plunges one day and Copper rallies the next…..get a clue….Dip Buyers rule.

        (And no, I am not in stocks but I just added to my Sugar longs by going long Soybeans too. I have a plan and I am sticking to it ….like glue.)

  39. It would appear that futures stopped trading twice last night.

    the mini crash monday 8/24 was the first time ever that i recall

    major systemic problems surfacing in the middle of the night

    only to be temporarily covered up by massive intervention

  40. Elliot Wavers seem to be active today. I would like to hear the analysis of the SSE composite over the past year. To my untrained eye, it looks like a good example of a 1-5 climb and then A-C correction, currently still in the C wave. Actually for me, I rarely see such a complete example, but again, I do not analyze Elliot Waves.

    1. JaFree, are you sure you are not an EWer? Your analysis is pretty correct.

      However looking at a longer term chart from 2007 high it would look like this year’s top is the end of Wave B of a downward A-B-C correction from the 2007 high. So I guess this down wave has a waay to go before it ends as Wave C.

    2. Purvez, I am familiar with the concept and the concept has served me well when making entry positions. What I do not do is try to analyze it to the point of setting levels and so forth. I am actually mostly a value investor. But I do try to know when to build cash and be ready for down turns. Times like now are times that I like to trade while I wait to go back to value entry points. I was just struck when I saw the SSE 1 yr this morning how nice that fit the EW concept. Thanks for the confirmation.

  41. US Nat Gas (UNG) did see a small surprise of lower than expected injection. This did not lead to the upward response I had hoped. I will most likely sell for 2% gain on 1/3 of my trading volume and look to get a couple 1-2% daily trades unitl next week. Demand did increase, but so did production. I expect demand to increase even more in next weeks report. Production should continue to level off as it is doing. However, this may not be a big surprise to the market since the trend is showing evident today. I still expect upward action but will play the gyrations if I can.

  42. GM, I’ve finally managed to get some time to read up on ordo liberalism and it’s basis for the ECB. The fundamental ideas are sound, particularly in respect of constraining governments and their wayward spending. Followed properly it would provide, as you say, a strong foundation for the Euro…..and therein lies the rub from my point of view. It is almost IMPOSSIBLE to implement these ideas across a diverse range of nations, most of whom have no experience of its effect. Also most of these nations are already too far down the ‘big government/debt curve’ to be able to implement this properly as it will simply exacerbate their problems rather than resolve them.

    Now if, as you seem to be advocating, these nations should be raised to the ground and start again, then that’s a different story.

    However I suspect that that is the Achilles heel because if you try doing that then you break up the Union and by default render the Euro useless.

    I’m conscious of using this blog to discuss currencies and economics (instead of trading) and would welcome any opinions from other participants whether this discussion should be taken off this blog.

    1. Hello purvez.
      It’s not an easy task, it’ll be a bumpy transition, but the BIS/ECB guys are a lot more prepared for this than the dumb socialist politicians who signed up for their own demise decades ago.
      As for this: ‘these nations should be raised to the ground and start again’, it’s sometimes necessary to have a cleansing, and it will be mostly governments that are hit’. I believe humanity is ready to make a leap, just pondering whether I should help it along actually.

      It’s going to happen everywhere anyway, just via different routes; currencies or actual defaults.

      1. GM whilst ‘cleansing’ is good ….eventually. The ones on the ground at the time do suffer enormously and quite often they aren’t the perpetrators. That’s why I find it hard to subscribe to this plan.

        As you say it’s going to happen regardless but I’d rather be helping the one’s getting ravaged innocently and let ‘history’ take it’s weary toll. Not trying to be a ‘hero’ ….just not a ‘villain’ either.

        Let’s see what life really brings us.

        P.S. Going back to the Euro….if the EU breaks then what good is the Euro? That bit I still haven’t got my head around.

        1. Sorry, re the Euro and the EU. Yes, if it all falls apart, things could become very *unstable*, AKA revolutionary, & war-ravaged. Let’s hope not.

      2. What comes after the forest fire purvez?
        Renewal.
        I am sure that the Eurozone, and eventually the world, will be a much better place when we are rid of the scourge of huge government and (seemingly) limitless debt.
        Tough times ahead for sure, for everyone. But at least there’s a plan, some hope.

    1. PALS next week:
      Seasonal Averages: Up M T, Dwn W Th Fr
      Phase: Up M to Th, Dwn Fr
      Distance: Down M to W, Neutral Th Fr
      Declination: Up M T, Dwn W Th Fr
      Planets: Inner planets supportive, Jupiter conjunction still negative
      Tides: falling all week

      Summary: If price goes above 2030 will move to cash. Will short no sooner than Tuesday of next week unless price gets above 2050.

      Happy trading and neuronal harmony this weekend.

        1. Thanks, Wouter. 2040 possible. Market should lose energy beginning as early as Monday, look to short near close on Tuesday.

      1. Valley, did you stay in your position through all of yesterday’s and today’s wild action?

        Hope you make enough for all that angst.

    1. Huh Peter_?!? Since when can you have a 4 that goes higher than the end of wave 2? Is this EW or something else please?

      I’ve been struggling with the ‘early’ part of this wave too but your count is ….. well…. unorthodox.

      1. Peter_ looking at your chart again, it has helped me to label the ‘early’ waves as follows:

        – Your red 1 is fine.
        – Your red 4 should be a red 2. It’s an expanded flat with your existing red 2 & 3 being the ‘a’ & ‘b’ of that flat.
        – Your red 5=A should be a red 3.

        It was the 1 & 2 that I was struggling with, so many thanks for helping me resolve that.

        1. I agree purvez. And about what is going on now: it seems to be some kind of wedge, not a triangle I have been told by somebody I highly respect. If you ask me wave B is done now and we are now in C up (we made C1, C2, C3.1 and C3.2 so I guess a hard up move is coming now). I am writing this at 13:18 Amsterdam time zone (+2 I believe) so for the Americans, do minus 6-8 hours (05:18 – 07:18 at you guys).

          PS: if the move goes below the start of C3.1, than this count is wrong!

          Cheers,

          W

        2. Whazzup very much appreciate your analysis. Please will you quote actual S&P points rather than C3.x because without a chart we are sort of stumbling in the dark.

          I, like you, can’t find an easy way to post charts so I’ve got used to quoting actual price points.

          Today’s back & forth has got me dizzy….and it’s a Friday. I can’t see anything big happening today. Famous last words eh?

          I might decide to retire early today.

        3. My take is the down leg of 5 is a double a-b. If it not complaint with bullish impulsive I have no stress thereby, just call it flat. Within a corrective the 5-3-5 is a corrective.
          When a 5 with compliant bullish form follows a bearish 5 (of any old form) then the turn is confirmed again. Trust this elucidates with an e-
          Narrowly she goes (SPX) and gives all the false signals, which remain false in the glowing frame unless the frame is brutally broken. Meanwhile the lips of the mouth of the Oracle begin to show a distinct sign of impending speech, the sentiment of which which we will hear once we see it.

        4. Hi purvez,

          I try that next time, thanks for the feedback!

          For now: I say next week hard up, still looking up because in my opinion we made a bottom today! Somewhere in the last 10 days of September (22 W1 start than 28 W2 top???), the party begins! 🙂 I guess the shit will stop dropping and bottom out around the end of October. Just my 2 cents. 🙂

          Cheers,

          W

  43. This may seem simplistic to many but hourly charts of DOW futures show successive higher lows from the August lows pointing towards an upside breakout.

    And isn’t the daily MACD crossing to the upside too? Might the technicals overwhelm the Elliot Wave Counts? I have the Delta wave counts with an expected “crash” up to a high Intermediate 2 even though the Delta odds (but not the rules) are against that wave count too.

    Now wouldn’t it be something if I am proved correct even though I have no “skin in the game” at this time? Possible, I will be correct because I am the most dispassionate and unemotional so, therefor, I see more clearly than others….

    1. Entirely possible. Saturn in Sagitarius next many months corresponded to manias in stock market last 3 times: 1986,87,,1957,58,,1928,29.

      1. Could be but I don’t know about that. What I do know is that the Moon is “causing” this 3rd strongest El Nino on record (and is expected to get stronger). What I do know is that Delta is based on a two dimensional 19 cycle of the Earth, Sun, and Moon. What I do know is that mini-Ice Ages are caused by Saturn, Sun, Jupiter, Neptune, and Uranus (Saturn on one side of the Sun with Jupiter on the other side and Neptune and Uranus accelerating around Jupiter) in addition to the Solar Cycle (said planetary alignment before the peak of the Solar Cycle). Because I do know that these Celestial Bodies do cause many different things to happen on Earth it is more than plausible that other Celestial Bodies or that the same are causing other things to happen on Earth that I am not yet aware of. I certainly know to keep an open mind.

        1. I have to disagree that this El Nino is getting stronger. In fact I see it weakening. The models continue to show weakening. The Sea Surface temperatures are also showing signs of weakening. I commend that you know that it is not the strongest El Nino, which is contrary to many sensational TV reports. Never the less it is still big, no denying that.

        2. The BIGGER question is what effect will it have on weather and from that through to Ags which are the ‘staple diet’ of the world?

  44. Appending this to end of convo thread as it may be missed in earlier reply:

    The key about all these demographic discussions is the velocity of money and which currency is a global reserve maintaining the trade deficit for holding governments.

    Equities of corporations will lose faith too as they are viewed by masses as too influential and in control of governments. Governments are not run by people anymore.

    In the wake of such a crisis expect mass change in governments whereby people become more united and less tolerant of status quo.

    Bankruptcies will occur initially. Overtime as companies go bankrupt, they do not even bother to collect from debtors. At the cost of changes in government structure or complete dissolution.

    Equities and bonds have no chance. I see LOCAL currencies emerging along with local banks; potentially bartering, but with lack of corporate trust; utility (electric, natural gas, water) maintenance under marshal law will be too difficult to maintain.

    How did Russian soldiers react when they did not get paid?

    Demographics will increase at the gain of modern medicine having vaccinated current populous for long enough that pregnancies will escalate due to lack of birth control. Death rates will soar, but still under pace the emerging birth rate.

    We will essentially go local, revert to the 1800’s. Local laws will evolve and trading across new borders will resume ultimately leading to new trade partners and unions. While disgust in resemblance might exist, the need for survival will outwit politics of any new era.

    The alternative: NONE of this happens. The cronies see the existential threat and classify it FOUO. They develop defense plans for massive population loss under various scenarios. Economic impacts are incorporated. Central banks model the same.

    I think INTENTIONAL disinflation will be new norm and wages from earned income will be cut by explaining the value of the currency is stronger. Passive income passively as markets adjust. It will occur through job changes and bond markets bailouts, i.e. mortgage loans. Tax rates will drop to accommodate currencies becoming stronger.

    Any equity indices based on currency values of what equities are in their respective lists would decrease gradually to levels not seen since earlier time periods due to disinflation, not recession.

    To repeat: The key about all these demographic discussions is the velocity of money and which currency is a global reserve maintaining the trade deficit for holding governments.

    The post- Berlin Wall globalization model has to fail first for lack of faith in currencies to come to fruition.

    1. wxguru, it would have helped if you had quoted, at least in part, what you were replying to.

      In any case an interesting read. Do you have a preference or leaning towards a particular scenario?

  45. ‘I think INTENTIONAL disinflation will be new norm and wages from earned income will be cut by explaining the value of the currency is stronger. Passive income passively as markets adjust. It will occur through job changes and bond markets bailouts, i.e. mortgage loans. Tax rates will drop to accommodate currencies becoming stronger.’

    I’d really love to see wxguru explain the statements in the above paragraph. Will he give it a go?

    ‘Passive income passively as markets adjust’

    Eh?

    1. For all you Gold Bugs; check out the dates in that article of the last two monster El Ninos and compare to what Gold did in those years. It ought to be an eye opener for Gold Bugs with blinders on.

      1. I dont believe in about three quarters of the hype many gold bugs believe in and have nocturnal emissions over, but unfortunately i get associated with them bc i am bullish. However, using two data points to discredit a mkt position is a flagrant deficiency.

        1. especially over some contrived media event like el ninos

          when are people gonna learn that if its on tellyvision it ain’t true

          it’s called programming for a reason

    2. There are important key indicators in this article to watch. The animation shows the weakening sea temps near South America and the temperature comparison from ’97 and ’15 are good too. Again notice the weaker S. America temps. Also note the temps near Alaska and Austrailia are different too. Massive El Ninos are more like the ’97 temps. I expect the progresive weakening by the models to be correct. This massive El Nino will not be as strong as originally predicted and over-hyped by media. This has no affect on the impacts of the expected weather from an El Nino. That will still occur. This is a big El Nino no matter how you slice it.

    3. If you are looking for some good analog years concerning weather on this El Nino, consider ’57-’58 and ’65-’66. I would be curious if you had any way of using these years as a comparison to your current strategy.

  46. seen some interesting EW concepts talked about. here’s my count hasn’t changed. thus far we have only had 3 waves down. if the triangle breaks up and not down, then the green count I show on the 30 min chart below has a nice chance of playing out. Should the SPX indeed break up then a couple of targets to watch are 2040 for the gap fill, or perhaps much higher if it meets its measured mark around 2100.

    should the red count prevail and the SPX put in another leg down, then we can throw away the large primary wave [4] triangle and look for a zig zag. So, the way I look at the charts no new low, then the low is likely in place, another low immediate term, would lead to more downside after a nice bounce in intermediate wave (B).

    1. Thx very much Alphahorn. Very good to see an alternative EW perspective so well laid out.

      Since I’m in the camp of your square bracket 3 being a C top it will be interesting to see what the markets actually deliver.

      1. square bracket 3 being a C top? Then what’s the count at one larger degree? In other words, what wave is the C top part of?

  47. PALS tops out on Tuesday at close, then is negative until at least Monday of following week. Whazzup had an interesting post above where he suggested a “hard up” in days to come. This could be consistent with the idea that the market may attempt to do what is unexpected to make trading more difficult. On “McVerry” and else where everyone is bearish, a rise of 3 to 5 percent from here might set a bull trap before the bear is revealed say, sometime between end of next week to October 5th. After mid October bear is not allowed to be shown as it is holiday pre season shopping etc.. So Whazzup may be correct and if so, good time to move cash to short side for a few weeks.

    1. Nice Chart, Samuel. Think b to c may take price higher a few more days based on New Moon plus four trading days being bullish(Sunday to Thursday).

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