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Are we there yet?

I ask that question rhetorically because I have asked it several times this year – and the answer was always ‘no’.  A few weeks ago, I noted a rush of MSM articles that proclaimed the end was nigh – and I took that as a clear signal the end certainly was not nigh.  And today on Bloomberg, I note these bearish articles:

“Goldman warns highest valuations since 1900 mean pain is coming”

“Credit Suisse: Clock is ticking for equities’ Last Hurrah”

“Deutsche Bank to Morgan Stanley shun European cyclical stocks”

I’m sure you get the drift, and with these major banks battening down the hatches, would this be the one time they are right?  That would certainly be a first in terms of timing.

But before we dismiss these perpetual Wrong-Way Corrigans (why not google it?), I have a little indication that they may actually have something.  Here is the 4-hr Dow chart

I have two major lines of resistance meeting about here (currently 23,910).  Whenever two significant lines of resistance meet, the resistance is doubly strong.  Note the yellow highlighted accurate touch points that lend credibility to the lines.

The market will either turn here or will power right through the resistance – and give Goldman Sachs et al a perfect 100% record, which is the most likely outcome, if you play the percentages.  By the time you read this, the market will have moved on. In any case, here is my EW analysis on the long term chart

The exponential rise in recent weeks is clear evidence we have a third wave in progress – in fact we have a third of a third (small red 3 of purple wave 3) and these are the most powerful in the book.  They take no prisoners.  This one is certainly living up to this billing – and are catching the ‘fundamental’ guys out who focus on valuations to proclaim the end is nigh (as they have for months now).

With third of a third waves, these usually terminate way past the pint when most have given up trying to figure it out based on the fundamentals.  They start saying it’s a ‘new paradigm’ – just as they did in the dotcom era of the 1990s when P/E valuations were infinite (no earnings)!

Standing in front of a roaring third of a third bull market is sure financial suicide and when the market turns, I will be on the lookout for a clear sign, such as a small scale five waves down.

It is always a marvel to me when the conventional analyst throws out his/her basic valuation models to explain a roaring bull market, but then returns to them in more ‘normal’ times.  Did they not learn anything at all?  I guess not.  That is human weakness at its most vivid. Not one market participant in 1,000 really understands how markets work – and I am so pleased that is the case since we can take money off them as they zig while we zag.

Imagine if everyone used Elliott wave theory (and were experts at using it) and believed it is the waves on the charts that are created by changes in sentiment – the charts would look a whole lot different and I would sadly be out of a job.

But that is not likely to happen in my lifetime since human nature changes glacially slowly – perhaps over thousands of years.

 

We are trading Ether for the VIP Traders Club

In my day, ether was either the medium through which radio waves are propagated (how appropriate for today’s crypto!), or a liquid that put dental patients to sleep (see chemical formula above)!  In fact, I recall I used it as an ingredient in my home-cooked rocket fuel for my 1cc model airplane engine.  Happy days!

But today, it is a means of making money from its blockchain.  With Bitcoin surging well past the $10k mark today, for most traders I believe Ethereum offers as good a ride based on margin employed.

It appears we have another third of a third wave setup.  And today it hit its own milestone at the $500 level on the same day as Bitcoin’s.

I have really no idea how high it could go, but as a slight warning, I see this week plenty of MSM articles on the cryptos and coverage of the investors who are trading them.  Hmm.

 

Is the dollar is about to rally hard?

I covered the dollar a few posts ago when the dollar was poised to begin a strong rally phase.  This is the daily chart updated

The standout pattern is the declining wedge/ending diagonal) going into the low on a momentum divergence and the clear break up out of it last month.  Since then, the pattern is a five up and now a three down to the recent low at the Fibonacci 62% support.  And a five up/three down off a major low is a sign the trend has changed and I expect a stronger dollar and higher T-Bond yields.

The euro, which makes up the lion’s share of the index, reached an important target this week

We weer trading long and as the market hit the Fibonacci 78%, decided to take at least some profits off the table.  This decision was based on the form of the advance which suggests an A-B-C counter-trend move.  If this is correct, the euro should start to decline from near current levels.  But a push above the C wave high would be problematic for this view.

 

How will Brexit affect the markets?

I am asked this a lot and have a simple response: the waves will continue to develop according to the changes in sentiment.  I know – not very helpful for the average person who wants a black/white statement.  But yesterday when the news emerged of the UK’s willingness to fork over £50 billion in Brexit Blackmail dosh in order to hope for a free trade deal, sterling surged.

But it was only adding to the uptrend that existed before the announcement.  We were long into it and happily accepted the added gains.

The FTSE had already turned at the Fibonacci 50% resistance and moved even lower as sterling climbed.

These so-called earth shattering news items rarely shake trends out of their destiny to complete.

 

  • Susie Sue

    John, did you not say several weeks ago that you were one of the only ones who managed to call the high/top on the Dow? That was some 300 points ago.

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