Last fortnight was one of major significance for stock indexes. Monday 20 September saw a major Dow low from the huge decline of 3,000 points off the August ATH, followed by a huge rally of 1500 points (Fib 50%) to last Monday’s high, followed by a savage decline back to the 20 September low reached just yesterday morning, followed by another sharp rally into the close of 1,000 points (Fib 62%). That’s what I call volatility!
I confess that action was very difficult to keep up with, but in the process it has traced out very telling waves that tell a very clear story. Just sometimes, I see an current chart that screams out where the market is directly heading with a high degree of probability. And that moment is now. Monday morning should be very instructive.
Of course, the political background in the US dominated headlines with visions of another government shut-down (predictably averted) and the ‘will it or won’t it’ nail-biter of Biden’s so-called infrastructure bill involving trillions (yes, that is a ‘t’). As another politician once almost said; “A trillion here and a trillion there and pretty soon we are talking real money.” I guess figures in the billions just won’t move any needle in today’s easy money world.
But of more significance is the action in the Treasury market where bond yields are rising and responding to the action in commodities which is grabbing headlines. And inflation expectations are suddenly being re-awakened after many years of dormancy. The recent surge in NatGas prices (see last week’s blog) has shaken up the investment world from its complacency.
And food prices (not included in core CPI indexes as is energy, believe it or not!) are on the march with shortages emerging amid crop failures. And in the UK, fuel shortages are also apparent leading to higher pressure on prices.
Consumer sentiment is falling rapidly (see last week’s blog) and the UK’s lines at petrol stations has not improved the social mood one bit. And with social mood on the slide, stocks can only suffer with valuations at nose-bleed levels.
And last week’s chart of the mammoth move into global equities is another amber light. Perversely, this not a bullish sign – in fact, it is extremely bearish as it demonstrates panic buying that usually heralds a major top and a swift reversal.
Here it is again for your delectation and delight
So how do I see the Dow (and all other indexes) this weekend? I see a very clear picture that points only one way next week – down
The ATH was made at 35,630 on 7 August and completed five waves up at all degrees of scale and a high prob end of the multi-decade bull market. Shortly after, I noted the Nasdaq had also reached a top and advised short positions. This index is leading the charge lower.
Here on the Dow, I have clear wave labels and the decline is a series of 1-2s. This is setting up to a resolution of a very long and strong wave 3 of 3 of 3 – the most dramatic wave in the book.
The bottom line: Indexes are poised to embark on a collapse of several thousand points from here (latest 34,360) into next week and beyond. There is a possibility the Dow could move a little higher first but the eventual outcome will be a hard decline. That is my most confident forecast (better that 80%).
The Tropicals are steaming!
The tropical commodities Sugar, Cocoa and Coffee are certainly catching fire. We have been trading them for some months as I saw back then the potential for massive bull markets that could likely produce returns that could mirror those in stock indexes. That was a bold claim back then and so far, I have no reason to amend my view. Of course, most investors/traders ignore these markets – until they finally note the huge gains reaping MSM headlines and buy in right at a top. That is usually where we are taking profits along with the pros.
Since March 2020 Coffee and Sugar have doubled in price and Cocoa has gained 50%. The first two just about matches the 120% gain in the S&P so my rough and ready forecast has panned out. But with stocks poised to decline and the tropicals go the other way, these commodities may well offer greater returns than shares in the weeks ahead. Spread betting traders please note!
Brazil – the biggest coffee producer – has been experiencing some periods of record low temperatures in the growing regions that has hit estimates of output this season with major and widespread frost damage. Incidentally, you are not likely to see this fact mentioned in the MSM as it does not fit the ‘climate emergency’ warming agenda they have all signed up to – at least not in the way intended. But Brazilian coffee farmers may wish to agree they do indeed have a climate emergency as they look over their damaged crops. Some estimates are that drought and frost have cut 20% off previous crop estimates.
Here is the updated charts of Coffee Cocoa and Sugar
Coffee has just completed major wave 4 down and is now starting final wave 5 up that could reach historic levels
Cocoa is the laggard but is likely to try to catch up once it can push well above the upper trendline of the wedge.
And Sugar looks set to test the ‘b’ wave high around 25 soon.
To take part in our campaigns in the tropical commodities, take a two-week Free Trial to my VIP TRADERS CLUB. I am also starting a major campaign in the stock indexes and the precious metals. But you need expert guidance in these treacherous markets that can move very swiftly. We take low risk/high prob trades and I send members a daily Trade Alert in the early mornings as well as the occasional Flash Alert when conditions warrant. Don’t wildly guess when or where to enter a trade – use my years of experience in applying my Tramline methods to the markets!
And in shares, many will suffer huge declines in the coming weeks and months. Take a three-week Free Trial to my PRO SHARES service for my expert guidance in how to navigate the choppy waters that lie ahead.
Is Apple about to fall (under financial gravity)?
Apple has been the darling of the US tech sector for some years, but in recent weeks, I have turned bearish on the shares. I have written several COTW articles on it advising investors to start taking profits as I foresaw huge declines up ahead. The shares reached its $157 ATH back on 7 September and since then, it has declined in a lovely five down to the 20 September low at $142 that confirmed the change of trend to down.
And now I can put high prob labels that likely herald a major decline in third waves of several degrees of trend
And so far my forecast is right on track. In the background is the supply problems in their China factories that is disrupting production. Added to that is the lukewarm reception to their latest iterations of the iphone and other gadgets. Shares have been priced for perfection on earnings and it is likely the next quarterly report on 28 October may well show perfection has not been operating this summer. I remain bearish against any rally above the $147 area.