Was Hyperloop One just hype after all?
Are the wheels coming off the mad rush into the brave new world of high tech (with driverless vehicles, flying cars, drone deliveries of your groceries through your open window into your kitchen(!), 100% renewable energy globally, etc)?
I see today that Branson’s Hyperloop One thrust into the future has come adrift with this Telegraph piece that relates the layoffs suffered and its future in grave doubt. Appears even his cheesy grin is unable to save the project. Remember, these pie-in-the-sky projects are only dreamed up in optimistic bullish times and when the market turns down as public mood turns more conservative as it is, many projects flounder under the increasingly harsh gaze of reality (rising interest rates and the drying up of extra funding to keep it aloft).
It is the very same phenomenon as the well-known Skyscraper Effect where the world’s tallest are conceived in times of optimism and come a cropper when the mood turns.
So is Mr Branson giving us a long term bear signal? Will Mr Musk of Tesla fame, who has a similar project in development, provide a second? Will Hyperloop One turn out to be more hype that Hyperloop?
Are we there yet?
Big strong Dow rallies this week and many are saying the swoon was just a blip to be bought (as per usual) and it’s up, up and away! While that may occur, the wave pattern tells me otherwise. But old habits die hard as the pundits invoke the time-tested Santa Rally idea and proclaim stocks will keep moving up now towards the New Year. Seeking Alpha has many such bullish articles.
But all of the major US indexes have very clear five downs and a still-developing three up. That is the classic EWT definition of a new bear trend. What may be confusing is the strength of the recent rally off the October lows. As we know, when the market is rising hard, traders turn much more bullish and find ‘reasons’ (aka rationalisations) for the surge.
As it happened, the US mid-terms on Tuesday were a convenient excuse. But how could the takeover of the House by the Democrats and the retention of the Senate by the Republicans affect sentiment towards shares? I am at a loss, unless gridlock in Congress is being considered good for shares. But the story sounds good and will sell a lot of newspapers (figuratively speaking)
But if I am correct in that we are in a very strong second wave up that tops out below the Dow ATH (at 26,950 on 3 October) that will lead to a massive third wave down, this rally is doing the normal job of trapping many newbie bulls right near the top of the market – and emboldening the old bulls. And these new bulls will provide the extra selling power in the upcoming decline as they will become forced sellers.
The only question I have is this: when and where will wave 2 turn? Here is the S&P (considered the most representative of US equity indexes)
As of Thursday, the wave c of 2 had rallied to a textbook zone where turns occur. Not only is at the Fibonacci 62% retrace but also at the wave 4 high of the previous five down. Both of these are typical turning points, which makes it doubly significant.
The Dow has risen a tad higher than the S&P and is close to the Fibonacci 76% retrace.
FLASH The Dow hit the Fibonacci 76% at the 26,280 level yesterday bang on the nose for a massively precise hit. What a remarkable demonstration in real time of the power and precision of Sr Fibonacci’s wonderful sequence of numbers (all derived from his study of the rabbits’ natural habits, remember!).
Crude oil takes a hammering
In recent trading, I was happy to forecast the big rally off the summer lows around $65 to my long-standing target zone around $80. I actually pinpointed the high when it hit a major trendline at $77 and then promptly fell. That is when i forecast a decline phase -which is now coming to pass.
Here is the long term chart
I recognised the larger pattern was a three up (corrective) earlier this year and when the C wave topped, I said we would see a large bear trend. So that was what I was waiting for in September. And this decline off the $77 high on 3 October is the first part of a larger bear trend.
And this is the 4-hr chart of the decline off the $77 top
I have a superb tramline pair working with the decline in five waves – and all I am waiting for is the final print of wave 5 that should either be here or will arrive very soon- perhaps on a spike low.
I am planning on buying this market soon and looking to take at least $6 – $8 from it.
Sterling rallies against consensus
Yes, sentiment has been running negative for some time but the euro has suffered even more with the EUR/GBP cross losing considerable ground (until recently). Here is last week’s COT
Hedgies have been running well over 2:1 short and even added to their pile that week to 30 October. But that was just the day the low was put in – just before a huge rally started!
And what a superb example of the observation that hedge funds, who are primarily trend followers, always are pointing the wrong way at major market turns. They are unable to envision a market turning but just keep moving in their direction. Apparently, they have never glanced at d a price chart such as that above!
Luckily, I am not a hedge fund and can make an independent analysis, which I did and concluded the market was set for a decent rally.
And that was correct – we have a very clear five up to a wave 5 high on a large momentum divergence. That was when I advised VIP Traders Club members to lighten up and take some profits. I saw the market coming back probably to the 1.2950 – 13000 area (Update – as I write, it is trading at the upper edge of that range).