Morning & evening updates
We chart the S&P 500, crude oil, the Euro, Dollar Index, treasury bonds, and gold, typically with a morning and evening post for every trading day.
Bonds drifted lower a little lower toward support at 137^25 today. Once over 138^17 again, the short term goal should be to rise to 139^08 or 139^25 to put the finishing touches on wave ii.
Bonds have moved a little higher this morning after testing initial support at 138^03 but think it best not to be too eager as a test of 137^24 in a deeper [B] is possible. Once [B] is set, the main target area for [C] of ii is 139^17 to 139^26.
It would be nice to have bonds higher near the daily moving averages before the end of wave ii. However, the dominate short daily cycle is nearing a high and also have the Lomb Periodogram forecasting a cycle high. Perhaps best to have a short bias while under 138^17.
Bonds would look better with more of a bounce to the 139^26 area.
Bonds may still drift a little more sideways before climbing to 139^08 to 139^25 to reach the first good target zone for wave ii.
Expect bonds to continue rising so as to test 139^26 next week.
Bonds can use a another couple days consolidating before running up to test 139^08 or 139^25 for the first serious wave ii candidate.
Bonds behaving well so far as they came in contact with next resist at 138^18. A bit of sideways would be fine before breaking over resist toward next target of 139^26.
Bonds had a small retrace intraday and have since pushed up to test next resist at 138^17. I'm not sure how firm that resist will be. Often there is a small stutter before pushing to the next resist at 139^25 which is a .382 retrace. In this case, I wouldn't be too surprised if prices just punched past it.
Bonds are retracing a bit from the test of 137^24. Will be watching for a higher low to develop today or tomorrow morning and an advance to test 138^18. 137^10 is minor support but should be open to a deeper retrace to test 137^01 to 136^27.
Bonds did well today climbing to first resist at 137^25. Any tiny retrace is likely to be bought on the way to 138^17. If the fast cycle influence is felt, expect net higher for about a week.
I like bonds higher now to get the early stages of a wave ii bounce started. First point to aim for is 137^24.
Bonds certainly are the gift that keeps giving for bears but still think they are close to ending the first impulse down from the August high. The Wave 59 9-5 study is on an exhaustion signal now. First step up is to recover 137^06.
Bonds have tested the top of the target range for the end of wave '(V) of [V] of i'. Since it s Columbus Day, the bond floor is closed, perhaps tomorrow is a better time to begin to fish for a bounce trade.
Bonds have been trending steadily lower for a little over a month. I have no qualms with bond prices working lower for the next several months but do think a bounce to retest the point of acceleration around 139^31.
Bonds are trying to push down from 138^03 but I'm not sure that is the end of (IV) or just the middle part of wave (IV). I think it prudent to allow for a retest of resist before looking for wave (V) down.
Bonds bounced off of 137^06 support and should now be in a small fourth wave. Allow another day or two for the fourth to form against 138^18 before the last push lower for this impulse.
Bonds had quite the down day yesterday. It looks like they could use a wave (IV) consolidation before moving lower into next week. Resistance at 138^03 and 138^13.
Bonds broke under the May low today and is extending lower. Expecting bonds to remain weak into next week at the next cycle inflection. Short term support for a small bounce at 137^30 and 137^06.
The 140^19 resistance has held in bonds with prices lower this morning. Next short term support at 139^17 though I prefer lower at 193^03 or 138^18. As to form, it still isn't clear if we are still in wave [IV] or if wave [V] has already started.
At the daily candle level, it is not clear whether bonds are still in a wave [IV] or if it is in wave (II) bounce in an ending diagonal wave [V] of ii. From a practical matter the difference is relatively small as both call for a new swing low but if still in a fourth, the moving averages may be tested first before lower.
Bonds bounced from just above the prior swing low to test resistance at 140^09 and 140^19. As long as 140^19 holds, prefer lower to a new swing low.
Getting close to that new swing low in bonds to complete an impulse down from the August high. Short term targets for '[V] of i' are at 139^14, 139^00, and 138^13.
The first day of a new month and trade news to spur stocks up at least today if not into middle of the week. Then we see if they like the NFP number at the end of the week. Anyway, on to the charts.
The wave [IV] it bonds looks to be nearly ripe and ready to start a thrust lower in [V] of i next week.
The wave [IV] in bonds is a little more developed now but can still tap 141^15.
Bonds followed the path from the intraday morning post pretty well. Is this good enough for wave [IV] and thus prices ready to push to a new low? Maybe, certainly better than this morning. It is a positive sign for bears the a doji candle formed but safer to short under 140^25 as there is still a chance to test 141^16.
Bonds have bounced into a more typical range for a wave [IV] but the form looks a little too simplistic at this point. Favor at least another down up sequence before wave [IV] is complete.
It was late getting going but bonds finally pushed higher to test first resistance for a wave [IV]. Pretty aggressive to short right away with the expectation of a new swing low, better to see if they either make a run for 141^16 or traverse sideways for a few days.
Bonds have bounced to a minor resistance value at 140^05 though that seems a little shallow for wave [IV]. Perhaps a small move lower on the FOMC statement but not a new low and at which point they take price a little higher or sideways.
Weekly updates & other posts
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The last high was probably an overshoot
Before looking at bonds, here is a chart of the 30 year Treasury yield. Yield has broken above the long enduring channel. The next cycle inflection is March of next year which suggests this break has several more months to run.
Bonds extended lower last week have breaking under a series of prior lower. I'd like to see support form from a little lower and bounce retest the break before continuing lower.
The week will start of dominated by exuberance that the trade agreement with Canada and Mexico got ironed out. Plenty of economic data this week with the high point being the NFP on Friday. That means there is plenty of news that can be used to move the markets around. On to the charts.
Consider a "base hits" trading approach now
To summarize expectations over the next three to six months: Bonds accelerate lower into spring of next year, US equities in a topping phase starting now and lasting as late as early next year, Dollar Index stronger in the period, Euro weaker, and gold net lower but should have a correction sideways to higher in the period. Let us move into the weekly charts.
I'm going to do this post a little differently than I have been in the past. I have been requested to formulate my thoughts on the big picture and what may take place over several time periods, three, six, nine months and more into the future. I won't address that fully in this post, but later when I think more on it and prepare some charts but will mention ideas for where things could be in the three to six month window.
Stepping stone levels to watch during the decline
Bonds appear to be dropping from a completed wave (ii). We will have more confidence in that hypothesis once under 142^03.
Hope you all are enjoying the last long weekend of the summer. This next week will see people getting settled in and back to work.
Here are some potential entry areas
The main count in bonds is the 1-2,1-2 type count where prices break lower from near here in wave (iii). Next week is the half way point from the cycle low to the next projected high, a good point to look to see if prices are going to use the cycle inflections in a low to low fashion.
But manage your short positions now
I relatively recently updated the copper futures charts as requested by a subscriber. At that time, my view was that copper was moving down in the last leg of wave (a) down from the high from late last year. I now think that (a) may be complete and ready to embark on a few months of choppy retrace up. Below you will find monthly and weekly copper futures charts and also monthly and weekly charts of a copper mining ETF (COPX).
Bonds may make a deeper correction up over that of current prices but not required as on a lower time frame there is resist being tested now. That resist has caused a doji to form on the weekly bar last week.
The strength of the move up in bonds last week argues that the alternate count from last week, where a 'b' wave low was being set, is in fact playing out. That means there should be more to the rally for the next couple weeks to test 146^18 or 147^25.
There's a line the trade should not cross
As I mentioned last week, it does bother me that shorting bonds is a popular trade but that is normal for a third wave. If bonds fail to drop under the May low in the next couple months, than the alternate count is in force and can result in a bounce into the end of the year.
By request, refreshing the copper analysis. Copper has been falling in line with the forecast from late last year. I think this is probably the first move down in wave [b] or [ii].
The upward form up from 2016 and 2009 in NQ should nearly be complete. The question now is if the impulse up from the consolidation early this year is complete. I'd say the minimum requirements are now met at the last high in late July. Following is the weekly chart. I will add two different daily charts later that address two possibilities, a simple impulse up and an ending diagonal. When I add the daily charts, I'll add a note to the top of the post to notify you.
I have reworked my EW count in the Yen to be that of a triangle wave [iv] that needs one more wave up in (e) to complete. The alternate is that wave [iv] was set early this year and prices are set to bounce in wave (ii) of an ending diagonal [v].
This week is busy on the scheduled economic news front with emphasis on the FOMC on Wednesday afternoon and the NFP Friday morning.
TLT has been trading in a tight range for the last several months, making short stabs at breaking lower but finding support at tests of prior swing lows. I lean to support failing over the next several months and pushing for a rough support area of 112.00 to 110.
The Russell 2000 ETF (IWM) is very late in the advance from the 2016 and likely the 2009 low as well. It is aggressive to sell to short but certainly makes sense to lock in profits especially if you went long or added in the consolidation earlier this year.
Dollar chart says manage your positions
If bonds are down in a third wave lower, bond prices should be heavy into the end of the year and take a shot at a new low for the year. If the alternate is in force, prices will stabilize above the low of the year and bounce into wave (ii) resistance again late in the year. Put another way, the question at hand is if the dominant cycle inverts and results in lower prices at the end of the year or if the polarity stays intact and drags bond prices up after a short term, several weeks to a couple month, pullback. I lean toward the former over the latter. We will see what it looks like in late September or October.
But the larger rally is nearly complete
For the last couple weeks I have been looking for a reversal lower in bonds but I am begging to wonder if they hold or even rise a bit more into the next FOMC meeting which is August 1st. My preferred scenario is one where the dominant cycle inverts and leads to a move lower into the end of the year.
with a focus on entry areas
Weekly bonds tested the 146^27 resistance level last week while the weekly dominant cycle is signaling a possible inflection and the adaptive CCI is about to have a zero line test. All the above suggest that the move up from May is in danger of ending soon and resuming the trend lower. The alternate is that this bounce is only the first wave up in (ii) and will become more complex later in the year retesting resistance after moving down for a month or two.
Changing up the order I look at charts to an alphabetical order to optimize my workflow just a bit. Don't worry, we will get the S&P 500, it will just be at the end.
Here is a brief intraday update on the progress of the S&P 500 intraday since the Slack service that we use for the live chat is having connection problems this morning.
The grand theme that I have been operating under is that the S&P 500 and US equity indexes in general should have a rise into middle of June at a minimum and perhaps into the next cycle inflection at the end of August. If the S&P 500 had a completed five wave impulse to a test of or new high with this cyclic positioning, I would be claiming a high was being set. The wrinkle in the plan is that we don't have a test of the high nor a very satisfying formation. Up to this point I've been pounding the table for the prospects for higher but I'm going to pull in my horns a bit now. I still think it wise to allow for higher but prudent to manage any long positions you may have. After all, the Russell 2000 and Nasdaq 100 have made new highs over that of early this year and wouldn't be shocking to have intermarket divergences at the top.
The equity markets took the FOMC rate hike well which I consider a positive for eventually getting a test or marginal new high in the S&P500. That said, it is worthwhile noting that the Russell 2000 and Nasdaq 100 have already made new highs over that of January this year satisfying the macro picture for a new high before a more serious correction process to begin. It also would not be shocking to see intermarket divergence where some indices make new highs and others make lower highs right before a serious downturn. Net, I think there is room for the equity market to extend but it is late in the game.
There should be a trade soon
This week is full of events that could either push the equity markets higher or pull the rug out from under them, the Singapore summit on Tuesday, FOMC on Wednesday, and ECB Thursday morning. My base hypothesis is the wheels will remain on even with a rate hike by the FOMC as long as it is accompanied by language that does not sound too hawkish for further hikes this year.
By request, here is a look at the ETF that covers Brazilian equity. Looking at the weekly chart below, you will see that I am calling the move from the 2008 high to the early 2016 low a completed three wave corrective structure. Up from the 2016 low, I think you can call that an impulse up for [i] or [a]. The current swing down this year should only be the first move down in a three wave formation for [ii] or [b]. Prices have bounced from a Gann related support at 31.37 though I favor a test of that low or a new low before the impulse is complete. The idea of a new low in (a) is alive as long a the bounce stays under Fib resists at 35.16 and 37.62.
I've been asked to look at Brazilian equities and will do so over the weekend, but thought some of you may find this interesting to tide you over till then. I had been working on this since it has been in the news. The Brazilian Real has been bouncing today off of support today. I don't know if the bounce will end up being a wave (ii) or (iv) as I can argue for either but certainly think it isn't something to short until up against 0.2775.
We show where to look for the trades
It should cut into the year-long advance
The S&P 500 dropped a bit lower at the beginning of last week to test the broken trend line and climbed up out of the hole the rest of the week. I see this as a positive development that should result in prices moving upward this week to new post May 4th highs. The main theme is higher into the middle of this month to the next FOMC meeting. Next goal should be to aim for 2794 SPX.
Primary view is that GBP futures are in the first stages of a move that should test or exceed the 2017 low. A monthly chart for perspective is below.
A downward break out of a decade-long triangle
The rest of this holiday is shortened week is filled with a fair amount of scheduled economic news with the NFP on Friday morning as the main event. The primary scenario in the S&P 500 is to see a break up out of the sideways formation of the last few weeks into the middle of next month.
IWM is rising as expected. Here are some target zones where the move might end.
Starting the weekly post with some musings on two ETFs that cover large cap European equities, the SPDR Euro Stoxx 50 ETF (FEZ), and the iShares MSCI EMU ETF (EZU). FEZ is the narrower of the two in that it is only the 50 of the biggest companies in Europe and EMU a more broad selection of large cap but there is obviously a lot of overlap between the two. They both paint a picture that says that valuations of large cap in Europe have not fully recovered from the 2007 financial crises and that they are late in their bounces, in fact, I think you can make a case for European large cap may be over. I'm open to the idea of these beginning to roll over and the US equity indices continue on to a new high later in the year.
Since Italy has been in the news lately by finally getting a coalition government formed, I thought it a good time to peek at the ETF covering the Italian equity market. As last time I updated this, it still looks like a decade long triangle either finished or nearly so.
I know you have had to endure my cautious optimism over the past three months where I have focused on finding lows versus pounding the table to sell on highs but it has borne fruit in Russell 2000 and its corresponding ETF IWM which has pushed to a new high over that of January this year. While I expect it to attempt to reach higher into at least next month if not into August, it is wise to begin to lock in some profit by some combination of raising stops or taking partial profits on this new high. Next harmonic of the wide base channel is at 166.00.
We have had a second solid week up in the US equity indices since the last test of critical support. The fast dominant cycle is in an up phase into middle of next month which supports the theme that between now and the next FOMC meeting will be a period which the equity indices have the lion share of the gain from the wave (iv) low. I'm a little skeptical they get a new high in by then but neither is it impossible. I still favor the equity indices holding up into the next cycle inflection in late August.
I think the main event that took place last week for the US equity indices was that the 50% extension of the channel in the New York Composite held. The low last week is a good candidate for a wave (iv) low and now looking for a rise for the next month at a minimum if not into the summer. I'd like to see a new high but I can live with a truncation or intermarket divergences. This week, the goal is to not give up much of the gain from last Friday and attack the April high.