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 creeped a little closer to resistance at 145^07 today. Bears can begin to dip a toe in but really need under 143^28 to get going.
I'm moving wave [IV] a swing to the right on this bond chart which means this move up is [V]. Right now price is testing resistance at 144^30. Score this as an aggressive place to short though I can't rule out a test of higher targets before turning lower.
The dominant short daily cycle on the bond chart crests in a week. Prices may have completed the pattern on a lower time frame but a good idea to give it a little time to see if it extends. If prices fall under 143^28 then it likely means the advance from 'b' is complete.
The minimum requirements for five waves up from the start of the month in bonds was met yesterday. Shorting is aggressive while above 143^27 as [V] could extend.
Bonds may have put in the 'c of (ii)' high today. You can count five small waves from the 'b' wave low up to the high today. It was just short from a retrace value at 145^07 but intraday targets have been hit. First confirmation will be prices falling under 143^28.
I've added wave [V] to [I] relationships to the following bond chart. Might pay particular attention to 144^30 and 145^19 over the next few days.
Bonds dropped fractionally under support at 144^03 but price did recover it by the end of the day. This development is not a problem at this point as there is not overlap in the rise. Still like a little higher before the possible end of wave 'c of (ii)'.
Provided bonds hold above 143^27, expect another thrust higher in wave '[V] of c of (ii)'. It is also possible that the wave [III] high has not been set yet which has a projected target at 145^04.
Bonds are likely to advance a little more toward 145^07 or slightly higher to test the channel before the next major decision point which is either to set the wave (ii) in August or to extend into September.
As noted in a previous post, I have promoted the old alternate to main, that prices are working up from a 'b' wave low in '[III] of c of (ii)'. We may not have seen the wave [III] high set yet....
The strength of the leg up today has me second guessing the idea of wave ii and thus promoted the alternate count to main, that this move is 'c of (ii)' instead of a mere wave 'ii'. There is a distinct possibility bonds rally into the next FOMC meeting in September. The decision between which count is in force will be made at either 145^07 or 145^27 to 145^29. Imagine that the resist zones are tested next week.
Bonds elected to end the five wave impulse down from July 6th at the August 1st low and now rising in [C] of ii. While at a target now, best to allow 144^03 or 145^17 to be tested.
Bonds bounced to retest 143^17 and into the daily moving averages. A test of higher resist at 144^03 but I don't think one should count on it.
As long as bonds are under 143^03, favor lower so as to get a new low under August 1st.
On a micro scale, the drop from the 143^17 resistance in bonds looks like an impulse but couldn't make it through 142^14 support. Allow for a bounce or small consolidation before attempting to push lower to ideally 141^03. Prefer it not take too long as the fast daily cycle will start to be a problem for lower unless we get an inversion.
Bonds keep dripping lower which is consistent with the idea that prices are moving down from [IV] and should therefore make a new low under that of August first to complete the first impulse down from July 6th. Looking for targets of 141^13 to 140^05 over the next couple weeks.
Nice to have bonds continuing their drop from yesterday. Need under 142^14 to enable a drop to a new swing low under that of August 1st. I wouldn't mind an extended fifth wave into August 24 but I may be a little optimistic with that.
The 240 minute bonds chart looks a little better for bears than the daily chart. Need under old resist at 142^29 to really get started.
onds bounced to test resist and the daily 20 EMA. As much as I'd like them to push down immediately after that test, the next cycle inflection is a week away therefore may have to put up with another test of this area or even 144^03 before pressing down again.
Allow for bonds to bounce another day or two and test 143^18 before taking a stab at lower to complete the first impulse lower from the July 6th high.
Lean to bonds bouncing in a small wave iv that should turn down again from either 143^17 or at worst 144^03 before resuming lower to target 141^03.
The minor bounce or consolidation continues in bonds. Best if 142^29 holds but higher to 143^18 is possible.
This phase of the bond move lower is somewhat overextended but I still would like to see 141^03 tested before a more significant consolidation or bounce.
I'm going with the idea that bonds are still in their first impulse down from the July high which implies a wave [IV] bounce is due. Alternate is the low made yesterday was the end of the impulse and now up in wave ii.
Tricky in bonds at the moment. The easy part of the initial move lower from the July high is over. It could extend a little lower and I certainly wouldn't mind a test of 141^03 level but I can't guarantee it will make it.
It is not clear if the small wave [IV] in bonds is complete or for that matter if wave [III] itself is done. I favor lower on any small retrace for the time being. Next supports are at 141^20, an extended wave [III] target, and 141^13, the first of the wave [V] targets.
Bonds tested resist at 143^19 today and have been falling away from it. Prices should now be free to push lower towards 141^24 or 141^03. The next cycle inflection is a week from today so perhaps the bond market does not like what the FOMC has to say tomorrow afternoon and they trend lower for a few days.
Bonds bounced from the 142^12 support into the first resist zone at 143^04. Not certain if that leads to lower to test 141^20 before bouncing again or if prices run sideways for another day or two before breaking lower.
Not against bonds dipping lower still to test 141^24 but not required. Resist for any bounce is at 143^19 and the daily moving averages slightly over that.
Bonds have reached the short term target of 142^12 and thus need to be open to a minor bounce in wave [IV]. I'm not opposed to wave [III] extending to 141^20 before the bounce.
Weekly updates & other posts
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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
A subscription package for the relaxed trader
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.
It appears to be breaking beneath support
Bullish scenario is kicking in
This week will be heavy on economic data with the standout items being the FOMC statement Wednesday afternoon and the NFP Friday morning. Because of this, I am thinking the easiest gains on the week will be early, Monday and Tuesday. Wednesday afternoon and/or Thursday might turn into a type of consolidation waiting for the Friday news.
I want to start with the Dollar Index this week as I think it is on the verge of poking over 90.51 causing a decent amount of short covering to kick in and the monthly and weekly dominant cycles should help it along. Worth noting that the ECB press conference is Thursday morning so no doubt could function as a catalyst to get this started. Monthly and weekly charts below.
I did a little work on the big picture in the QQQ's, the ETF for the Nasdaq 100 index, today so that is a good starting off point for this review of the big picture for this week.
US equity indices gave back gains made in the first part of last week at the end on increased tariff rhetoric but held above important areas. I know that it may be frustrating that I am not on the sky is falling bandwagon but I still think there is a good chance that the wave (iv) correction ended and we start a rise from this area for a couple months. Don't get me wrong, I think the market is headed for some very turbulent times but I don't think we have seen the high yet. We will see if they can hold steady at the start of the week and not be shocked by the FOMC minutes Wednesday afternoon. Let's start off with a bonus chart of sorts, a weekly chart of the ETF for the Russell 2000, IWM. It is resting on the top of the wave (iv) target area now and has the adaptive CCI positioned at a zero line test.
Two ways a decline might play out
4th wave correction nearly complete
The S&P 500 held important support last week from both a typical 'c' wave target and a trend line that has proven to be important over the last couple years. If that area holds till the NFP on Friday, the odds that wave 'c of (iv)' has been set go way up. One thing of interest on the weekly chart below is that the adaptive CCI is nearing zero after an extended time above it, which is typical fourth wave behavior.
The 'c of (iv)' in the US equity indexes is well underway and can complete in the holiday shortened week.
The main event for news this week is the FOMC rate decision on Wednesday at 14:00 followed by the press conference at 14:30. It is typical for the equity markets to rise into the FOMC meetings thus that will be the main game plan going into middle of the week. It is possible that the 'b of (iv)' has been set in SPX last week but still think we see a modest high over that of last week.
I was working on the ETF that tracks crude oil, (USO), and have decided to promote what I had as an alternate count in crude to the primary, that there is one more high needed to complete a five wave sequence up from the low from last year.
The main hypothesis is that the DX rise up from 2008 is not yet complete and can accommodate at least one more high over that of the 2017 high. Why do I push back on the idea of a DX high being in and the first impulse down complete or nearly so? Two reasons. One, the move up from the May 2016 low does not look like a well formed impulse but more like a three which is more consistent with a (b) wave high. Two, both monthly and weekly cycles suggest a pretty significant low and a into 2019-2020. I'll even add a third, that the correction from 2012 to 2014 lasted 22 months, and the correction from the 2015 high marked [iii], to the low last months was 35 months, about as close as you can get to 1.618 expansion in time as you can get thus having price and time pointing to a significant low.
The British Pound ETF (FXB) is assumed to be forming a wave [iv] like most of the major USD crosses. The move up from the early 2017 low has stalled against a possible wave [iv] target but has not quite pushed low enough to break the uptrend.