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 started lower today but were bid back up on the equity weakness. The move from early October to the present looks like a consolidation wave though there is some ambiguity as to whether a fourth or a two. As I type prices are hugging the 139^22 resistance zone. First real confirmation of a turn lower will be falling beneath the daily moving averages which are around 138^19.
Nice to see bonds down this morning but need under 139^00 before getting too excited.
Here are the daily charts from last Friday.
Will post charts as I complete them today.
Promising look for a lower high in bonds but need under 138^22 and the daily moving averages, about 138^10, to really get a move lower started.
Primary view remains the same in bonds, that they are working on a lower high to the October 29th high. Need under 138^22 for first confirmation.
Bonds poked up to test resist at 139^07 and fell back to near 138^22 which is near where it opened the day to form a doji candle. That doji forming so near the ideal cycle high implies we could have the lower high set and ready to drop lower. Need under 137^30 as a first step.
Obviously running late this morning. Will be posting charts as I finish.
Bonds held near the 138^22 resist today and may poke over if the equity indices drop a little lower tomorrow but cycles suggest any poke higher should be brief.
As long as bonds remain above 138^01, expect a retest of 138^22 or higher before (C) of [II] is complete.
Expecting a lower high to form in bonds this week to the late October swing high. Bond prices tested resist today at 138^22 and is a place to shop for an aggressive short though I can't guarantee prices will not test 139^07, especially if equity prices fail to firm up tomorrow.
Bonds are extending upward in (C) of [II]. Look for 138^22 or 139^05 to be tested by Wednesday.
I can't see calling this the Day Ahead when the next day is the weekend, but essentially the PM edition of the Friday post.
Posting as I complete charts. Complete.
Cycles support the idea of a weeks worth of choppy bounce in bonds and the pattern is conducive to that idea. 137^30 still looks interesting especially if they drag the bounce out in time as the daily moving averages will likely intersect resistance late next week.
Bonds fell from 137^30 yesterday but it is premature to call that the end of wave [II]. Allow for 137^30 to be retested if not fractionally higher before turning lower again.
Bonds did bounce to test 137^30 today and sold off but seems a little too quick for a correction for a move down that lasted over a week thus think it best to allow resist to be retested.
Again posting as I finish the charts in a reverse order, starting with SPX. Post complete.
It looks like bonds now have a five count down from the October 29th high and thus due for a bounce. Watch 137^30 and 138^22 for resistance on the bounce.
Again, running with the post as I complete each chart paradigm. Good trading.
Not expecting much bounce in bonds before dropping to a new low under that of October 9th in bonds. The question then will be if that is wave '[V] of i' in the alternate count or only the beginning of a more persistent decline in iii.
Charts added as I finish them. Complete. Good trading.
Bonds slipped lower today and probably has a little more to go before a modest bounce perhaps into the next cycle inflection on November 12.
I'm going to post this as I work on it versus making you wait till complete. ETA for the complete post is 9:45.
Bonds founds support at 137^29 and are retesting the daily moving averages from below. Not unusual for prices to bounce up to retest a broken support. Now need prices to fall away from the retest.
Bonds could use a small bounce but expect lower as long as 138^06 or 136^15 hold as resistance.
Bonds fell under the daily averages today which is added evidence that the wave ii correction is complete. I've added a few possible Gann based supports at 137^29 and 137^08 which may be speed bumps that pause the drop long enough for a possible retest of the break though said bounce is not required.
Making good progress on the forecast for lower in bonds. Keep a bearish bias until 137^28 or 137^14 is tested. As I mentioned last night, the micro form for the impulse down from the high is...
The wave ii high idea in bonds is looking pretty good today. Next confirmation is a drop under 138^20.
Promising drop from wave ii resistance zone in bonds. Now want to see bond prices under steady pressure.
Weekly updates & other posts
(Public posts are included on this page too.)
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.
It is normal that the recent rise is slowing as previous highs are tested but do think we should at least see the channel tested on the monthly chart, around 3.27%, or the first fib extension up at 3.35% is tested before much of a retrace.
Since there are elections coming up this weekend in Italy, thought it would be a good time to update the big picture charts for this ETF. I have interest in it as it has formed a classic triangle from the 2009 low and may have completed at the start of this year. I also think it can turn into a canary in the mine, a harbinger for the future.
An overall bullish expectation with some targets to watch
As a continuation of the post yesterday taking a look at the big picture, here is much the same but using the ETF for the Russell 2000 (IWM). The idea expressed here is the same, that we are now in wave (iv) of [v] up from the 2009 low. Expect at least a few months of mostly sideways price action before a push to a new high.
Quite a week in the equity indices last week. Is the end upon us? As you know, my view is no, that we have been expecting a wave (iii) high in the advance up from early 2016 and now should be forming a several month corrective pattern for wave (iv) before an eventual top that should end both the advance from 2016 but also the rise form the 2009 low.
The primary hypothesis in Crude is that the 2017 low was a truncated low and that we are now seeing the first move up out of that low. The next move should be a corrective move lower that last at least until May if not continue into October.
Here's a quick reference for Bradley siderograph inflection dates and gaps up in the Dow and SPX
In the big picture, either a high is being set soon that results in a significant retrace lower or gold will make a run for mid 1400's if not 1500. Gold has mostly been range bound for the most part of last year and as such I don't see that as terribly bullish. USD has been weak the last year against most crosses and this is the best gold can do?
Bonds are staying on track with the primary forecast of a breakdown out of the ending diagonal that finished in 2016. Best if price pushes under the March 2017 low before much of a bounce.
Both scenarios suggest bullish opportunities in coming months
With the USD weakness that we have being seeing over the past few weeks, it is a good time to update the monthly and weekly charts on both the main and alternate EW counts on a popular ETF for USD, (UUP).
Bearish scenario still in the lead
Price is putting stress on a supportive trend line, forcing a squeeze between support and resistance.
Here’s a compilation of the open gaps in the S&P 500 and the Dow 30 since last September.
Since I just updated the DX monthly and weekly charts, thought I would plough ahead and update the ETF UUP as well. Same story, expect a wave (iv) has been set and looking for a new high over that of the early 2017 high in the next 18-24 months.
Just refreshing the long term charts on the Dollar Index (DX). The forecast is unchanged in that I think that that the Dollar has at least one last high left in it over the next two years.
Right now the bearish case looks best