We step out of our “ordinary” way of doing things around here to share a follow-up with our Peoplenomics.com subscribers because of how the ChartPack looked Wednesday. (Besides, this will give non-subscribers a sneak-peek at what goes on in the loge seats).
Wednesday decline in the market, followed by this morning’s rally (and then a likely down end to the week) leaves us in an extremely vulnerable position going into September.
Let’s discuss the “technical problem” in a nutshell beginning with…
A Review of the Literature:
One of the many ways of viewing the market is called Elliott Wave analysis. Invented by legendary inventor Ralph Elliott, there are two defining books to study. this first being Elliott’s own “The Wave Principle” or with additional material “R.N. Elliott’s Masterworks: The Definitive Collection” but more organized and approachable is the Prechter and Frost book “Elliott Wave Principle: A Key to Market Behavior.”
Now we can move on to…
In Elliott Wave analysis, markets tend to move in 3, 5, or 7 “steps.” Impulsive moves – waves in the direction of the prevailing trend – are counted with numbers. A corrective move *running counter-trend) is noted with letters.
The Elliott works (augmented by Bob Prechter, et al) comprise a substantial Rule Set that some (especially Ralph Elliott, the discoverer of the technique) have used with good success. On the Peoplenomics side, Elliott is “just another arrow in the quiver” used with a multiplicity of other tools including trend channels.
If you need a good intro to these, a study of Gilbert Raff’s ”
- The market MAY have completed a “fifth of the fifth” upward move.
- The trend channel bottom was tested in Wednesday’s trading.
- We are likely to bounce higher today.
- But into next week, the view turns more bearish.
THE RED LINE IS CRITICAL
It’s the crux of things today: One of Elliott’s “rules” was that for a wave count to be correct, the 4th wave of an impulsive run could not overlap wave one. On the left of the red line, you will see the top[ of the (i) and on the right, how (iv) has overlapped.
In their masterful interpretation of Elliott, the Prechter A March, 2016 point on Prechter’s www.elliottwave.com site titled “FAQ: Sometimes on your charts there is overlap between waves one and four within wave 5. Doesn’t that break a rule?” addresses this specific case.
The short answer is that while Wave 4’s may not generally overlap Wave 1’s, the ending diagonal is the pattern to pay attention to. And, as shown in our chart above, that certainly is where we appear to be right now.
Therefore, while it looked earlier this week like we would break out to the upside (breaking the bounds of the ending diagonal opens up a new “box of possibilities” unless we’re mistaken, the odds now favor:
- A Rally at the open today.
- Weakness evolving toward the close with not too much change for the day.
- A resumption of the decline tomorrow so commercials can cover the index options expiring at the close today and make a little ‘lunch money.’
This would clear the way for what could turn into a brutal fall and winter because:
- (As my consigliere notes) Europe is already sliding into chaos and it tends to propagate to the US over time…so that’s likely coming here.
- The Special Prosecutor comes us on his “election balckout period” in the first week of September.
- And of course, the Hang Seng has been screaming weakness coming to Asia, K-Pop can’t save a whole region.
Thus, the perfect storm for this fall might look something like this:
Decline now into mid September. This would be a larger-degree Wave 1 down. Then a short, violent rally between mid September and mid October. Followed by panic setting in during the weeks prior to the elections.
At the far end of those possible events, there’s no telling what 2019 will look like, but since democrats have turned socialist/communist, we can expect that absent a “blue wave” we will see higher taxes as the runaway political “victim class” seizes to turn the Trump hate campaign into future political power.
When even a substantial portion of this alt. future comes into the investing public’s mindset, the odds of collapse will increase. That, in turn, will increase calls for American “protectionist” trade policies in order to “create/save jobs” and that will scare the hell out of markets.
In the meantime, there are some key underlying value shifts to be keeping track of. One of these is the decline of gold prices which we reasonably expect could drop more than 30% concurrent to a market decline this fall of similar magnitude. While silver will still be around – and will have a role in the prepper’s stash as a possible “coin of the Apocalypse” we expect that the new “Currency of the Webolution” – Bitcoin will continue to retreat.
This morning, gold had bounced a bit early while Bitcoin was languishing again in the $6,430 range. We’ll talk more about BTC’s tomorrow.
For now, the futures look to pop up 200 at the open but as they do, we’re mindful that it will take piercing of the overhead ending diagonal boundary to turn us back into bullish on prospects for the fall.
So enjoy the “running of the shorts” today and let’s see what kin d of “covering” Friday brings.
You see, even with a strong projected open today, we’ll still be a couple of hundred points in our Aggregate work below the levels set August 7 and 8. If those fall? Then bulls might come out of the closet.
Minor Housing Data
We’ve got some new data out from Census today. Highlights only with detail here if you need it:
…July – were at a seasonally adjusted annual
rate of 1,311,000. This is 1.5 percent (±1.3 percen
t) above the revised June rate of 1,292,000 and is 4.2
percent (±1.7 percent) above the July
…were at a seasonally adjusted annual rate of 1,168,000. This is 0.9 percent (±11.5 percent)* above the revised June estimate of 1,158,000, but is 1.4 percent (±11.7 percent) below the July 2017 rate…
…at a seasonally adjusted annual rate of 1,188,000. This is
1.7 percent (±10.9 percent)* below the revised June estimate of 1,209,000 and is 0.8 percent (±11.3 percent)* below the July 2017 rate…
One week from next Tuesday before we get the Case-Shiller numbers this week, due to how the calendar lays out. Consumer sentiment and leading indicators Friday shouldn’t amount to much, so it looks like a good three-day weekend…
On the retail front: J.C. Penney same-store sales miss estimates, shares tumble. but balancing it off Walmart’s U.S. e-commerce, comparable sales growth strong, shares jump.
Fox sides with Trump in “Trump was right to revoke Brennan’s security clearance.” Meanwhile, Time reports “Analysis: Latest Political Influence Campaign on Facebook ‘Most Probably’ Russian.”
And, as we would expect, here’s CNN with “Investigation into Trump Foundation donations.”
Sort of covers all sides, we think. Oh, except for the Twitter problem – what the hell is “healthy” tweeting? The Hill takes a run at answering over here. Amusing, but we ain’t twits and we sure as hell don’t share the UrbanSurvival/Peoplenomics on/off switch, lol. You get that, Jones?
Attention Space Force
While the pacifists and appeasers go nuts on the idea of a Space Force, here comes a story about the Russians weaponizing space that seems to be right up their alley: “Mystery Russian satellite’s behaviour raises alarm in US/”
One other space note: Extraterrestrial craft in the Bermuda Triangle, anyone?
Marriage Counseling vs. Doctor Visits?
This one from Science Daily caught our eye:
“Married people who fight nastily are more likely to suffer from leaky guts — a problem that unleashes bacteria into the blood and can drive up disease-causing inflammation, new research suggests. .”
Details over here… We’ll be off to a homologous breakfast in a minute based on the report that “Eating breakfast burns more carbs during exercise and accelerates metabolism for next meal.” Yum… oh, wait..;mean I have to work it off????
OK, “moron the ‘morrow…”