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Thursday, May 23, 2019

Strong Counter Trend Rally Expected into May 29 then Watch Out!

The NASDAQ and Russell 2000 both made new lows today, but the S&P 500 did not, creating a temporary slightly bullish divergence. But overall, the pattern is worrisome for the market after the expected relief rally into next week.



The next cycle low is due between June 5 and 12th. 115 TD's is the maximum expected for a 20 week low and that hits on June 12.  June 12th also melds with my work for an important low in the precious metals sector.



I had earlier on thought that the S&P 500 bottomed its 20 week low on May 13th at 94 TD's (I had also thought that it might occur in early June).  The 20 week low can run 85-115 trading days. As you can see on the first chart, a forming a-b-c type "B" Wave developing.

May 13th bottomed on the 16 TD low, which can run as much as 20 to 21 trading days, putting the next timing band around June 5-12 for the (z) of B Wave low. This would then place the Wave C of "Y" top out into early/mid August for the stock market and quite possibly the mining share market too.




Brad Gudgeon
Editor,
BluStar Market Timer

Wednesday, May 1, 2019

Why the Stock Market Rallied So Fast

Most market analysts didn’t expect the stock market to recover so fast, but if you knew how Elliott Wave works, you could have anticipated the current move. 
This week, I will be looking at the S&P 500 from the perspective of 20-years 1999- 2019.

The basic premise behind the Elliott Wave Theory is that markets move up in 5 waves and down in 3 waves, completing a perfect octave (like music). R.N. Elliott (ca. 1920’s-40’s) was able to see the Fibonacci sequences that are found in nature (e.g. the spiral of galaxies, seashells and the inner ear) and apply them to waves of mass greed and fear in collective human buying and selling activity.

The top in late January 2018 to the bottom in December 2018 was a three wave buying pattern I call X-Y-Z (an a-b-c or 3 wave pattern).  Elliott noted that these patterns are very bullish once completed and launch markets to higher highs. This is where we are now.

True bull waves always move in 5 waves (1 up, 2 down, 3 up, 4 down, 5 up).  The last such bull wave lasted from 1974-99, which I have labeled (in the chart below) as Super Cycle Wave III. After 1999, the S&P 500 completed an XYZ wave in March 2009, which I labeled as a larger Wave X.

What is surprising (given the magnitude of the launch), is that the wave up from the 2009 low to now (April 2019) does not have any true 5 wave sequences in the impulse waves.  It is a double 3 wave affair (ABC X A now B with C to come or a Double Three Pattern). This can happen only if Wave Y is an irregular topping wave. For this wave to have gone this far up (and looking to go higher in the next 2-3 years) means to me that it is likely what Elliott termed a “rare” Running Correction pattern since 1999.

A Running Correction basically exceeds the previous top (SPX 1552 Wave III-1575 Wave Y of [X]) by the same percentage amount it fell below the top (Wave Z of [X] 2009) completing Wave [Y] and then falls back to test that area in Wave [Z].  Wave [Z] then completes Super Cycle Wave IV, launching the final Super Cycle Wave V.

One of Elliott’s Rules was called the “Rule of Alternation”, that is if Wave 2 was simple, Wave 4 would be complex and vice versa. Wave 2 and 4 could never be the same pattern, no matter what.  Wave 2 (1966-74) was a simple expanding flat (x-y-z [X], a-b-c [Y] and a-b-c [Z]) lasting some 8-9 years (same as [X] of SC Wave IV 1999/2000-2009).

The problem is: the sideways x-y-z pattern of 1999-2009 was too similar to the “1966-74 wave pattern”. This makes Wave IV the complex wave pattern in the sequence. The fact that Wave Y of IV has gone this high and looks to be going higher in the years to come, goes beyond the scope of a normal irregular top (like the one we are now since December 2018, Wave Y of “B”, see chart below).

Normally, in past 80-90 year cycles, we have seen huge sell-offs (e.g., 1929-32 down 89%, the deflationary bear market of the 1840-1850’s, and the British Panic of 1772). Each one of these depression sell-offs have occurred right before major wars (e.g., American Revolution, American Civil War, WWII).

There are a lot of forecasters that are forecasting doom and gloom in the next few years. In fact, there are too many of them.  As a contrarian, this concerns me, as I used to be in that camp. Based on Elliot Wave and my cycle work, I think the worst we see is a repeat of 2007-09 by 2024. I see a lot of market pundits touting silver and gold as hedge against the coming calamity.  My methods tell me different: we are in a continuing bear market in precious metals like gold and silver until 2023 (more on this sector at another time).

Getting back to the stock market, I see a nice pull back in May called Wave “b” of Y associated with the 20 week cycle before we go much higher into July of this year (S&P 500 3170?). As I write this article (April 26, 2019), I see at least one more move higher into April 29th, probably above 2960, before the market corrects in Wave “b”.

Next week, I’ll be writing about the wave structure from Dec 26- April 29 and what we might see in May on the downside before the market resumes higher into July.
4_25_19_spx_monthly.png
(Every 83-84 years, Uranus enters into Taurus for 8-9 years.  These periods have been marked in history by social revolutions, economic depressions, technological innovations; currency, banking and agricultural changes.  Our current period 2018-26 is one such period.)

Tuesday, April 23, 2019

Stock Market Due for 9-10% Pull Back?


The December 24-26 low in the stock market finished an E-Wave xyz bullish flag, which itself was likely an X wave of larger degree.  The move up to all time highs within only 4 months of a 20% pull back has been quite impressive. The xyz pattern is a very bullish e-wave pattern and the current Wave Y runs an abc type rally with “a” due in this general time frame. 

The 20-week low (“b”) is due around May 17-20 and it wouldn’t surprise me that an intermediate top forms shortly (within the next 1-4 trading sessions) and drops 9-10% into the mid May expected low. The 9 month top (“c” of Y) is due in early July and a move to above S&P 500 3100 would not surprise me at all, but like I said, a 9-10% pull back is likely first.







The mining shares and gold itself rallied out of a 31/32 month low back in August/Sept 2018.  Gold is leading the rally.  The current pattern is actually a must needed pause to refresh, a bull flag pattern that once finished should launch higher into the summer. The next cycle low is the 4-year due in Dec ‘19-Jan ’20.

Overall, I believe the trend is down from the 2011 30-31-year top and should bottom in late 2023 somewhere near the 2008 low of $667. This is not saying we won’t see some nice strong rallies in the months ahead.







 2023/24 is also when we should see a hard low in the stock market based on the 7-Year cycle, which forecasts a top in 2021/22. We had a 20% bear in 2018 and the next one will likely be 30%+. Late 2019 into 2020 is the danger period for the next bear drop.  After that, one more strong rally above 3500 on the S&P 500 looks likely to me.

For a long time, I had been looking for a major bear market in the category of the 1929-32 drop, which took the Dow 30 down 89% within less than 3 years. The current wave structure is giving me doubts that we will see anything harder than what we saw in 2007-2009 from 2022-24. It also bothers me that I have a lot of company out there calling for something apocalyptic in the next few years. When too many think the same way, we often times do not fulfill those exact expectations.

The cycle we are in is called the 4-generation cycle (80-88 years) as we tend to make the same mistakes that our great grandparents made.  That cycle runs an average of 83-84 years and coincides with the Uranian/Taurean 8-9 period last seen 1934-42 and before that 1850-59.

It is a period of revolution and technological innovation. It is a period of banking/currency changes and changes in how we farm and our relationship to the earth. It leads into what is termed the “Crisis War”.

Crisis Wars were last seen in America in 1941-45 and 1860-65.  Before that, it occurred right before the American Revolution. Hold on! If you ain’t got somethin’ to hold onto, grab anything, for as Dylan wrote in the 60’s “the times they are a-changin’”.

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Brad Gudgeon
Editor,
BluStar Market Timer