The Market Perspective

Market Ends Week Erasing most 2018 Gains

Weekend Dec 8 2018

 

All the Moving Averages MAs are now pointing down.  The A/D line is below al the MAs. MACD at bottom is about to roll over.

Weekly Charts are More Important

Note the complete reversal in RSI at top.

A/D line is now below all the weekly MAs.

At bottom MACD is still falling.

Transports

When mood is strong the wave pattern is clear. Transports traced out a clear five waves down in October. November featured a textbook A B C corrective pattern. Now The very strong three days in a row down suggest a powerful Wave 3 has begun.

Russell 200 Small Cap Stocks

The small cap Russell 2000 breached the October low. This is yet another negative sign that this is not a  correction as many still claim but the making of at least an intermediate top.

Gold

The only market that is advancing is gold

Social Mood Negatives

Paris on Fire, Macron backs down on fuel tax

Trump and Tillerson exchange insults on CBS

Kelly out as Chief of Staff, Trump calls for jail time for Cohen

May cannot seem to put the Humpty Dumpty Brexit back on the wall

British leaders disagree with the voters

Shanghai Exchange down 50% since 2014

Trump in tariff war with China and Canada

Kevin Hart out as Oscar Host

US Warships in Black Sea and China Sea

Canada arrests Huawei CEO to extradite to US, China furious

All this follows Lauer, Weinstein, Cosby, Spacey, all gone now

Manafort and Cohen facing jail time

Democrats splinter on various issues even as they take the House

Qatar exits OPEC

Crude Oil price collapse

Gold rallies

US Dollar peaking

 

 

 

Time Lapse Fractals

Friday Dec 7 2018

Monthly

The long bull market from 1982

Bull Market since 2000

Bull Market Since  2009

The fractals keep re-occurring

notice that each division of the move up has five waves, this is the concept of fractals.

2016 to Present

Markets on the Brink

Friday Dec 7 2018

Markets on the Brink

 

Friday Dec 7, 2018 6 40 AM CST

 

The 617 point advance in the DJIA Wednesday generated a lot of positive buzz in the media. But there are reasons to remain cautious.

 

The Dow Transports are re-testing the 200 day moving average. That is not far from 10,679 today but markets are trading lower as I write.

 

If stocks turn down next week, which I suspect they will, the specter of a bear market reality looms.

 

This Column Dec 2, 2018

 

That was a better than average prediction. Now what?

 

Yesterday Thursday Dec. 6, the DJIA had a huge 709 point intra-day move. It managed to come back to close only 79 ponts down from Wednesday. One might have thought a bit of rally today but in pre market trading, DJIA is down 175 points again.

 

The low October 26 was 24,122 closing at 24,442.   The low yesterday was right at that prior close, 24,442. If those levels are taken out, the market is likely to head even lower. The DJIA has dropped 1,750 points just this week.   The Transports are signaling economic weakness. A break below 9,800 would signal much lower prices.

 

It may be that stock U S stock markets manage to stay above their October lows. The Advance Decline lines have turned down which is significant. Overall expect lower prices into the new year.

 

WTIC dropped 3.3% while Brent slid 2% Thursday. Unleaded gasoline and heating oil fell as well. The most watched 200 week moving average is $52.27 with a close of $51.49.  Crude needs to hold this level.   XLE Energy ETF is also testing its 200 week MA at $66.11 closing at $64.43 yesterday. XES Energy Service ETF is most discouraging at $10.98 well below its 200 week MA of $18.16. The market is suggesting it will be really difficult for the service industry to prosper in this environment.

 

Energy prices will not likely turn on OPEC or Russia or Trump or the Kashoggi murder in Istanbul.   The most important thing, as always, is the direction of the US Dollar Index.  

 

The Dollar hs been tracing out a top around 97 since its high November 12 at 97.53. As oil is priced in dollars, a drop in the dollar could raise oil prices.

 

Virtually unreported, other than in this column, has been the one market embarking on a new bull phase. That market is gold. Gold has steadily advanced from its August low of $1,167. It is now $1,244 just under its 200 day MA of $1,261.

 

The Dollar index is probably topping now. This should lead to a rally in gold and silver this next week. And that just might prop up weak energy prices.

 

Dennis.elam@gmail.com

 

 

 

 

 

Market to Re Test October Low

Thursday Dec 6 2018

The broader based NYSE actually internally peaked in late August.  Again this is our most reliable single indicator.  It is re testing the October an November lows.

A break below those lows on a weekly basis will again signal more market weakness.

NYSE

Notice the gap down in the NYSE today. It has taken out the November low and will shortly test the October low.

PMO is rolling over which suggests the October low will not hold, Not labelled but notice the five waves down in Otober and then a A up B down C up that ended Monday.

Now a third, the most powerful of the three down waves is kicking off big time.

Major Market Idex

 

The XMI Major Market Index is under its 200 day MA already.  PMO is rolling over. Notice the MAs are beginning to converge which is always the preliminary to a change in market direction.

DJIA

 

 

Evidence Builds the Bear Has Arrived

Wed Dec 4 02018

Evidence Builds the Bear Has Arrived

 

The 617 point advance in the DJIA Wednesday generated a lot of positive buzz in the media. But there are reasons to remain cautious. This move up looks like a normal Wave C rebound, A up, B down C up, after the October collapse.

 

The Dow Transports are re-testing the 200 day moving average and need a close over 11,000 to turn the turned up. That is not far from 10,679 today but markets are trading lower as I write.

 

If stocks turn down next week, which I suspect they will, the specter of a bear market reality looms.

 

This Column Dec 2, 2018

 

And that is precisely what happened Tuesday Dec 4. The DJIA plunged 799 points to erase most of its 2018 gains. The economically sensitive Transports dropped 4.5% on Tuesday. Bank, energy, and energy service stocks were all hammered.

 

An accountant named Ralph N. Elliott devised his Elliott Wave Pattern of social energy and stock price movement in the 1930s. A complete discussion is beyond the bounds of this newspaper column. Learn more at

https://stockcharts.com/school/doku.php?id=chart_school:market_analysis:introduction_to_elliott_wave_theory.

 

It is more and more probable that a final fifth of a fifth wave on a monthly, weekly, and daily (fractals) basis occurred October 3, 2018. The DJIA dropped 2,500 points in October. A textbook recovery took place in November with an up down up pattern into Monday December 3. That pattern completed and the larger Wave 3 down began in earnest with an 800 point drop.

 

Politicians, fund managers, and most media types will not accept the inevitability of such a pattern, but it is plain to see. The markets are now probably starting a third wave down the strongest in the series, evidenced by the 800 one day drop.

 

If that analysis does not appeal to you, here are some other clues.

 

• No stock market recovery has ever lasted more than ten years. This recovery is in its tenth year.
• Interest rates were rising but fell significantly Tuesday. The ten-year note yield is 2.925, the five year is 2.972. We are in danger of inversion, the ten year rate falling below the five year rate. This is usually an indication of an economic slow down ahead.
• Few are noticing but the ratio of gold mining stocks is outperforming the SPX, it jumped markedly Tuesday. This is another indicator of trouble ahead. Gold shares are ending a two-year period of correction.
• This column has warned of serious trouble from a tariff war for the last year. Now Trump declares he is Mr. Tariff.
• Finally energy shares have been hit hard, once again Trump does not get it, that is an indication of economic slow down.

 

 

Perspective on Gold

Wed Dec 4 2018

Gold shares compared to the SPX have been correcting for two year.A slightly higher low was notched this summer. The new bull market in gold shares is beginning.

Daily

 

The 800 point drop in the DJIA and whatever it was in the SPX jumped the ratio over the  50 and  87 day MAs leaving a gap.

This is happening as the US Dollar  is topping.

GLD ETF versus UUP ETF for US Dollar

Gold shares are advancing relative to the US Dollar.

The world is awash in weak currencies from Russia to Argentina to Venezuela. Gold is coming back.

Markets Cose Wednesday, Surveying the Tuesday Sell Off

Wed Dec 5, 2018

The weekly NYSE A/D line has dropped below all its moving averages. This is not encouraging.

Transports

 

Transports lead the way and they fell 4.4% yesterday.  Transports are more economically sensitive than Industrials.  Bank stocks were hit hard as interest rates fell. This is the first time since Oct 3 investors ran for the safety of bonds, a flight to quality, rather than stocks. The difference in the short term 2-3 year and ten year note is narrowing. This is causing many to wonder if the yield  curve will invert with longer term rates below short term rates, another negative view of the economy. 

Regional Banks

Note the 5.48% drop in ONE DAY!  Lower ratres mean lower profits for banks. This reverses the recent rise in bank stocks given higher rate expectations.

CAT down 6.93%. BA down 4.85%.

It may be that knowing the markets would close today accelerated the sell off yesterday.  Now many are sitting this out to see what happens tomorrow.

Trump states he is a Tariff Man. We consistently warned on this weblog and in our weekly newspaper column that a trade ware would likely sabotage his tax  and regulation cuts. That is now becoming a reality.

The Bottom Line

On a monthly weekly daily basis, major market indexes have likely completed five of five waves up. Indeed this may date all the way back to the bull market beginning after WW II about 1948. Remember  that market action takes place in freactals, smaller and larger  pictures of three waves in one direction two in the other.

The move down in October was a Wave One. The A B C move in November which apparently ended Monday as Wave Two. If correct that means the 800 point down day Tuesday kicked off Wave Three. Third waves are typically the largest of the three waves One, Three Five in one direction.  The October drop in the DJIA was about  240 points.

If Three follows in Fibonacci fashion, this wave could be

2400 x 1.618 = 3,883

24,400 - 3,83 = 20,517

The 200 week MA is now 20,619 so that seems to be a reasonable target. The last time it was tested as January 2016.

Sell Off Across the Board Adds to Evidence the 2009-2018 Bull Market has Ended

Tuesday After Mkt Close Dec 4, 2018

Junk bonds are a stock market proxy. In times of social mood, investors pile into high yield low rated bonds.  It is a stock with a high dividend yield.

 

Here is another five wave down that faile at its 200 day MA.

REITs collapsing

This 2% drop in a big REIT is another clue the markets see economic weakness ahead.

XLE Energy Shares

Trump thinks he wants cheap gasoline and oil, that is a sign of a weak economy.

Note the 2.87% drop in XLE the Energy ETF.

XES Energy Service

Energy Service, think Halliburton, has always bee the main stay of the Permian Basin. Here is drops 5.95%in ONE DAY!  Yikes!

Sedco RIG was down % just today as well, YIKES!  FANG dropped 6.32% today, YIKES! CRAK dropped 2.8%, that is the Refiner ETF.

Corrective Wave C Up Ends,Violently

Tuesday 12/4 1 14 PM CST

Here is the ending to my weekend newspaper column posted last Friday.

 

The 617 point advance in the DJIA Wednesday generated a lot of positive buzz in the media. But there are reasons to remain cautious. This move up looks like a normal Wave C rebound, A up, B down C up, after the October collapse.

 

The Dow Transports are re-testing the 200 day moving average and need a close over 11,000 to turn the turned up. That is not far from 10,679 today but markets are trading lower as I write.

 

If stocks turn down next week, which I suspect they will, the specter of a bear market reality looms.

TMP posted Friday Dec 1

Forget what I wrote about bottom signals this morning, I did notice the SAR PAR had not generated a buy signal in energy stocks, and they have reversed hard to the downside. One analyst made the comment in a WSJ article this morning that the last thing Trump should be wishing for is cheaper oil. That of course is indicative of a weaker economy world wide.

Here is an update on the Wave Count

This is as textbook as it gets in Elliott Wave.  DJIA posted a clear five waves down in October. We then had an A B C corrective A up B Down and C up. The 617 point day last week really got the talking heads on CNBC bullish, ignoring the wave count. Note Wave C peaked below Wave A.  We are now beginning a new five wave sequence to the downside. Notice PMO is breaking over to the downside.

Paris is on fire, Xi and Trump do not have a deal, and the USMCA will probably get hung up in the Democrat House, probably, come on Dennis.

Crude Oil Rises 4%

Tuesday Dec4, 2018

Crude oil rallied on the three month trade truce. The bullish percent of energy stocks did the same.

This indicator has gone from 85 to less than 5 and is now picking itself up.

FRAK

If this sell off is similar to January of this yea, and it now looks to be, surely FRAK is good for a couple of bucks to the upside.  This is an ETF of shale producers.  USO the oil ETF is in similar over sold condition.

CRAK

CRAK is the ETF for refiners like Valero. And CRAK  is a lot less expensive than VLO.  But take a look at VLO.

VLO has completed five waves down.

Just two months ago it was 120.Should it return there that is a 50% move!

Gold and silver are both up again today.  And the Euro looks to be bottoming while the US dollar may be topping. that would be supportive to both gold and oil.

PMO is oversold and RSI is picking up.

And we are in time frame when stocks rebound after an October sell off. After the 600, 200 and  250+ last few days stocks are off about  130 this morning which is to be expected.

But it appears this is a good time to shop for a Santa Claus rally.