The Market Perspective

Chart Analysis

Weekend June 22, 2024

 

FX, Stocks, Commodities, Cryptos... Learn How to Know When This Key Price Pattern is Over (Video)

By Elliott Wave International

"12345-ABC." That's a basic Elliott wave pattern in a nutshell. That "12345" is a so-called impulse, and it's a key price pattern to know, because impulses point in the direction of the larger trend. In this clip from a recent Trader's Classroom lesson, host Favio Poci shows you step-by-step how to spot an impulse and know when it's likely over. (Market in focus: EUR/CHF, but you can apply this to any liquid market.)

Continue Your Education on Impulse Waves with this FREE Online Course!

For a very limited time, you can get free access to our online course, "How to Spot and Capitalize on Impulse Waves." ($99 value)

In about 1 hour, you'll learn:

1. "What do I look for?" -- just what, exactly, should you look for on a price chart? See an easy way to spot an impulse wave.
2. "What does it tell me?" -- Impulse waves are great at showing you the direction of the larger trend (which, as you know, is "your friend"!)
3. "Are there variations?" -- Most impulse waves are simple, but some are... well, different. You'll see how to quickly distinguish one from another.

Start Watching Now

This article was syndicated by Elliott Wave International and was originally published under the headline FX, Stocks, Commodities, Cryptos... Learn How to Know When This Key Price Pattern is Over (Video). EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

 

Junk Bonds Too Close to T Bill Yield

 

Trouble Lies Ahead. Are You Ready For It?

By Steven Hochberg | Elliott Wave International

Conversations about whether or not the Fed will cut interest rates any time soon continue to dominate the airwaves. But we are looking elsewhere for signs about where markets and the economy are headed.

Having observed market behavior for 45 years, we've got a lot of historical precedents to lean on. The emerging picture suggests that investors not paying attention may be caught unprepared for an impending change.

The chart below is stunning in its implications.

It shows the spread between the yield on U.S. corporate junk bonds and the yield on 3-month U.S. Treasury bills going back to the 1990s.

Junk bonds, IOUs of companies with the weakest financial structures, currently yield just 2.7% more than the risk-free rate on 3-month U.S. T-bills, which is 5.4%.

This is one of the narrowest spreads in history, revealing a hunger for risk-taking so fervent that investors cannot comprehend a financial environment that will be different from today's.

Back in February 2007, the junk-yield-to-T-bill-yield spread narrowed to just 2.2%. That extreme coincided with a peak in the S&P 500 Financials Index, which occurred at the forefront of the worst economic and monetary crisis since the Great Depression. Near the end of the crisis, the spread had skyrocketed by a full ten times, to 22.9%, as corporate defaults shot higher and investors panicked into any asset that was perceived to offer safety.

When another widening of this spread starts, investors' historic complacency toward risk will be replaced by anxiety and eventually panic as financial asset values contract.

If you want to learn how you can prepare for difficult times, Elliott Wave International has a free report that not only explains the problems, but also offers solutions, such as how to bank safely and store your precious metals: Preparing for Difficult Times.

 

 

The FED Leader or Follower?

 

 

 

Does the FED lead or follow the Market?

EWI video on stock market

Monday 5/20/20224

Click for 28 mnute video of Steve Hochberg on stock market at The Money Show

Time Tested Indicator

Monday 5/6/2024

 

Why You Should Pay Attention to This Time-Tested Indicator Now
"How High Can Markets Go?" -- asks this magazine cover

By Elliott Wave International

Paul Montgomery's Magazine Cover Indicator postulates that by the time a financial asset makes it to the cover of a well-known news weekly, the existing trend has been going on for so long that it's getting close to a reversal.

A classic case in point is this Time magazine cover from June 13, 2005:

As you can see, it says, "Home $weet Home," followed by "Why we're going gaga over real estate."

Interestingly, this was published around the time that the S&P Supercomposite Homebuilding index was peaking. The housing bubble of that time was on the verge of bursting, and you'll likely remember that major crash.

Fast forward and here's what was shown on the March 2 -- 8, 2024 Economist cover:

As a large cluster of balloons carries a bull upward, it asks, "How High Can Markets Go?"

The March Elliott Wave Financial Forecast, a monthly publication which provides analysis of major U.S. financial markets, said:

It is a bearish signal for stocks. ... In the context of the multitude of other sentiment extremes ..., as well as a fully mature wave pattern, we think this cover is meaningful.

Just a few weeks after that was published, the Dow Industrials hit a high of 39,889 on March 21. The NASDAQ indexes also topped on that date.

As you probably know, the stock market has trended lower since. Only time will tell if the downward turn morphs into a major bear market.

Also know, from a technical analysis point of view, that the price pattern of the Dow Industrials is also sending a major message.

If you're unfamiliar with Elliott wave price patterns, read Frost & Prechter's Wall Street classic, Elliott Wave Principle: Key to Market Behavior. Here's a quote from the book:

Although it is the best forecasting tool in existence, the Wave Principle is not primarily a forecasting tool; it is a detailed description of how markets behave. Nevertheless, that description does impart an immense amount of knowledge about the market's position within the behavioral continuum and therefore about its probable ensuing path. The primary value of the Wave Principle is that it provides a context for market analysis. This context provides both a basis for disciplined thinking and a perspective on the market's general position and outlook. At times, its accuracy in identifying, and even anticipating, changes in direction is almost unbelievable.

Here's the good news: If you'd like to read the entire online version of Elliott Wave Principle: Key to Market Behavior," you can get complimentary access by following this link: Elliott Wave Principle: Key to Market Behavior.

This article was syndicated by Elliott Wave International and was originally published under the headline Why You Should Pay Attention to This Time-Tested Indicator Now. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

 

Stock Markets Topping

Weekend April 28, 2024

Most stock indexes topped at the end of March, 2024. I believe the final high is occurring now. Here are some short ideas.

SH Short SPX

SPX is now trading at  5100

3800 seems reasonable, remember stocks fall seven times as fast as they rise.  Late August seems reasonable which is only four months away.

PSQ is short the QQQ which is the NASD ETF

A target for the NDX whichis the NASD 100

NASD

Targets are all the January 223  low.

Will energy shares resist the overall sell off, we shall see, if there are signs of weakness there, time to exit.

With the world awash in debt, silver and gold should do well as they did in the  1970s.

Silver played catch up with gold. SLV should pull back to re test its beak ou at 22-23, That should be a good spot to add.

Bullish Buzz

Wed 4/24/24\

This "Bullish Buzz" Reaches Highest Level in 53 Years
Learn what the AIM Index reveals

By Elliott Wave International

Yes, there's been a recent pickup in stock market volatility, but overall, bullish sentiment remains very much alive and well.

Indeed, here's a Feb. 18 Yahoo! Finance headline:

A Bull Market is Here.

On April 9, a Fox Business headline reflects the views of a well-known investment manager:

Fed doesn't matter in this bull market

An extreme in bullish sentiment also shows up in the Advisor and Investor Model, which is a very broad measure of market sentiment compiled by SentimenTrader.com. The model is also known as the AIM Index.

This chart and commentary from the April Elliott Wave Financial Forecast, a monthly publication which covers major U.S. financial markets, provide insight:

The AIM Index constantly fluctuates between extremes; what's unparalleled about it now is how long it's been pinned to the top of its range. After hitting its highest possible reading of 1.0 on December 19, it stayed above .90 for the entirety of the first quarter for all but one week. This relentless bullish buzz is represented here by the index's 20-week average. At 0.93, the April 2 reading is the highest in 53 years.

Yes, it's possible that this dogged bullish sentiment could persist even longer. Yet, as you might imagine, Elliott Wave International considers extremes in market sentiment to be major red flags.

The April Elliott Wave Theorist, a monthly publication which analyzes major financial and cultural trends, reveals another cautionary sign via this chart and commentary:

As many pundits are saying, the market is not beyond the valuation of 2021, so what's the problem? But that was the year of the most overvalued U.S. stock market of all time, from which broad indexes such as the Russell 2000 have not recovered. That optimism has returned to an equivalent level is a big deal. ...

This is an especially critical time to keep on top of the stock market's Elliott wave pattern.

If you're unfamiliar with Elliott wave analysis, read Frost & Prechter's Elliott Wave Principle: Key to Market Behavior, which is the definitive text on the subject. Here's a quote from the book:

[Ralph N.] Elliott recognized that not news, but something else forms the patterns evident in the market. Generally speaking, the important analytical question is not the news per se, but the importance the market places or appears to place on the news. In periods of increasing optimism, the market's apparent reaction to an item of news is often different from what it would have been if the market were in a downtrend. It is easy to label the progression of Elliott waves on a historical price chart, but it is impossible to pick out, say, the occurrences of war, the most dramatic of human activities, on the basis of recorded stock market action. The psychology of the market in relation to the news, then, is sometimes useful, especially when the market acts contrarily to what one would "normally" expect.

If you'd like to read the entire online version of Elliott Wave Principle: Key to Market Behavior, you can get complimentary access by following this link: Elliott Wave Principle: Key to Market Behavior.

This article was syndicated by Elliott Wave International and was originally published under the headline This "Bullish Buzz" Reaches Highest Level in 53 Years. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

 

Elliott Wave Depiction of Clinton Presidency

Friday April 19, 2024

The Elliott Wave Theory was laid out by accountant Ralph Nelson Elliott in the 1930s.

It is a depiction of social action. The main move is in three waves corrected by two in the opposite direction. After the fifth wave a three wavee  A B C corrective pattern follows, usually f inding support at the previous fourth wave.

Here is a depiction of the Clinton Presidency in Elliott terms.  Wave one is  asurprise no one expected, Clinton beats Bush.  Wave two seems to reassure the crowd that Wave one was a lie and an outlier. In this case Clinton lost the House and Senate to the Republicans. He replaced advisor Carville with Dick Morris. Morris advised Clinton move to the middle which he did, recall big welfare is a thing of th past and wave three was underway. Wave four was Monica. Note the alteration, if Wave two is sideways and it was in this situation, Wave four i s more severe which it was. But mood was positive and teflon Clinton bounced back.

This would never have happened  in the Jimmy Carter era. Then from 1968 - 1982 mood was negative. Nixon resigned, Ford  the VP became President and lost to Carter,  then Carter lost to Reagan. Reagan was lucky to lose the 19706 nomination to Ford as the republican after Nixon was sure to lose th election.

 

Understand that if you were to ask Bill Clinton about his Presidency, he would say his policies ruled the eight years. But positive mood rescued his Presidency while negative mood destroyed Carter, a decent man i n a terrible situation.

Dow divided by Gold

Friday April 12 2024

Gold is real  money, the money politicians cannot print from trees. The DJIA to Gold ratio peaked in 2000when gold fell below  $300. It bottomed when Gold went to  $800 and the DJIA was  577 in 1974. It has now retraced some of the 2000 - 2007 decline but is likely to resume the decline. As I write gold has hit a new high  and the DJIA is beginning to fall hundreds  of points a day,

Gold timing

 

Gold: Setting Near-Term Price Targets
This was our "initial upside target" -- which has now been exceeded. What's next?

By Elliott Wave International

Around the first week of the year, the outlook for gold was not looking promising, at least according to this Jan. 5 headline (Reuters):

Gold set for weekly decline as dollar, yields climb

The rally in gold which started in early October continued to struggle for much of the rest of January.

Even though the mainstream media was looking to so-called fundamentals -- such as the action of the dollar or bond yields -- Elliott Wave International focused on the patterns of investor psychology -- as reflected by Elliott waves.

Indeed, on Jan. 24, the U.S. Short Term Update, a thrice weekly Elliott Wave International publication which focuses on major U.S. financial markets, said:

Spot [Gold] made its lowest close since January 17 today. Still, prices remain above $1972.89, which keeps the short-term bullish potential dominant. The [unfolding Elliott wave] should carry gold well above $2250 as the rally's pattern progresses.

Keep in mind that when this analysis was offered more than two months ago, the price of gold was trading around $2013 -- a far cry from our price target above $2250.

Now, fast forward to April 1 and this headline (CNBC):

Treasury yields jump to start second quarter

As you'll recall, rising bond yields were mentioned in the media as a negative for gold back in January.

But what did gold do on April 1? Correct -- it hit another all-time high.

Not only that, April 1 was the day that our price target was reached.

Here's a quote from the April 1 U.S. Short Term Update:

The initial upside target for [Gold] was "above $2250," which we first stated in the January 24 Short Term Update and reaffirmed throughout February and March. Gold hit this target today when spot prices pushed to $2263.64 intraday.

On April 2, gold traded even higher.

Remember, Elliott Wave International doesn't make forecasts for financial markets -- like gold -- based on common beliefs about "fundamentals" which investors cannot count on.

Instead, we arrive at price targets based on Elliott wave analysis.

If you'd like to learn more about Elliott wave analysis, read Frost & Prechter's Wall Street classic, Elliott Wave Principle: Key to Market Behavior. Here's a quote from this "must read" book:

When after a while the apparent jumble gels into a clear picture, the probability that a turning point is at hand can suddenly and excitingly rise to nearly 100%. It is a thrilling experience to pinpoint a turn, and the Wave Principle is the only approach that can occasionally provide the opportunity to do so.

If you'd like to learn about the Wave Principle, know that you can gain complimentary access to the entire online version of Elliott Wave Principle: Key to Market Behavior for free.

Just follow the link and you can have the Wall Street bestseller on your computer in moments: Elliott Wave Principle: Key to Market Behavior -- get free and instant access.

This article was syndicated by Elliott Wave International and was originally published under the headline Gold: Setting Near-Term Price Targets. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.