Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
Warning All Investors: Global Stock Market Are Shifting Away From US Price Correlation - 20th Jun 18
Gold GLD ETF Update… Breakdown ? - 20th Jun 18
Short-term Turnaround in Bitcoin Might Not Be What You Think - 19th Jun 18
Stock Market’s Short Term Downside Will be Limited - 19th Jun 18
Natural Gas Setup for 32% Move in UGAZ Fund - 19th Jun 18
Magnus Collective To Empower Automation And Artificial Intelligence - 19th Jun 18
Trump A Bull in a China Shop - 19th Jun 18
Minor Car Accident! What Happens After You Report Your Accident to Your Insurer - 19th Jun 18
US Majors Flush Out A Major Pivot Low and What’s Next - 18th Jun 18
Cocoa Commodities Trading Analysis - 18th Jun 18
Stock Market Consolidating in an Uptrend - 18th Jun 18
Russell Has Gone Up 7 Weeks in a Row. EXTREMELY Bullish for Stocks - 18th Jun 18
What Happens Next to Stocks when Tech Massively Outperforms Utilities and Consumer Staples - 18th Jun 18
The Trillion Dollar Market You’ve Never Heard Of - 18th Jun 18
The Corruption of Capitalism - 17th Jun 18
North Korea, Trade Wars, Precious Metals and Bitcoin - 17th Jun 18
Climate Change and Fish Stocks – Burning Oxygen! - 17th Jun 18
A $1,180 Ticket to NEW Trading Opportunities, FREE! - 16th Jun 18
Gold Bullish on Fed Interest Rate Hike - 16th Jun 18
Respite for Bitcoin Traders Might Be Deceptive - 16th Jun 18
The Euro Crashed Yesterday. Bearish for Euro and Bullish for USD - 15th Jun 18
Inflation Trade, in Progress Since Gold Kicked it Off - 15th Jun 18
Can Saudi Arabia Prevent The Next Oil Shock? - 15th Jun 18
The Biggest Online Gambling Companies - 15th Jun 18
Powell's Excess Reserve Change and Gold - 15th Jun 18
Is This a Big Sign of a Big Stock Market Turn? - 15th Jun 18
Will Italy Sink the EU and Boost Gold? - 15th Jun 18
Bumper Crash! Land Rover Discovery Sport vs Audi - 15th Jun 18
Stock Market Topping Pattern or Just Pause Before Going Higher? - 14th Jun 18
Is the ECB Ending QE a Good Thing? Markets Think So - 14th Jun 18
Yield Curve Continues to Flatten. A Bullish Sign for the Stock Market - 14th Jun 18
How Online Gambling has Impacted the Economy - 14th Jun 18
Crude Oil Price Targeting $58 ppb Before Finding Support - 14th Jun 18
Stock Market Near Another Top? - 14th Jun 18
Thorpe Park REAL Walking Dead Living Nightmare Zombie Car Park Ride Experience! - 14th Jun 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

US Stock Market Elliott Wave Predictions for 2018 and Beyond

Stock-Markets / Stock Markets 2018 May 20, 2018 - 06:04 PM GMT

By: Chris_Vermeulen

Stock-Markets

Recently, an interesting concept was discussed among our research team – a very interesting concept about the markets.  As many of you know, part of the process or research is to test conclusions that may lie outside common thinking.  While we were discussing the Fibonacci and Elliot Wave structures of the US market using longer-term charts, one item kept intriguing our research team.  This one item could change everything in terms of how we are thinking about the US markets and Global markets.

Almost everyone knows that Elliot Wave (EW) theory consists of Five Waves to complete a major EW Cycle.  The most common form of EW price cycles is A, C & E (or 1, 3 & 5) waves advancing and B & D (or 2 & 4) waves declining for an uptrend.


Chart courtesy of stockcharts.com

The opposite is true for a downtrend.  It is relatively common knowledge these types of price formations make up almost all of the markets price moves.

Chart courtesy of stockcharts.com

Yes, there are variations that can sometimes come into play, like Triangle formations, Zig-Zag formations, Regular, Expanded, Contracting and other rarities.  Yet, many people don’t understand the mathematics requirements that apply to EW and Fibonacci as a method of constructing proper EW structures.

The question proposed by one of our research team was “what if this recent move higher (from 2011 to current) is nothing more than an extended wave 3 and not a wave 3-4-5 formation.  What if this 166.94% rally in the SPY is nothing more than an extended Wave 3?  This question began a quest within our team of research to try to identify if this concept had any validity – and the results are surprising.

Basic Concepts of Major and Minor Wave Formations

Before we continue, allow us to explain some of the basic concepts of major and minor wave formations as defined by Ralph Nelson Elliot and Robert Prechter.

  • The basic 8 wave form is fractal in nature. It is operating at all degrees (chart timeframes) simultaneously.
  • In most impulses, there is a 5-wave pattern which unfolds adhering to the following rules:
    • Subwave 2 does not overlap the start of wave 1
    • Subwave 4 does not overlap the extreme of wave 1. Also, as a strong guideline, it is not advisable to assign a wave 4 label if there is any overlap of the territory of wave 1 during the 4th
    • Subwave 3 is not the shortest of 1, 3, & 5.
  • Impulses are typically bound by parallel lines
  • In impulses, one of the waves 1, 3 or 5 will likely extend substantially in comparison to the other two. In the stock market, wave 3 is most likely to extend, whereas, in commodities, wave 5 is the more likely to extend.
  • Rarely, a wedge-shaped diagonal appears as wave 1, A, 5 or C. It is sometimes referred to as a diagonal triangle.  In a diagonal, both trendlines slope/tilt in the same direction (both up or both down).  Most often, the trendlines converge (get closer together) as they extend.  Sometimes they diverge (get further apart with time). Concepts courtesy of Elliott Wave Predictions

One aspect of the EW rules that intrigued us the most is that “Subwave 3 is not the shortest of 1, 3 & 5”.  This facet of EW in combination with the concept that retracement waves typically contract to 38.2% of the previous impulse wave provided our research team with an impetus to consider alternative wave counts.

What if, this chart below, showing a completed EW 5 wave cycle where wave 3 & 5 are nearly identical in length is structurally incorrect.

What if the real EW count is as we are showing in the next chart below – where the current upside wave (originating near the end of 2011) is nothing but an extended wave C setting up a push higher.  Remember, wave 3 (in this case wave Ciii) can’t be the same length as wave Ci.  In the chart, below, the yellow arrows drawn for Ci and Ciii are identical in length.  It could be concluded that, if our hypothesis is correct, wave Ciii is not completed yet and will extend further to the upside (if it develops into a complete 5 wave structure) or wave Ciii may be near an end because it is already 2.618 x wave A and has completed a structurally relevant ABC formation.  Traditionally, wave 3 is the longest wave of the ABCDE wave formation.

The one aspect of wave C in our research that confounds us is that neither of the corrective waves (wave Cii or the current pullback near wave Ciii) come close to the 0.382% pullback expected by corrective waves.  This one component of our research is leading us to believe the upside in the US majors may be dramatically underestimated by most market analysts.  If our research is correct, then this current market pullback, or corrective wave, may be a “combination sideways minor correction of wave C”.

Our predictive analysis is clearly indicating US majors should continue to push higher over the next few months.  This analysis is counter to a completed EW 5 wave cycle.  In other words, the US market should not attempt to target new highs if this recent high is the completion of a total EW 5 wave cycle.  Therefore, it is our opinion that we are looking at an extended (2.618x) EW wave 3 move that will result in a correction at some point in the future (forming wave 4).

We will follow up this research article with another, more detailed, one soon.  We believe we have accurately understood the EW pattern formations that are currently setting up in the market and we believe there is a strong potential for an upside breakout to attempt near all-time highs in the market before any start to a corrective wave.  We believe far too many people have failed to understand the structure of this major EW pattern and have concluded this is an EW wave 5 completion.  There are going to be a lot of short sellers getting caught in any upside move as the Upside Triangle breaks and prices push higher.

One condition for all of our analysis is that the low at corrective wave 2 (@ $254.67) must hold as price support.  Failure for the price to hold above this level means we have a failure in our proposed analysis and we would fall back to a potential that this corrective move could fall further to complete a 0.382% (or greater) wave pattern.  It all depends on price and our predictive modeling systems are showing us that price should advance over the next few weeks, thus we believe our analysis is correct.

As we close out this research post, think about what this means to us as traders.  A large portion of the globe may be setting up for a massive market top formations – setting up short positions and leveraging their positions for what they believe could be a massive downside move.  Yet, if our analysis is correct, this downside move may be over and we could be setting up for a broad upside move in the US markets to create a further extended wave C or a new wave E.  If we are correct, the pressure put on these short sellers is going to be tremendous and the markets could skyrocket higher.

We’ve been discussing “capital migration” recently to highlight how fragile certain foreign and Emerging Markets are and how capital will quickly move into more stable economies/markets that can generate solid returns.  It may be that we are setting up for a massive wave of capital migration into the US equities markets and the US Dollar that everyone is failing to understand or foresee.  Time will tell if we are correct.

If you want to know how we are helping our members and the specialized proprietary research we offer to keep them ahead of this market, please visit www.TheTechnicalTraders.com. Last weeks trade resulted in a +18% profit for our members.  Once you realize that we have been calling these market move perfectly over the past few months, you’ll understand that our membership costs are very nominal compared to the benefit and information we provide to you each day.

Our articles, Technical Trading Mastery book, and 3 Hour Trading Video Course are designed for both traders and investors to explore the tools and techniques that discretionary and algorithmic traders need to profit in today’s competitive markets. Created with the serious trader and investor in mind – whether beginner or professional – our approach will put you on the path to win. Understanding market structure, trend identification, cycle analysis, volatility, volume, when and when to trade, position management, and how to put it all together so that you have a winning edge.

Chris Vermeulen
www.TheTechnicalTraders.com

Chris Vermeulen has been involved in the markets since 1997 and is the founder of Technical Traders Ltd. He is an internationally recognized technical analyst, trader, and is the author of the book: 7 Steps to Win With Logic

Through years of research, trading and helping individual traders around the world. He learned that many traders have great trading ideas, but they lack one thing, they struggle to execute trades in a systematic way for consistent results. Chris helps educate traders with a three-hour video course that can change your trading results for the better.

His mission is to help his clients boost their trading performance while reducing market exposure and portfolio volatility.

He is a regular speaker on HoweStreet.com, and the FinancialSurvivorNetwork radio shows. Chris was also featured on the cover of AmalgaTrader Magazine, and contributes articles to several leading financial hubs like MarketOracle.co.uk

Disclaimer: Nothing in this report should be construed as a solicitation to buy or sell any securities mentioned. Technical Traders Ltd., its owners and the author of this report are not registered broker-dealers or financial advisors. Before investing in any securities, you should consult with your financial advisor and a registered broker-dealer. Never make an investment based solely on what you read in an online or printed report, including this report, especially if the investment involves a small, thinly-traded company that isn’t well known. Technical Traders Ltd. and the author of this report has been paid by Cardiff Energy Corp. In addition, the author owns shares of Cardiff Energy Corp. and would also benefit from volume and price appreciation of its stock. The information provided here within should not be construed as a financial analysis but rather as an advertisement. The author’s views and opinions regarding the companies featured in reports are his own views and are based on information that he has researched independently and has received, which the author assumes to be reliable. Technical Traders Ltd. and the author of this report do not guarantee the accuracy, completeness, or usefulness of any content of this report, nor its fitness for any particular purpose. Lastly, the author does not guarantee that any of the companies mentioned in the reports will perform as expected, and any comparisons made to other companies may not be valid or come into effect.

Chris Vermeulen Archive


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules