For those of you reading this who trade the ES futures market I have a question. How’s that choppy price action treating you?
It’s hard trading chop.
However, to those of us who analyze price action, it’s a big clue. It represents indecision in markets. The age-old battle of fear and greed tugging and pushing against each other. Chop usually reconciles in big swings that take price outside the immediate confines of support and resistance. Price action goes from being indecisive to something else entirely. Is it a notion of giving up? On behalf of some, yes. However, it is the entry of new participants that converts the choppy price action to impulsive price action. Liquidity becomes scarce as these new participants overwhelm a market in a one directional trade. That is what I believe is on the horizon for the SP500 and global markets will follow.
Please indulge me as I explain.
Since the day price bottomed in October at 3502, we have had nothing but chop. To an Elliottition, chop is called overlap. Since the October bottom we have migrated higher in a very overlapping pattern. Now to mere morals, one can deduce that market participants just got tired of being bearish and this price action since October is a reversion of the mean of trader sentiment so to speak. To an Elliottition, this is a classic counter trend rally.
However, the multi-trillion-dollar question is, counter to what? Is the trend lower and now all we’ve done is granted ourselves of short-term reprieve from even lower prices than the October low?
Short answer. Yes, I believe so.
You see, to me, we are now in a super-cycle wave (IV). To the Elliott Wave uninitiated, trends are counted as 5-wave patterns, whereas, counter trends are counted as 3-wave (overlapping) patterns. The patterns are fractal in nature. This means the 5 and 3 wave patterns contained in the micro timeframes on the 3 minute, 1 hour, etc. charts are self-similar to the larger 5 and 3 wave patterns contained in the daily, weekly and monthly timeframes, etc.
The above chart is a monthly chart of the SPX cash market representing the small and large fractals of 5 and 3’s since the inception of the SPX.
Contained in the monthly chart is the pattern reactions to much of what humanity has experienced in the last 100 years. All of these events have produced 5 and 3 wave patterns that started on the tick chart and escalated to build larger patterns through the various timeframes into the chart you see now. We just started to experience a very normal consolidation of gains in what many pundits on CNBC and other business outlets will term a bear market, within a secular bull market.
With the utmost respect, I disagree.
A secular bull market consists of three basic events that feed off each other: (1) valuation expansion of the companies that make up the indices, (2) being driven by earnings growth, and in a favorable environment of (3) falling interest rates. That is the literal definition of a secular bull market. Does that strike you as the type of economic environment where in?
NOT ONE OF THOSE EVENTS ARE OCCURRING.
I understand if most of you reading this would think to yourself…”so what”. Cycles being what they are, we’ll eventually revert at some point in time. I agree, with only one caveat. Where are we within the overall larger pattern in the history of the SPX index? My analysis shows we’re in the beginning stages of a super-cycle wave (IV) shown in green. The target box for this green wave (IV) is also outlined. So I believe we may eventually come around to the fact that we’re in a secular bear market, and from time to time, economic activity will migrate from short term cyclical bull to bear and back and forth, but make no mistake (and by definition) we’re no longer in a secular bull market.
So where we?
We’re are now consolidating gains of the entirety of the SPX rally since the 1929 stock market crash. A rally that began 94 years ago is what we’re now just beginning to digest. The next decade or two will be a normal progression of the pattern I have shared with you today.
If it were possible to argue with Charles Dickens today, I would respectfully correct him and offer my version…”It was the best of times…and it appears it’s about to be the worst of times”. LOL
But this will not occur in a straight line. If I am correct, that print we got of 4808.25 in the ES/SPX futures in January of 2022 will not be revisited for a very long time. However, that’s not to say there will not be major opportunities for traders on the long and short side. Now 90% of you reading this are not in agreement with my analysis, nor my economic thesis. Here’s one way to know if I might be correct. There’s an economist named Nouriel Roubini. He is affectionately known as “Dr. Doom” to those in the financial world. I have never read any of his works, but he is popular for his apocalyptic views on the global economy and markets. Suffice to say, Mr. Roubini has been dead wrong for the vast majority of his career. He gained some popularity during the 2008-2009 financial crisis…but most market pundits consider him a fairly un-credible, but entertaining guest. Here's how you get a clue I may be right in what I’m sharing with you today. If he starts appearing on CNBC, FOX business, Bloomberg on a regular basis….within the next couple years or so, let’s just say there may be something to this Elliott Wave thing. LOL
This pattern…where we are in the super-cycle of the SPX market….”IT NEVER ENDS WELL”.
Best to all,
Chris
It’s hard trading chop.
However, to those of us who analyze price action, it’s a big clue. It represents indecision in markets. The age-old battle of fear and greed tugging and pushing against each other. Chop usually reconciles in big swings that take price outside the immediate confines of support and resistance. Price action goes from being indecisive to something else entirely. Is it a notion of giving up? On behalf of some, yes. However, it is the entry of new participants that converts the choppy price action to impulsive price action. Liquidity becomes scarce as these new participants overwhelm a market in a one directional trade. That is what I believe is on the horizon for the SP500 and global markets will follow.
Please indulge me as I explain.
Since the day price bottomed in October at 3502, we have had nothing but chop. To an Elliottition, chop is called overlap. Since the October bottom we have migrated higher in a very overlapping pattern. Now to mere morals, one can deduce that market participants just got tired of being bearish and this price action since October is a reversion of the mean of trader sentiment so to speak. To an Elliottition, this is a classic counter trend rally.
However, the multi-trillion-dollar question is, counter to what? Is the trend lower and now all we’ve done is granted ourselves of short-term reprieve from even lower prices than the October low?
Short answer. Yes, I believe so.
You see, to me, we are now in a super-cycle wave (IV). To the Elliott Wave uninitiated, trends are counted as 5-wave patterns, whereas, counter trends are counted as 3-wave (overlapping) patterns. The patterns are fractal in nature. This means the 5 and 3 wave patterns contained in the micro timeframes on the 3 minute, 1 hour, etc. charts are self-similar to the larger 5 and 3 wave patterns contained in the daily, weekly and monthly timeframes, etc.
The above chart is a monthly chart of the SPX cash market representing the small and large fractals of 5 and 3’s since the inception of the SPX.
Contained in the monthly chart is the pattern reactions to much of what humanity has experienced in the last 100 years. All of these events have produced 5 and 3 wave patterns that started on the tick chart and escalated to build larger patterns through the various timeframes into the chart you see now. We just started to experience a very normal consolidation of gains in what many pundits on CNBC and other business outlets will term a bear market, within a secular bull market.
With the utmost respect, I disagree.
A secular bull market consists of three basic events that feed off each other: (1) valuation expansion of the companies that make up the indices, (2) being driven by earnings growth, and in a favorable environment of (3) falling interest rates. That is the literal definition of a secular bull market. Does that strike you as the type of economic environment where in?
NOT ONE OF THOSE EVENTS ARE OCCURRING.
I understand if most of you reading this would think to yourself…”so what”. Cycles being what they are, we’ll eventually revert at some point in time. I agree, with only one caveat. Where are we within the overall larger pattern in the history of the SPX index? My analysis shows we’re in the beginning stages of a super-cycle wave (IV) shown in green. The target box for this green wave (IV) is also outlined. So I believe we may eventually come around to the fact that we’re in a secular bear market, and from time to time, economic activity will migrate from short term cyclical bull to bear and back and forth, but make no mistake (and by definition) we’re no longer in a secular bull market.
So where we?
We’re are now consolidating gains of the entirety of the SPX rally since the 1929 stock market crash. A rally that began 94 years ago is what we’re now just beginning to digest. The next decade or two will be a normal progression of the pattern I have shared with you today.
If it were possible to argue with Charles Dickens today, I would respectfully correct him and offer my version…”It was the best of times…and it appears it’s about to be the worst of times”. LOL
But this will not occur in a straight line. If I am correct, that print we got of 4808.25 in the ES/SPX futures in January of 2022 will not be revisited for a very long time. However, that’s not to say there will not be major opportunities for traders on the long and short side. Now 90% of you reading this are not in agreement with my analysis, nor my economic thesis. Here’s one way to know if I might be correct. There’s an economist named Nouriel Roubini. He is affectionately known as “Dr. Doom” to those in the financial world. I have never read any of his works, but he is popular for his apocalyptic views on the global economy and markets. Suffice to say, Mr. Roubini has been dead wrong for the vast majority of his career. He gained some popularity during the 2008-2009 financial crisis…but most market pundits consider him a fairly un-credible, but entertaining guest. Here's how you get a clue I may be right in what I’m sharing with you today. If he starts appearing on CNBC, FOX business, Bloomberg on a regular basis….within the next couple years or so, let’s just say there may be something to this Elliott Wave thing. LOL
This pattern…where we are in the super-cycle of the SPX market….”IT NEVER ENDS WELL”.
Best to all,
Chris
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