Hi. The running flat count I propose for the futures chart doesn't look good to me In the spot market, therefore here I go with the nested 1-2 instead.
For having alternation between Minor 2 and Minor 4, as the former was sharp, the later should be sideways, hence the triangle (the flat scenario is about to become unlikely).
Comments
kunsan
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Yes the blue channel in your top chart. My bullish count is different - I have wave 1 of 3 higher at 2280 (because of a triangle 4th where you have 'i'. If so, we are about to enter wave 3 of 3 of 3 from roughly the 2322 low. Of course this might not be correct. But if it IS, then a strong upwards move is about to happen, stronger than shown on your chart. However even your chart suggests an upwards move of circa 100 points shortly.
I should add that I can also see (for different reasons) a quick dip to the 2280 area again before the rise.
It's all very uncertain at the moment. I don't have any open positions and I'm content to wait until a solid risk/reward pattern arises.
kunsan
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This coming week sees not only the French elections but more importantly Trump's proposals on tax reductions. If my economics memory is correct, low taxes = higher interest rates thus strong currency. The stock market should also respond strongly. If this is true, then the dollar and the stock market might experience a strong move shortly if it looks like Trump's tax reductions are extensive (as promised) and he is able to get the proposal through congress.
I still think we remain in your blue bullish channel with an upside target in the 2500/2600 in the summer until proven otherwise.
mikeoakster
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In terms of economics, unfortunately I don't have enough knowledge to add to your analysis.
In terms of chart analysis:
- If you refer to the blue channel of the first chart, then I agree with you;
- If you refer to the second chart, then I could agree with you if the 3rd signal doesn't occur, but even then I would have doubts about determining if the channel would have been broken.
kunsan
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@mikeoakster, if Trump announces significant cuts in taxes including a 'deal' to bring overseas cash home (2 trillion) then the stock market should jump expecting increased earnings and stock buybacks from the overseas cash. At the same time the dollar should strengthen. However any positive reaction should be a 'one 'time' adjustment, perhaps enough to complete wave 5 over the next few months/one year.
That's the way I see it at the moment. Much depends on what the Trump team announces.
mikeoakster
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Hi, kunsan. Despite what you say could make all the sense (it probably does, I just can't help you on that), as the market is driven by the mass reaction to those events, and as I can't predict what that reaction will be, I just try to analyse the waves structure so that I can identify good trading opportunities.
Do you find that fundamental type of knowledge as any help to your trading/investments?
kunsan
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@mikeoakster, like you I believe that the charts tell (almost) the whole story. However having a knowledge of how fundamentals can affect markets is a useful extra 'edge'. For instance in my message of 22 April I suggested that markets might have a very strong move due to the expected announcement of the Trump tax cuts etc. At the time there were no or few chart indications of such a move, and yet here we are approximately 70 points higher. I think the fundamentals can give a small additional insight into how markets might move, and where we are in the bigger scheme of things.
For instance I believe that the tax cuts will justify a rerating upwards of the US equity market, perhaps by 10% or 20%, and particularly due to the low 'cash repatriation tax' which is designed to attract money back to the States for investment in business. This helps understand how/why the SPX can reach the C=0.618 target of 2700 when many market observers consider the markets to be overvalued. Changing the corporate tax rate from 35% down to 15% produces a jump in corporate net earnings which reduces the PE and takes away the 'overvalued' argument.
mikeoakster
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Hi, @kunsan. I appreciate your rationale on the fundamentals, they make sense to me. But I don't see how they can be used to place orders in the market...
You say that, on April 22, there were no or few chart indications of a rise... well, on April 20, I posted this chart:
With technical analysis, I've been able to anticipate some moves (with EW) and to identify entry and exit setups (with a method I developed). With fundamentals, I don't know how I could it.
kunsan
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Very nice chart and I suspect you are on the right track. I'm a little concerned that there isn't much Fib relationship between the various waves you've labelled - that would be unusual.
I notice that your blue '1' when given a Fib multiple of 1.618 reaches 2414, a little higher than the recent peak at 2400. It's possible that we are currently in a '4' but perhaps that's a '4' one level down from your count, and we might try for the 2414 multiple for wave 'blue 3' before then moving on to 'blue 4 and 5'.
My 'red 1' is at the next small peak which appears to have been a small five for 'wave 5 of 1'. You might try drawing your red channel from that point.
mikeoakster
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In the cash chart, applying 1.618 x Minor 1 (blue) to the end of Minor 2 results in 2410.1, right? I think it should be considered very close to 2401. And in the futures chart, Minor 3 actually exceeds 1.618 x Minor 1.
Let's keep in mind that a Fib relationship doesn't have to be exact and is a guideline, not a rule. The requirement is to exist a wave structure that complies with all the rules of a known pattern.
Regarding the degree of the current wave 4, I take into consideration two factors:
a) I can count five waves from the end of Minor 2 (2083.8), meaning there would be no need for one more wave up in one lesser degree (Minute).
b) The trend channel of the Minor 3 rally is about to be lost.
IMO, unless factor b) is not confirmed, the probability of Minor 3 is already completed is high.
Finally, about the end of your red 1 being at 2120.6 on June 8... that would mean the previous decline (April 20 to May 19) would be the fourth wave of one lesser degree, right? My question to you is this: where is the respective wave 2? If wave 4 of a specific degree is visible on the daily time frame, then wave 2 of the same degree should also be visible on the daily time frame, and it is not. This is one of my "rules", do you agree? It makes sense to me, hopefully it is correct.
I should add that I can also see (for different reasons) a quick dip to the 2280 area again before the rise.
It's all very uncertain at the moment. I don't have any open positions and I'm content to wait until a solid risk/reward pattern arises.