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Saturday, July 11, 2020

The NASDAQ Peak and Weekend Charts and Stuff

Last weekend's NASDAQ blog post gave a target of 10,601 based on Fibonacci wave relationships between wave 3 and 5.  Friday's peak was 10,621.8 (Fibonacci 21 points above the target). This makes the wave relationship not a perfect .618, but rather .632.  It was proposed that wave 5 of (5) would strike the upper channel line of 1, [b] of 4 peak, and the peak of 5 probably twice each in both log scale and arithmetic. This happened also.

We don't know what the futures will hold for the markets on Sunday.  They amazingly held above support all last week in increasingly volatile trading sessions.  So there is no need to hash and rehash all the counts and propose other exotic alternate counts. (although I will show the usual squiggles!)

The market is still severely fractured and last week's trading did nothing to make it better other than fracturing it further. There is 1 index (Wilshire 5000/SPX) poised to break over their down trendlines from February peak.   Yet, even if they gapped up (small gap mind you) Monday, they still would have some work to do to take out their June 8th peaks.

So the situation is setting up thusly for Monday depending on futures:

1. Futures hold or are somewhat bullish overnight, producing a possible exhaustion gap up that reverses after the NASDAQ Composite touches the intersecting log scale double channel lines at around 10,650, and then sells.  This would have the Wilshire/SPX probably breaking higher with SPX possibly touching 3200+ before selling off.  This might even have the Wilshire coming quite close to taking out its June 8th peak but it should hold.  This would be our false breakout scenario. Hard sell reversal is the theme.

2. Futures open flat(ish), oscillate, eventually Composite rises to meet the double channel line hit at around 10,650 and then reverse and sell. Same as above, except no (or small) gap up and possibly only the NASDAQ is green the other indexes get a head start down.  It reverses hard after achieving its wave 5 of (5) goal.

3. Futures sell hard creating a gap down weekly island top in the Composite for us to ponder forever and ever.

4. Futures gap up like 1.5 - 3% (upside surprise "third of third" spot creating a possible wave 5 of (5) scenario (or just even more confusion) in the Wilshire/SPX thus blowing up my primary major wave counts. I am fully ready for this scenario as like Charlie Brown, Lucy always seems to pull the ball away at the last second. 

Again why bother doing anymore mental gymnastics on a Saturday trying to predict what futures will do over the period of 15 hours until Monday's trading.  We have enough squiggles in place to consider 5 of (5) on the NASDAQ Composite complete as is. Yes there is very small room for a few more, so either way, its acceptable.

I found some bear chart porn.

 Another alarming volume ratio comparison. This time we compare the TOTAL VOLUME of the NASDAQ 100 to the TOTAL VOLUME of the NASDAQ COMPOSITE. Fairly simple setup.  Over periods of time, it might tell a story. Before I set this up, I wasn't sure what I would see. Would we see an extreme high NDX volume ratio compared to Composite? At first that came to my mind as might be the case, but the results surprised me until I thought about what may be going on.

Here is the weekly chart going back many years.  My conclusion is the QQQ's have been steadily collecting in an accumulation, the ratio has been steadily dropping. As the QQQ's go higher, the volume ratio drops between the 100 and the Composite. This makes sense. If Warren Buffett now holds $100B of Apple stock (he does), it took him a while to accumulate it. He is probably not accumulating very much more at these prices. 

The ratio plummeted at wave (5)!  This implies strongly that there is LESS and LESS greater fools to keep buying the NASDAQ 100. (and who would those fools be ? Yeah you guessed it - Robinhooders!)
And here is the Daily chart. The extreme dropoff in NASDAQ 100 ratio to Composite at (5) as prices rose, the ratio plummeted. This should set off alarm bells!
Here is that possible double channel line hit on the Composite if prices are up Monday. And the Wilshire on the bottom of the chart might hit its own green trendline, then prices should sell. This is the false breakout scenario described above. 
Revamped 5 of (5) Composite count, moving wave [iii] peak. This aligns more correctly with the future's count.  But it works to help us find the true channel. Friday's low was [iv].

Also shows where a possible double channel line hit would be. There is no need for this final hit it already has 2 touches in both log and arithmetic.
And now the day session Composite count would align with overnight QQQ's.

I'll tack on more as the weekend progresses.

Proposed wave [v] of 5. There is room for more squiggles.
What's interesting is that the QQQ's did go up another 19 points or so after the day market closed. It may have completed the final squiggles in A/H. And hit its own trendline(s)

Again not gonna pound my head over this, its only Saturday.
CPCE again with some added enhancements.  Similar setups but its even much more aggressively bullish than earlier this year.
One hour chart of the NASDAQ in log scale.
Tesla looks kind of long in the tooth. Triangulated its way out of danger last week. Look, if Intermediate (3) down begins in earnest, everything is going to sell anyway. But its nice to see that so many stocks seem to be "finishing up" their patterns.
A lot of things are at trendline support or resistance. VIX. Bottom half is the SPX. SPX has about 1.45% (like the Wilshire) to spare without breaking its June 8th peak.

I have a feeling Monday will be a very eventful day one way or the other.
The total volume ratio intrigued me comparing the NASDAQ 100 versus the NASDAQ Composite as a whole.  Being that the 100 is part of the Composite the ratio is a ratio x ratio which is just fine because as long as the parameters are constant, it can reflect useful data.

I assume the math works like this: If the NASDAQ 100 total volume is 60% of the entire Composite than this ratio comparison would work out as .6 x .6 =  .36   You can see .36 is where the ratio was in January of 2019.

If the total volume of the NASDAQ 100 drops to 38% of the entire Composite, than the ratio would be .38 x .38 =  .14 ratio.  You can see that ratio was met recently.

So what does it all mean?  Surely it seemingly doesn't make sense that the 100 index comprised of stocks like Tesla and Apple which have gone parabolic on an arithmetic scale should be getting a lot of volume - and they are ! (well it was...its dropping too)  You can see that on the chart in the volume bars of the NASDAQ 100, volume is certainly elevated.  But the rest of the Composite is certainly elevated even more.

What is happening though is the entire index is being pushed higher. All 2500 stocks in the NASDAQ Composite is getting pushed higher no matter what on tremendous volume. The 100 prices have now (again) topped above the Composite prices.   The 100 stocks are dragging the index higher yet for the rest of the Composite to keep pace it requires more and more total volume to push the other 2400 stocks to keep up. And thus the ratio is dropping like a rock.

And the 100 is likely running out of buyers.
As a curiosity, I went to the list of Composite stocks and picked 3 at random. The first is 1-800-Flowers (lol it was the first listed). Here is what we get:  Price to Earnings ratio of 36.  Spending money on flowers is a bull market activity. When social mood is rising, we act nice. (Anyone ever heard of the Tulip Mania?). In a bear market, when people are defensive with money, sending flowers will be one of the things that gets reduced.

Oh yeah, it's at  near the all-time high.

Here is the second one picked. Its a tech stock. Manufacturer of semiconductor products. P/E ratio of 39.   Its not like we haven't already gone through a massive electronic expansion phase over the last 30 years.  Its priced for perfection.

The third company is Roofing. At the moment it has a P/E ratio of infinity because it loses money. Its not at its all-time high, that has come and gone. But someone still values the stock.
Look, the point is the Composite companies are all likely grossly overvalued (along with the NASDAQ 100). But the entire Composite is being literally dragged along upwards with all the high fliers in the 100 with tremendous historic volume. It takes more and more total Composite volume for the other 2400 companies compared to  the NASDAQ 100 to keep prices like the above 3 stocks elevated.

Added: Actually upon reflection, these stocks are perhaps already "peeling away" from the pack having already peaked.

There are not many buyers left for the 100. I think the rapidly declining volume ratio reflects that perfectly. And if the 100 stalls out, its over for the Composite as a whole.

Here is another analogy;

Think of the NASDAQ Composite as one of those old Northeast city water mains.  Huge water main that has a good size branch connecting to it, we'll call it the 100 branch. The people living on the NASDAQ 100 street want more and more water. They are expanding. But the pipe is only so big. The main branch (Composite) needs more and more volume of water to satisfy the 100 branch. But the main branch is developing a lot of cracks (unprofitable companies) and is losing a lot of water to waste.  In fact the 100 branch is also developing cracks and is losing water (is Tesla even profitable?)

So the total water volume of the main has to be increased to satisfy the insatiable demand of the people living on NASDAQ 100 street.  Every street connected to the Composite main branch benefits and also has more water available. But the cracks (unprofitable companies) are never repaired. They just keep increasing flow of water to overcome any substructure deficiencies.

So the total volume of water flowing through the main, which remember, includes the 100 street's volume, versus the total volume through the NASDAQ 100 street only branch is increasing.  Thus the total water volume of the main pipe (Composite) and the total water volume of the branch pipe only (NASDAQ 100) ratio increases (see green histogram bars at bottom of chart). And as the ratio increases (in reverse 100 vs. composite the ratio decreases) there are more and more cracks developing in both the main and now the 100 branch itself.

Thus to keep the flow going on 100 branch street tributary, they have to pump up the total volume in the main. The total water volume between the main branch and its 100 tributary start to become exaggerated.  If you're a technician at the water pumping station and your differential meter started to peg, probably an alarm would light up indicating there are major problems in the water piping network. But all the water technicians have been taught to just silence the alarm, that its no big deal, and continue pumping! So that's what they do.

At some point there are so many cracks in the main branch (Composite) and also cracks in its highly coveted tributary branch (the NASDAQ 100) that the system blows up completely.  The main branch buckles and water pours out. The NASDAQ branch is also overheated and cracked and over expanded far too fast and all the people living on 100 street wake up one day and there is no water at all.

Liquidity flows dry up completely and what do you think happened to the entire main and its 100 branch? They went thirsty and moved.

Friday, July 10, 2020

Elliott Wave Update ~ 10 July 2020

Last weekend's post was meant to try and find the NASDAQ peak.  We may have found it or are very close. The counts:

Looks like a hit on the trendline in Arithmetic scale.
2 hour scale in log is a bit short. If we get a final pop Monday, look for a hit in LOG scale on this chart.

Look at the double zigzag on the Wilshire. Repeating Fractals.
The past week is a mess which is one reason I don't usually count the Composite. But it sure looks like distribution again....
I could change the waves, put [i] somewhere else or whatever. It will still look like a mess so I'll leave it alone. However, what's nice is wave [iv] orthodox low finished beneath wave [iii] high. This is the final "bounce" point and in my mind indicates [iv] is finally over. 

What looks funny is most of the waves of [iii] occurred overnight and the big gap up. But it is what it is.
Now here is the kicker.  Perhaps the theme of "compression" is again rearing its head.

Yes, there are actually enough squiggles to count this as complete! We have perhaps again a huge wave 1 of (i) and (i) itself. Then i-ii and then [1]-[2] meandering in price and time. And then the acceleration channel takes off (over the blue base channel) and it gets compressed. The blue base channel line gets backtested which might be the (iv) low based on the backtest wave is the major four wave of the structure in question.

Squint, and you'll see all the squiggles. Of course this implies Monday opens breakaway gap down.
It would be a good spot since the Composite so violated the 10 year channel line.
And parked itself above all containment for everyone to ponder for 3 days. The RSi profile is a classic wave five peak on any scale. Double divergence and a trendline touch.
Nothing really changed despite today's rally although we had to move wave [ii] on the Wilshire and SPX - but again I expected that to happen in last weekend's post, in fact I thought it would have to move earlier than today.  Yesterday it didn't look like it would rebound so high, but I guess the 50/200 DMA crossover event has to flex its muscles. Just so you can ponder that all weekend too.
9 full days of trading is a perfect timeframe for the Composite based on our count and the theme of compression.
Oh and the NASDAQ 100's may have formed an Ending Diagonal triangle.  Was anybody watching this last 3 days how prices were laboring?  That's describes an ending diagonal and then final excitement at the end with overthrow. And its parked there for the weekend! Amazing.

Who was holding over the weekend at this peak is what I want to know? I mean sentiment is sky high there ain't many greater fools left to sell too.
SPX finished at the downtrend line. VIX pretty much did also.
There is still room for a pop Monday. Look, next week will likely resolve the direction of this market one way or the other. There is actually a smidgen of negative divergence in the RSI. Just a smidgen. But in a bear market rally that can be deadly.
The above was shown on the weekend post. It was anticipated it might be higher and would have the highest weekly close since the March low and might show a smidgen of RSI divergence. It barely missed the close but it probably has divergence.
 Ok here is something interesting.

Again a fractal of the entire rally:
Now just wave 5 but its labeled like the total rally. Looks neat huh? That implies the top trendline may be touched.
If we get an early rise Monday, 10,642 - 10,655 is where we would get an early double channel hit.  We'll know Monday depending on what the futures hold.
30 Day ticking down still. The "extreme complacency " line is not meant for the 30 DMA. Again, I use Wilshire to show that its extreme yet the market is not in alignment which makes it more amazing and focused on 1 index only it seems.
Its got the same kind of setup as the February high however the setup has actually shifted lower.

Elliott Wave Intraday 10 July 2020

This is the last option for a wave count that I can see for the moment. Its a maddening market huh?

The key is there seems to be triangle waves developing. There is another count that stretches it out and doesn't pop to the target until end of day. We'll see. Ideally Minor wave 5 of the NASDAQ takes nearly a full 9 days and today is the ninth day. 
Here is another version of the (w)-(x)-(y) construct. This works nicely too. May not get resolved today though with the way things are going.

Honestly it looks like distribution to the little guys. Who else is buying here in a historically overvalued market at the top - correction - outside the top of a 10 year channel line?

Thursday, July 9, 2020

Elliott Wave Update ~ 9 July 2020 [Update 6:15PM EST]

[Update 615 PM EST]
The Composite has been hiding its channeling where waves 1, 2, 3, 4, and 5 (any degree) connect on a channel or at least 1, 3, and 2, 4. (of any degree) or using an [a] or [b] wave within a corrective.

There is still room for a channel and a (v) wave move to our ideal Fibonacci range tomorrow morning.

Something screwy like this.  Again, unorthodox but follows rules and guidelines ok.

And do you like how the blue wedge lines were tacked on there? See dat?
The above could be labeled like this too. Rising wedge. Satisfying an Elliott Wave pattern, maintaining channeling guidelines, and hitting our ideal Fibonacci range. Then sell off for Freaky Friday.

I would suspect no other index is able to follow to any kind of pivot highs. This would be NASDAQ all on its own for about an hour or so. Say 10:30, which was my original projection time from my weekend NASDAQ post.
And the Composite daily. The craze has peaked. Volume ratios are waning.  And that's to be expected because volume is picking up on the sell side of the other indexes. Another good reason to root for a Friday peak is the uncanny compression going on.

The NASDAQ Composite's high today was 17 points from our ideal Fibonacci cluster of 10,594.8 - 10,601 range.

There are enough squiggles to complete the pattern as is. There is obviously room for one more squiggle to our target range first thing tomorrow. Again, for the third night, this would be subject to the whims of the overnight futures.

The NASDAQ Composite internals were horrible.   Decliners outpaced advancers by a ratio of 2.44:1. Volume was a 50/50 split between up volume and down volume.

And as happened at the peak of 3, the divergence between indexes was pronounced. The Wilshire has been making lower lows as is most every other index.
Fractured market.
This week's trading has done nothing to dampen the bearish outlook.
NASDAQ minis has a possible completed pattern also connecting on a channel.
Proposed wave 5 complete or nearly so.
Best guess count for the Wilshire is a small series of i-ii, [1]-[2] down. This is what occurred at the wave C peak while the NASDAQ diverged and kept making higher highs.
LOG scale. Then the 1 hour will be in arithmetic.
The hourly has slightly different touch points because its non-log scale. It uses both [a] and [b] of 4 l. But it has at least 2 trendline strikes last few days which is better than one.
Weekly zoomed in. Closed at about the upper containment line. maybe they try and gap it up over again to reach our ideal target?
I was going to show the Apple chart last night and was wondering if it would hit its upper channel line. I guess the question was answered.

I can't believe Warren Buffett has 47% of his Portfolio in Apple - A corporation who's success and failure is completely beholden to a Communist country (Um yeah, China)! - much like every other tech....

Portney was right. He is a dumbass.
Who keeps buying Apple? Oh yeah, Warren, that other rich guy they mentioned, and the ROBINHOODERS!

I got Gold in a series of ones and twos. So we are close to liftoff I suppose. Best guess.
Again, it seems to be steadily rising building momentum in a base channel almost to the acceleration channel up.
LMT, our proxy stock for the humongous defense industry. It just took out it's B wave low. This sector is a downside leader!
The much-anticipated 50/200 bullish crossover.  SPX did too.
Ok, have more later when data starts coming in.

Ok NYSE. This peaked like first few minutes Monday on the gap up. 
Best guess on the Dollar is its headed to the support trendline.  A huge ascending triangle, Watch for extreme bearish sentiment on the dollar as it approaches the line. The usual "dollar is worthless" stories.  Some day in the distant future it will indeed fulfill that legacy, but for now, it likely will be the grand champion of the proposed coming bear market. 

After all the other worthless paper, every bond, every IOU, every derivative of a derivative on this earth is exhausted (and converted to dollars), then the dollar will be the last worthless paper standing.  May King Dollar live on!  Only then will everyone realize the Emperor has no clothes either.
Possible squiggles.  Note the heavy trading internals.
This might be the best count for the 10 year yield. Or the triangle. But it may be forming a small series of ones' and twos' down also.
GDOW in a precarious technical position. Under its multi-year trendline after punching above it briefly.