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Friday, July 31, 2020

Elliott Wave Update ~ 31 July 2020

The contrarian in me wants to think the market is going to rip a huge open Monday gap down right from near the spot where it did it in February and create yet another unclosable gap down.

WILSHIRE COUNTS:
Three preferred squiggle counts. 

1. Most bearish. The reason there may be a mega-gap down Monday is because Europe may be breaking down very bearishly.  This was shown on yesterday's post on the DAX and CAC and today's Europe action seemed like a small relief rally. If selling picks up in earnest that will likely effect Sunday/Monday futures. Or not. But its a concern if your long into the weekend here.
2. This count is a Monday effort to close the February gap down. Remember it has been stated on this blog many times that if this is wave (2) the February gap down shouldn't close all the way. So far that has been true.
3. The 5 wave count to challenge new highs. The "start" for 4 would be the recent channel line hit.
How many realized this is the highest monthly close ever for the Wilshire 5000 and SPX? Yup. And its July so its the highest quarterly high ever also. duh! brainfart, nevermind.
VIX. Never seen a more stubborn VIX! The bearish pattern comes to an end one way or another Monday. 
DAX. Again, if that was an ending wedge, prices likely need to collapse quite a bit more. 
INTRADAY
Caught the bid at the last price channel trendline. Probably upside surprise coming Monday.
Facecrook and Crapple. FB looks like a wedge with overthrow.
Apple probably missing a squiggle or 2. Looking for a channel line strike (or 2).
 
POSSIBLE NDX COUNT. This would match any final squiggles up in Apple come next week. There are lots of ways to label the NDX but if we get another high, I'll go with this due to channeling and because it makes the most sense.
CPCE and Ratios. The last "selloff" was very relaxed. 
Ratios. The ratios dropped.  That could be a clue that a storm is coming. Or not. Just thought I'd throw that in there for excitement. But seriously, the computers shifted a bit over the last several days....Probably just confirms a lot of the total volume occurred in Apple and a select few other NDX 100 stocks that doubles up in 2 ratios (NDX and SPX) was getting the bulk of the volume action today, and hence the ratios dropped.  But so did the NYSE finally. 

Probably a bearish sign all around!
GOLD. Still like the $2020 mark. 

10 YEAR YIELD
I had assumed yields would collapse when equity prices collapsed but that's not the case. This "bull" market mania is buying everything in sight.  Stocks, Bonds, Bullion, Digital Currency, Select Real Estate...

The only thing that is selling is...King Dollar.  And guess what registered an 8% Daily Sentiment Reading according to Elliott Wave International? Yes the dollar. Guess what's ready to rally?

OMG, this market is so dangerous. If equities AND bonds AND Bullion AND Digital Currency AND real estate ALL sell in the coming collapse its surely game over.  A cascade effect could occur in the bond market and interest rates could get extremely volatile. This volatility may even trigger the quadrillion? ($250 Trillion ok?) dollar interest rate derivative markets ...Holy crap!  And with many bonds worldwide in negative territory, things could get squirrely. 

Intraday we had a lower low today in the 10 day yield. 

Elliott Wave International just reported today that the ICE BofA MOVE Index, a measure of implied bond market volatility, just reached a record low. This is an extremely "calm" bond market and it implies a "relaxed" sentiment as if bonds would never sell. After all they have been in a 40 year bull market, probably everything is just hunky dory and Fed has our back huh? LOL!
Ok this goes back as far as Stockcharts lets me. You can pretty much see the top of yields in 1980ish. Elliott Wave International mentioned the "duration risk" and I had to look it up to better understand. 

Based on what I read, my assumption is all the debt issued since March is at extreme duration risk due to the low yield it was issued at. Basically anything under the channel. But that amount since March (and its a lot of debt piled on!) might act like a trigger to the entire debt bomb. Which may set off the interest rate derivative bomb (you do remember those from 2008 yes? - they are still there!). There is a reason banks are selling below book value...

I'm just a regular Joe Schmoe here, but this chart looks like a "buy" for yields pretty freaking soon.

 

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