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Wednesday, August 5, 2020

Elliott Wave Update ~ 5 August 2020

Posting perhaps the most important chart(s) and that is the NASDAQ 100 wave [v] of 5 of (5).  A very nice Fib relationship exists at 11,280. If we can nail the top of this, everything else will soon fall into place.

There are enough squiggles in place to consider it "complete" but we'll count it as if it is not. We may get some early weakness though so perhaps [iv] is labeled too early.
Also ok, here is the best 5 wave count for the Wilshire. Lets assume the wave 4 low is very near where the NDX 4 low was. Makes sense.
If the Wilshire (and SPX) wedge(s) are significant (and real), then they should trigger heavy selling pressure no later than tomorrow.
The Wilshire 5000 "feels" both upper wedgelines. Prices exactly gapped and stayed between them except for at end of day they slipped and then a furious close to the end of day put prices at the upper line again.

We may get a brief overthrow tomorrow, but heavy selling should then trigger if these are bearish wedges.
Closer look at the wedge wave (2) count. 

The Wilshire printed an open gap today.  Curious how that only happens on certain days. It's probably a conspiracy that triggers algorithms in the computers and creates retrace targets. In simple terms = all open Wilshire gaps are meant to be closed (just like the Feb gap down). And yes there are a several (huge) open gaps up from the March lows, mostly near the bottom. Sooner or later though, it will not work.

The Wilshire 5000 closed above the close of February 21st. The big gap down is finally sealed shut. However the SPX did not close it's gap down (3338) from February 21st close.

(There is actually another open gap even higher in the Wilshire from February.)
E-mini wedge. Could hit the top wedgeline overnight tonight.
Prices are into the gap down but not completely close just yet.
And the NDX count. Composite hit that magical 11,000 mark today.  And in this chart, the Wilshire is shown in arithmetic scale with the bigger wedge which shows slightly different than the log scale 1st chart above.

Classic extended fifth wave just like in 2011's count.
Reconfigured the squiggles to match.
We got the Silver pop today as expected.
VIX capitulating. But not yet completely. Sub 23 close. It also sports a wedge.
Apple squiggles. Due for one more pop higher to make it an even $2T market cap? If this triangle fails, its bearish. And, well, if it succeeds its also bearish!
Going to hold off on the Wilshire 5 of (5) wave count(s) for tonight. You know what they look like anyways. Lets see what happens tomorrow first.  Lets see how we end the week and this weekend, if warranted we'll explore all the possible options.
Nevermind, see the update charts.

Big rally in yields today. From overnight low of .508% to .55% today. That's about an 8% rally. In my humble estimation, a rally to only 1.00% may be fatal and trigger a negative feedback loop on the entire bond bubble. (Back up into the long 40 year price channel)

Ok Dan, yields have certainly rallied before why would this be any different? Well good question and a 2 part answer.  

1.) When you issue most of your debt at the end of a 40 year downtrend in yields at very lowest yields you can possibly imagine (or negative yields for a lot of the world!), it can only mean one thing: the end of the trend is near and yields can only go up.  

2.) Debt loads to GDP is now well over 125% (138%?) and rising.  Its actually much worse when you consider unpaid political and pension promises. Rising yields will mean lower bond prices which will induce higher yields in a negative feedback loop.  The debt load becomes very quickly unserviceable. You can't issue more debt to cover because that will only exacerbate the feedback loop (but they will try!). The system destructs or, more correctly, debt (credit - which is money) needs to be "retired" or significantly repriced with everything getting a huge haircut resulting in massive deflation. Which results in more deflation, defaults, bankruptcies, etc.

There is a point where income/debt ratio has shown to induce bankruptcy. In a household, 100% debt (excluding mortgage) to income ratio has always shown to be deadly. If you make $40,000, then $40,000 in credit card debt breaks you. If you make $100,000, then $100,000 in debts will break you.

Its fairly simple. And if you think of the US government as one big "household", then things are already past the point of no return.

Here are some more examples. I could just call it a Ponzi scheme and be very correct which it is. But the Fed has made it more like a shell game of "try to find the marble".  The reason they have so many "credit facilities" opened at once is so they can more easily play this shell game. Between the Primary dealers and the Fed, it has been remarkable that we have reached such a staggering debt/GDP ratio to begin with.

But in a shell game it only takes one screw-up to have the whole thing come unglued. Perhaps in another market panic and a round of bad mood, you have one primary dealer doing something they were instructed they should not do or decided they wanted to play their own shell game (which they all do to in the fractional reserve banking world). Because when social mood hits the fan, its every person (and bank) for themselves! And the system gets very unstable.

Another example is "check kiting". Yes, back in the day you could cash a $200 check on Monday thereby taking advantage of the time it took to clear the bank and use the money as long as you kept cashing checks every day and depositing the money to cover each check as it clears until Friday payday.  But lets say you get sick on Thursday and cannot get a check cashed and make a deposit. Then you're likely to bounce the 2 checks from Tuesday and Wednesday. You bounce $400 in checks and induce penalties with the bank and with wherever the check was cashed. So the scheme all unravels if you slip up just one bit.

And that is what the Fed is playing. A dangerous game of check-kiting and shell games. It only takes one slip-up. There are too many moving parts for them not to slip up. And the debt/GDP ratio is dangerously unbearable.
.41 print. They are relentless!
Ratios. One could figure the Composite:100 ratio was going to spike higher today and it did. You seen the upside pressure applied to get the Composite to the 11,000 mark and to try to close it over (they just missed).  There was intraday divergence. The NDX did not make a higher high after its early intraday high. Flowers was over $30 today!

Again, these are abnormal numbers and represent extremes. Yes they seem to be getting more extreme-er but that only lulls the viewer to sleep, not the danger underneath. The chart uses the 100 count for simplicity sake for both.
I love this chart. It is so elegant, I am rooting for a new all-time high so things won't be muddled anymore!

But I still don't think we get there! 

34,616.78 Intraday all-time high.
34,533.94 Daily closing all-time high.
34,428.34 Weekly all-time closing high.

Today's intraday high: 
34,093.7  - a mere 1.52% from the all-time intraday.

As you well know, this blog has been calling for a market collapse for the past few months due to the wave count(s). However, the count(s) still point toward that likely outcome very soon.  And it occurred to me that the market is probably just looking for a "news" reason to sell off.  If it was Coronavirus wave 2 or 3 or whatever, we would have already headed down by now.

I'll just throw this out there: Biden is due to pick his Vice President and if the pick is not a black woman, the market will probably sell off very hard. 

And if it is a black woman, again, the market is due to sell off hard anyways.  I think the timing will happen to be very, very bad for Biden's VP pick either way. And if it is a black woman and the markets panic, the Wall Streeters better batten down the hatches because it'll be deemed a racist market (which is silly because under Obama it did great). The dismantling of Wall Street may again become target #1 of the "Occupy Wall Street" (and now BLM) protesters for no other reason than that it is too "rich". (which it is I suppose!)

So either way, the VP pick timing is coincidentally at a likely major social mood inflection point.  But that's just the way social mood works sometimes.

Just a passing thought I had.  Maybe the day the pick is made we have a blow off top type up move and then crash.

Or maybe not. This is a social mood blog, so that's tonight's commentary on that.
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