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Tuesday, December 8, 2020

Elliott Wave Update ~ 8 December 2020

Our primary count seems to continue to work out nicely and seems to align more or less with the Electoral College vote on the 14th. We are looking for the top of wave (iii) of [v].

Here is a more detailed look at proposed waves [iii], [iv] and [v].  Wave [iii] was a huge thrust upwards of uncovered gaps resulting in another breadth thrust "event" (as what happened in wave [i]). 

Wave [iv] clearly consolidated those rapid gains in a stealth consolidating triangle. Wave (b) would be considered the complex wave within the triangle. 

After breaking upwards, there was a successful, brief backtest of the triangle breakout that resulted in wave [v]'s advance. Note that wave [v] has been less steep than [iii] and careful to cover its open gaps for the most part. This is typical late stage wave [v] behavior. Slow, steady yet sentiment gets to an extreme which is what is indeed happening. 

Since wave [iii] was not the shortest, wave [v] is free to range as high as it requires.
The above reasons spells out why the primary count is what it is. The most bearish count is that today was the top or nearly so. There are enough waves in place and a mini-wedge going. But it doesn't look or feel right so its probably not correct. I only show it because its a neat little wedge and there are enough squiggles in place as is.
And we have the variation count in that the entire rise from the election in early November is actually only wave [iii]. Again, this would suppose a lot to happen between now and late January. Sentiment extremes are happening now.  We can't presume that things will play out this way but they might and its the best option if we get a top in late January near Inauguration Day (January 20th).

Here is the NYSE Breadth Thrust chart. I use the Wilshire so that I can be illustrative of the overall count. The NYSE is practically uncountable as an impulse there are violations. But there is a reason I use the Wilshire, it reflects the total market (thus in my opinion the best chart to use for counting waves).

This chart also supports the overall count. We see an unusual thurst cluster back in June indicating (in retrospect) the strongest part of wave (iii). We see a breadth thrust event for wave [i] of 5 - in fact nearly a Zweig Breadth Thrust event (10 days or less). And then we see that event followed up by a negative event. Highly unusual!

And then in the proposed wave [iii], we see yet another positive event following up the negative event which followed the nearly ZBT event!  And all this happening at VIX +20 and CPCE readings in a historic never before seen setup. Its the market going absolutely bonkers.

We have a steady diet of high readings for wave [v], there has yet to be a "washout" day or so, and the market is setting itself up for a MAJOR heart attack as a result in my opinion.

Simply put, if we have a sharp move lower and breadth dips beneath the .40 line yet again in a swift amount of days, then I'll tell you, this is a hugely dangerous and unstable market. But you know that already.
Apple Update. The stock seems poised to break higher in [iii] of 5 up.
I usually don't pay a lot of attention to the Industrial count. But it is in an unusual looking pattern.  Wave 4 does not match the count of wave [ii] of 5 on the Wilshire (and that's just fine), so its throwing us curveballs.
Yesterday's CPCE data. I don't know if the 90 day moving average has ever reached the complacency line. Again, this is "lemming" behavior at an extreme. We see it throughout society, everyone is just trying to "keep their head down" and for the most part, "going along to get along".  The markets reflect this sentiment. Everyone has gotten long, and even if you think its coming all unglued, you have no choice but to do the same!
Here is another example. JUNK DEBT, all-time high! Yet anyone with half a brain there will be hell to pay. Commercial properties are already in distress.

Everything has been deferred though. The exemptions generally run out at the end of December.  Tens of Billions in deferred payments and rents and obligations of all sort. Sooner or later there will be a day of reckoning.

We are experiencing our own "madness of crowds" moment. Most refuse to see it nor are capable.  When they were selling tulips at astronomical prices, it made sense back then too. Until it didn't.

Anyway, I have Junk a count - it aligns sort of with the Wilshire's.
The entire world is caught up in a madness of crowds moment.
I haven't shown GOLD since counting squiggles to its all-time high. The price action since then is ambiguous. At any rate, its my opinion gold is tied to the fate of the stock market.  If the market holds up through January, Gold could very well have another run toward a higher high. If the market breaks down they could very well throw the baby out with the bathwater so to speak and gold gets hammered.

The same was thought back in 2011 - 2012 in that it could make a higher high after topping above $1900, but it kind of oscillated in a high range and then eventually broke down. Same could be happening here.  Either way, I have no strong opinion on the matter. I was bullish toward its $2100+ peak, and now I am not so.

I don't have a good squiggle count, but this long range count works just fine for now.

My Lockheed Martin proxy for the huge defense industry (and thus one of the major sources of high paying jobs that have yet to be affected by COVID) has been floundering also. In fact, the price action over the past month (or 3) does not inspire confidence. 

Its the kind of price action in which you hold onto hoping and wishing for the best. Not anything super bearish to scare you only to keep you locked into the stock. And then WHAM! it spikes downwards causing a reaction.

Of course this is tied into the overall market also. But it seems more bearish than bullish. 
Ultimately the fate of the bond market will control the fate of stocks. The 10 year yield is making steady progress in perhaps a series of stair stepping wave ones and twos. We have yet to have a "surprise" moment  - which would align with a "third of a third" up. 

All those deferred payments cannot afford higher interest rates. Its all going to blow sky high, Krakatoa-style. 
And of course the mighty dollar. It broke beneath its trendline yet it is still above horizontal support $89. Bonds will be worthless before dollars. I know everyone likes to say the dollar will be worthless first, but no one pays for food in bonds. In fact, if you sell your worthless bonds what do you get in return? Yes dollars!

In the coming great collapse, I am anticipating the dollar to double in value from here before all is said and done. The great deflationary collapse will see your cash look like King. But not forever.
30 year yields. Knocking on the channel underside again. 

I don't think team Biden will give a shit one way or another whether the stock and/or bond market collapses or not.  I truly don't say this from a partisan manner at all. I just think it is not their priorities so to speak. I don't think Kamala gives a rat's ass about the fate of Boeing's 401K for example (and should she? - probably not!)  And Joe has clearly lost mental capacity in the last 4 years and I dare say may only be a figurehead. In fact, I don't even give him a year before he gets pushed aside or health problems cause him to step aside.

And you know Trump will be screaming from the sideline saying "I told you so". 

So get out while you still can in everything. Guns and cash under the mattress!

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