World Indices Roundup - Jan/Feb 2018 Major Top?

Lot's of early evidence is mounting pointing to a potential important top in many world equity market indices.

It's very difficult to accurately call market tops. A much more challenging charting exercise than measuring & forecasting retracement lows but I am seeing enough to give me some conviction that a change is in the wind.

I have mountains of chart work dating back in some cases over a hundred years and to show you all my reasoning would be impractical not to mention confusing if you don't understand what you are looking at. I have chosen just a small number of the key examples to show here for SPY, XAO & XJO, DAXX and FTSE.


SPY




Have already posted in other threads potential top for SPY is likely in Jan/Feb 2018 and at the latest April at around 2700/3000. Fails if we see a strong monthly close above 3000.

XAO



XAO and XJO both tagging important line work at completion of an ending diagonal.


FTSE



FTSE also completing ending diagonal. Often these major tops will 'square' a previous major low price with an equivalent time harmonic - see chart above. Finding a price & time 'square' adds massive weight to the evidence. This one goes all the way back to the low after the 1987 crash!


DAXX



Daxx completed 5 wave set into typical price targets for end of wave 5. Also has a price & time 'square' from Feb 2016 low.

To put this in context the expectation is for a medium term retracement in the long term post GFC bull run. Too soon to gauge how long it will last and timing slightly varies between markets. Most evidence points to downside until at least October 2018. A normal length ABC correction to the SPY would take us through until 2020. 1 - 2 years down is quite normal in a medium term correction.

It may never happen Even if it does, long term investors need not panic, simply ride on through and look for bargains. I do not post this stuff to advocate 'trading', as a matter of fact I advocate quality accumulation based strategies for the surest path to wealth. Obviously key info like this can still help both psychologically and for finding good prices!!

For those who are looking to accelerate their wealth building with a little more active approach there are lots of ways to safely protect holdings and/or pile up the cash and take advantage of any dip.

No Advice, DYOR.

 

Gotta admire you Alex. It takes a lot of knowledge, experience, courage and confidence to make these calls in advance. As you know in the world of trading the great majority are hopeless and will only ever mention a rare winning trade after the event. So it’s great to see you as a trading professional share these calls in advance with us.

Some of us older retirees here including @SatayKing and @truong have become cautious more recently. I don’t know their reasoning but I base mine on some very simple observations. I stopped buying anything awhile back.

Of course when any of us say these things and are wrong others will delight in criticising us. But I don’t care, as retirees our SANF is all that matters nowadays. Hence I’ll only take on more risk when it makes sense for us to do so.

Note again we’re RETIREES.

 

Anton comments on the recent correction on Wall Street | Investors Mutual Limited

 

I agree. When you've won the financial game of life early and have retired, there's no need be greedy and risk bringing it all undone by investing more in toppy markets. Even being reasonably cashed up, my portfolio still managed to grow, after retirement expenses, by 7% overall last year which is more than enough for me.

 

Thanks Noddy, agree that the vast majority of traders are hopeless.

A lot of folks equate TA skills with 'trading'. My philosophy is that there is no such thing as trading vs investing - investing is trading on a long term basis (often this is mainly for income) and likewise, trading is simply investing with a shorter time frame in mind. A lot of the same info and skills apply to both and there are a heck of a lot of ways to use TA to give yourself a slight investing edge without adopting the stance of a full on 'trader'. Speeding up the whole process of compounding money is a function of analysis skills, psychology, money management and confidence - all things we should strive to develop if we wish to acquire our own personal licence to 'print money'.

The problem is it can look and sound deceptively easy, but it is most certainly not!! Trading (in the context of active day trading or even medium term swing trading) is one of the toughest skills to learn on the planet period. This is for 2 main reasons...

1. Genuine professional level charting skills are not taught openly in the public space.

After many years of searching I can assure you this is true, I personally had to knock on a lot of doors to find a true master of the markets to learn from. My mentor is one of the most eccentric characters you would ever meet and at first he didn't want to teach me, these guys don't give this stuff away easily! I persisted long enough that he eventually accepted my sincerity and then he made me practice on one concept for months before progressing.

In professional circles that the state of the art in discretionary charting is considered to be the use of market geometry and the Elliott/Andrews&Babson/Gann schools are dominant in this space. IMO it is almost impossible to learn this school of charting to an effective level from a book or course, personal mentorship is essential.

As far as non-discretionary chart tools (pop-up indicators that do not require skills to apply them), the concepts of relativity and statistical volatility I have found to be the most effective of these type of auto-tools. These 2 concepts when applied well, will also deliver an edge and have their own specialised set of chart tools. However they are not as close to 'perfect' as the geometry school and are more useful (to me) for filtering and confirmation of opportunities.

Most of the public don't realise how much human skill, training and knowledge goes in to marking up a chart. It looks as if the computer is doing the work for you but this is FAR from the truth in the discretionary school of TA. It can take years of training to produce even one correct Gann master chart. Many 'Gann school' students give up in disgust because it is so confusing and there are conflicting sources of information all over the web and none of them contain the truth of it which is that scaling is the key to everything and without the knowledge of how to use scaling, Gann techniques are worse than useless. Elliott is a far more understandable place to start from as scaling is not required

It's not easy to find a source to properly train and develop skills such as understanding how to calculate and apply the correct scaling, probabilities of various geometric & mathematical relationships, Fibonacci structure and how it relates to Elliott structure & predictive characteristics, how to use and interpret the complex master tools of Gann, and many other nuances of advanced charting methods. Typically when I come across a frustrated trader they are still only using a bunch of lagging indicators (because that's the 'easy' road to take!) and have no idea how to use or apply drawing tools, have no knowledge of Elliott structure or harmonics, have never heard of a median line or what implications it holds etc etc. You may have noticed on my charts there are none of the popular lagging indicators such as Moving Averages, RSI, MACD, Williams % R, Stochastic etc.

2. People often come to learn 'trading' with only greed in their hearts.

They MUST learn to over come their own greed and how to take sensibly managed risks. Sadly, again many early stage traders are blinded by greed and end up overleveraging or simply don't understand the importance of using an appropriate money management algorithm. That one principal will ensure that even if a trader has only mediocre chart skills they can still make a reasonable fist of their plan overall or face only a controlled loss that they have accepted as a possible outcome of their trading plan. Money management (position sizing and cash flow considerations) underpin all successful trading plans and the right kind of algo will help create exponential progress providing the TA skills are up to the task.

No advice

 

I like your work Alex, much appreciated

 

Dow Jones down 500 points today....

 

Looks like quite a correction. Asx 200 futures down 2.5%, S&P 500 futures -3%

 

Interesting. May have a look-see if there is anything worthwhile once I get back from doing more important stuff.

 

Make that 1100! Biggest one day point fall ever.
Let's see if Trump still takes responsibility for the stock market.

 

The only question to ask is what happens tomorrow .. The % drop is -1178 or -4.63%- and that is another mark for history..

Going by prior GFC disasters ,as this could well be the start of CFC MACH 2 ,might have to get the Clenlivet duty free triple cask matured by distiller Alan Winchester and watch what happens this morning in the ASX..

 

Maybe the US economy is not as robust as some of the PC members on here think... could be an interesting period coming up. It’s only a 5% drop so far.
How will those US house prices go if the stock market confidence takes a tumble? I’m sure lots of people still remember what happened to their property equity in 2008

 

Doesn’t matter what the cause or where it may go. Just enjoy the opportunity when it’s there.

 

Don't you think it is important to know the cause and where it may go to avoid catching a falling knife?

 

Nope. Have a plan and stick to it.

 

yea agreed, it is very hard to ascertain exactly what the cause is - and then even harder to try to price that for any given market.

The commentary seems to be that inflation/increasing interest rates have spooked this market. So, that suggests that the economy is going well and controlled inflation is the key isnt it? Amazingly, this has caught everyone off guard so a little correction is occurring. Who the F knows, and who knows where the market will go

All I know is that it has been over-heated especially since the election. Basic charting shows you this and it was unsustainable obviously. 40% odd increase since the US election - mind-boggling stuff!

I like at long-term, log charts and I think even a regress to around the 240 odd mark on SPY is still fine - heck long-long term trend could see it back around 200. Would absolutely love that, but I highly doubt that will happen.

 

@willair Are we having fun yet?

 

US Futures all over the place. Looking much less bearish than earlier today. I think these traders need to enroll in @Alex Straker’s trading courses.

 

Too early to tell yet Alex,still just the time to be a good listener ..At least the 3 CommSec orders went through
and there is still a few dollars left if it goes the other way..

 

Yep I hear ya, early stages yet