World Indices Roundup 2020

The uptrend continues, led by TSLA & APPL, and with the SP500 hitting an all time high. So far, the 21EMA has served as the boss moving average on the Nasdaq.

TSLA has screamed higher on the announcement of its share split. This looks to be the alpha leader, so one to watch for possible clues of what institutions are thinking.

August is often a weak month (with low volume) but we haven't really seen this yet (except the low vol).

We are now seeing a close-to-record uptrend in terms of strength and time. Amazing considering where we were just a few months ago. An outlier historically speaking, for sure.

As the indexes move higher, breadth is decreasing with strength concentrated in the large tech leaders (TSLA, AMZN, APPL, NVDA, etc).

Many other leaders have been making, or have made, shallow pullbacks near their 50DMA (e.g. ZM, COUP, NOW, DXCM, DOCU, CRWD, etc). It will be interesting to see how they move going forward.

US election ahoy.

 

Are we there yet?

Does this mean something to you? I said something, not someone.

 

Markets are like old men. They can walk a hundred miles, so long as there's the occasional park bench to rest on.

Here's a time count I've been monitoring. XJO made three failed attempts to push through the 9 June 2020 high. One at 173 days from the February high, the next at 181 days and the last at 183 days. The average of these is 180.3 days. Time counts of 30, 60 , 90, 120, 150, 180 etc. are often important in markets. Time may just be up for XJO.

 

On both weekly (higher) and daily (lower) time frames, it's hard to argue the old man isn't puffed.

 

Looks like its finding resistance (while tightening up) at the 200 day moving average. If it breaks above that convincingly, it could be a bullish clue. It might not, of course.

The 50 day MA coming up from below is something to watch too. It found support there previously.

 

CRM broke out on its earnings. This ignited the software sector leaders like COUP and NOW. CRM is also joining the DOW.

AAPL and TSLA split today. Excessive stock splits can potentially put the dampers on a stock. It will interesting to see the effect on these two in the weeks ahead.

Earnings for ZM and DOCU this week - two COVID leaders to watch on how they react to their earnings.

 

Regardless of the wave count DJI looks as if it's close to exhausted on both the daily and weekly time frames, just as they fiddle with the stocks that comprise it.

 

The Fibonacci sequence was all about breading rabbits.
Maybe you didn't read the book so I will enlighten you.

Fibonacci was trying to work out the formula for breading rabbit numbers.
The number 1 at the start was used arbitrarily and wrongly used to start the sequence.
You cannot bread with one rabbit. The #1 does not exist in a rabbit breading formula.


So the formula you are using is wrong.
Maybe if you had the right formula you could actually trade your numbers and theories.
Yet I have not yet seen anyone actually trade profitably using Elliot Waves and any type of Fibonacci.

50% is though a number Gann nagged on about endlessly, so if you follow his teachings then it's important.

When measuring ranges any division can be used as a yardstick.
Gann and Elliot us the empirical system of 1/8s, 1/12s, 1/16s.
Using a decimal system is no different when is come to measuring ranges.

 

I'm down 2.5% so far today. Is this the beginning of the end?

/sarcasm

 

Thanks for the post @Piston_Broke.

Just a quick response on the Fibonacci number sequence. Yes I have read the book, of course not the original 1202 manuscript Liber Abaci but a modern reprint.

I'm afraid you have simply not understood the example of the rabbits breeding. It's about one or 1 pair of rabbits and how that pair would multiply. It is not about one or 1 single rabbit.

I don't have access to the book at the moment as I'm away but the following is taken from wikipedia:



I really don't want this discussion post (or others) to be a forum where you, @Fargo and some others persist in simply criticising the ideas, concepts, theories etc. put forward. The title of this discussion is "World Indices Roundup 2020" and your post and my response add nothing to that. You and others have the right to express your views but you're really just hijacking this discussion topic. If you're that anti EWP and or Gann simply go and start a separate discussion and post away.

 

@mtat Just a quick response. My take is that XJO and DJI have reached the end of the rally that started in March 2020. No comment on other markets e.g. NASDAQ as I do not maintain charts for them but XAO and XJO are like twins.

The change in trend means different things for XJO and DJI in terms of their Elliott wave count as they are simply different markets. I will post in more detail later.

 

Ooopps Don't worry, Sky not really falling ..... must remember not to look at charts while standing on head.

 

DJI /DJIA update.

I have updated my chart to reflect my current understanding. The key points are:

• The period from the January 2018 high to the March 2020 low is labelled as Intermediate wave (4), a corrective wave.
• Intermediate wave (4) took the form of a "flat", a corrective structure, that subdivided into three waves, Minor waves A, B and C which included a new price extreme at the Minor wave B high.
• The rally off the March 2020 low is impulsive, subdividing into five waves (Minute waves ((i)) - ((v)) ). Given the context, this means it is not part of a corrective structure that is retracing price and it is part or all of Intermediate wave (5). In other words the dominant trend off the March low was up, or in simple terms the rise was part of the bull market resuming.

I don't believe the rally off the March 2020 low is all of Intermediate wave (5). If it is, GFC II may well have started with the DJI's overnight fall. I believe, as is consistent with previous posts, the real peak is due 2026. Adopting this context, the rally off the March low is just the first Minor wave of Intermediate wave (5). Within that Minor wave 1 I am able to count five smaller waves, so it is possible to label it as technically complete, so a larger correction than those which occurred during the rally off the March 2020 low is now due. My previous posts warned of waning momentum. The correction would normally be expected to be deep, in the order of a 0.5 - 0.618 retracement of the advance. This is a range 22410.19 - 23706.50.

 

I have posted some ideas here on residential property that may be of interest:

Australian Property market chart: Technical Analysis

 

Oh thank god. For a second I was worried I'm going to have to buy some gold (shudder)

 

XJO long-term wave count.

In previous posts I have discussed triangle patterns and by way of example showed the Shanghai Composite index which has been in a clear long-term triangle since the high of 2007. There is the possibility that XJO (and even XAO) is in a long-term fourth wave corrective triangle. However, if this is the case then it's not a text book example but it can't be discounted on this basis.

The pattern may not be a triangle and be a pattern that is complex in form. In simple terms, this means it could be three or five standalone corrective structures in sequence. Such structures are extremely difficult to navigate because you see a corrective structure as complete...but the assumed trend post the first corrective structure does not resume. It becomes a case of but wait there's more!

What I have done is recast my long-term wave count assuming a simple triangle is playing out in Supercycle wave (IV). In simple terms, Supercycle wave (IV) subdivides into five waves of a triangle, Cycle waves a, b, c, d and e. This is shown in the chart below. The chart is conceptual only and not meant to show price or time points.



More posts to follow.

 

XJO March 2020 low - present.

Below is a chart that shows how I label the rally off the March 2020 low. Within the context I have set the rally is a counter trend wave. In other words, as the rally was up the dominant trend is actually down and the rally was just a reaction to the down trend (with more down trend to follow after the rally). The key points are:

• The rally from the March 2020 low is labelled as Intermediate wave (A), a corrective wave, however, there is at least one alternative wave degree that could be assigned to it.
  
• Intermediate wave (A) would be part of a larger wave, Primary wave ((B)).
  
• Intermediate wave (A) took the form of a "zigzag", a corrective structure, that subdivided into three waves, Minor waves A, B and C.
• Intermediate wave (A) is labelled as being complete, although it may not be. It is within the range of an extension 0.786 - 1.0 x Minor wave A measured from the end of Minor wave B to give the length of Minor wave C which would also be the end of Intermediate wave (A).
  
• Minor waves A and C each subdivided into five waves, Minute waves ((i)) - ((v)).
• Minor wave B subdivided into three waves, Minute waves ((a)), ((b)) and ((c)) (not shown for clarity)
• Minute wave ((iii)) of Minor wave C subdivided into five waves, Minuette waves (i) - (v) (which are shown).

It is possible to label Intermediate wave (A) as three clear waves up at Minor degree, so it is technically complete. It could extend slightly further, time will tell. Above I said that Intermediate wave (A) could be assigned at least one other wave degree label. It is possible that what is Intermediate wave (A) is actually all of Primary wave ((B)). This is just achieved by rescaling. Minor waves A, B and C would simply be assigned a wave degree one level higher, i.e. Intermediate degree. The completion of three Intermediate degree corrective waves would thus (normally excluding complex corrections and triangles with five overlapping waves) conclude a wave one degree higher, i.e. Primary degree.

Labeling price waves is an iterative process. A wave count is an interpretation at a given point in time based upon available information. Wave counts adapt to what unfolds.

The next post will discuss some ideas of what may come next.

 

The leaders got smoked. It looked like rotation early in the morning into old world stocks but turned into all round selling on volume.

It was one day of action only, and we’ve had shake out days in this rally before with the Nasdaq then finding support at the 21 EMA.

However, some things I’m keeping in mind:

• This rally has been in the 98th percentile in terms of length in time
• The Nasdaq just hit its long-term upper trend line
• Leaders like TSLA, DOCU, and ZM are having volatile moves (potential climatic); and APPL and TSLA have split.

Its 2020 and anything came happen.

 

Before I continue, a brief update on DXY the US Dollar Index.

As previously posted the US Dollar Index has been in a persistent down trend. This has been the case since late March 2020. At the moment the big money or smart money "commercial" traders of US Dollar Index futures are holding a rare record net long position. In other words, they are betting the US Dollar Index will strengthen, even though it has been declining.

Every futures contract is simultaneously one long position and one short position, held by different parties. So, the "non-commercial" traders or large speculators are holding a record net short position. In other words, they are betting the down trend will continue. The "non-commercials" is the group that follows the trend in the market.

So, what's the importance of this? Well, one group will be right and one group will be wrong. When these record positions emerge, they often signal a trend reversal is approaching. It is usually the "non-commercials" that are on the wrong side.

DXY fell to a new low of 91.746 on 1 September 2020 and has moved up from this point. At this stage it is too early to call that a reversal in trend has occurred. The DXY rising is usually bearish for Asian equities. The chart below shows DXY moving down in Minor wave C of Intermediate wave (B). Minor wave C has subdivided in five waves, Minute waves ((i)) - ((v)) and Minute wave five is shown as subdividing into five waves, Minuette waves (i) - (v).



The "non-commercials" make the same mistake that the typical man (or woman) makes in financial markets. They mistakenly believe that the trend ahead will be the same as that in the past.

For example, on the ASX the shares of the BNPL companies like Z1P, SZL, APT etc. have absolutely been rocketing. Many, many holders are wedded to the idea that the parabolic trend up in prices will continue indefinitely. These holders claim "...they [the companies] are the future...". They are blind to the possibility of a significant high forming and a reversal in trend occurring. They mistake market weakness (a buying climax) for market strength. Z1P holders were trapped in this situation last Thursday morning. Shares peaked in morning trading at 10.64 and fell close to 40% over the next few days. Those that didn't sell into the high are now clinging to the hope that prices will recover. Will the shares recover and go on to new all-time highs? It's too early to say.

 

Very curious to find out how/where do you check for the long/short holdings of different type of traders?