World Indices Roundup 2022

The Nasdaq has now corrected 15% from its highs. Stocks that have been resisting the selling (F, NVDA, etc) have now started to break down. The intraday volatility is consistent with a bear.

The stocks which led the last bull phase are unlikely to lead the next. Stocks with strong growth and liquidity which show relative strength during the correction and setup the right side of their bases are the ones which are likely to lead - when the market conditions are right.

Quick rallies, or big up days, happen often in bear phases. The clue to a new bull leg will be the potential leading stocks setting up underneath the surface.

 

I might be a bit late to the party but I've just switched my super to 100% cash.

I had some good gains after doing this just as COVID-19 hit in March 2020, and then bought back in after the market started to rise again.

Not aiming to do that again necessarily, but I'd rather preserve my gains if I can and wait another month or two to see what happens. If I miss out on a little bit of growth I'm ok with that - can't see the meteoric rise of last year happening again this year but what would I know? Markets seem pretty irrational to me sometimes.

Too many questions up in the air for me - superbubble, Russia/Ukraine, interest rates etc.

Not advice, and I am very much doing this based on a 'vibe' rather than any deep understanding of the markets.

 

Gold approach the high of the handle in its monster cup.

 

SPX long-term 20+ year wave count from 2000 high

 

thanks Kitdoctor for sharing your crystall ball and please continue .. I'm a big fan of yours and Alex's posts

Looks like the GFC2 drop won't be as big as the GCF crash ? Only about 32% from peak which is similar to the 2020 COVID drop yet it will take about 4years to recover ?

 

The lower trend line drawn through (A) will be the approximate lower limit of GFC2. Note I'm not saying it has to meet this line. The trend line through (A) is constructed by drawing a line parallel to the (B) - (D) trend line. What form (i.e. wave pattern) GFC2 takes is unknown. I have just shown one possibility, a contracting triangle.

As I have said before don't attempt to measure price, time points or duration from what is simply a far distant conceptual representation. There are limitations working with TradingView i.e. I'm trying to draw a wave pattern that looks realistic in a snapshot picture, however, on TradingView the time scale of the X axis is quite compressed, so I'll exaggerate the wave pattern for clarity. What is important are notes I'll add to a chart e.g. "mid 2026".

 

Since this post, we've entered a bear market in US stocks. Bear markets have sharp and violent counter rallies so can be tough to trade in both directions. But they also setup the next bull market.

Growth stocks outperform in a bull, and under perform in a bear.

The next bull market will come when the crowd least expects it. Watch for stocks with strong earnings and/or revenue growth setting up underneath the surface for clues.

 

Good news and bad news...first the good news. My short-term charts and preferred count for SPX suggests the worst of the decline is over. The decline, Minor wave A, could be a flat (3 wave corrective structure where the C wave divides into five waves) comprising Minute waves ((a)), ((b)) and ((c)) where ((c)) is five waves. A nice level for it to finish around would be 3766.59 where the length of Minute wave ((c)) is 1.382x the length of Minute wave ((a)). This would fit nicely with the bigger picture where Minor wave A is the first wave of a larger triangle. There are some alternative short-term counts that would see lower levels reached.

 

...and the bad news. My long-term chart suggests the COVID rally of 2020-2021 ended in January 2022. This concluded Minor wave X which I originally thought would resume following a shorter and less substantial decline. With Minor wave X now finished a final corrective pattern (e.g. A-B-C, A-B-C-D-E etc.) will now play out and take SPX through to complete Intermediate wave (E) marking an important low around 2027/2028. My forecast is that this final structure will be a neutral triangle (A-B-C-D-E) where Minor wave C is the longest.

When Intermediate wave (E) finishes this will conclude the larger structure comprising Intermediate waves (A) - (E) that started at the 2000 high. After Intermediate wave (E) finishes a true bull market will begin.

Since the low of 2009, although moving higher over the long-term, SPX has been in a bear market rally. In other words, grinding slowly higher working against a powerful, dominant (think underlying and invisible) trend to the downside. The simple way to identify the underlying trend of the market is to identify the biggest/fast moves. These occur in the direction of the underlying trend. So, the collapses off the highs of 2000, 2007 and 2020 are to the downside, so the underlying trend since the 2000 high is to the downside. The drawn out, time consuming moves are counter trend moves. So, why has the market moved higher then? There is no Elliott or NEoWave rule that requires a correction to finish lower than where it started. Only structure determines if a pattern is a correction. When a correction finishes higher than where it started (when the long-term direction of the market is up) it's known as a running correction. In a running correction, the counter trend move/s (e.g. a B wave) drag a market higher so, for example, wave B ends higher than the origin of wave A. Such a correction is signalling extreme future strength in the market once the correction concludes.

 

With XJO the situation is less easy to understand as there is inconsistency between my long-term and short-term analyses. Normally in such a situation the long-term analysis is the one to be guided by.

The short-term analysis suggests the COVID rally ended in September 2021 (maybe August). However, there hasn't been a violent, large decline needed to confirm the end of Minor wave B. Instead, a sideways, expanding triangle has developed, Minuette waves (a) - (e), with (e) yet to finish. Minuette wave (e) should fall below the end of Minuette wave (c) if the pattern is an expanding triangle.

An explanation for this expanding triangle is that this is Minute wave ((x)) which suggests another corrective structure comprising at least Minute waves ((a)) - ((c)) will play out before Minor wave B finishes. I can't say if this next corrective structure will take the market beyond the current all-time high. It might simply regain some ground then lose momentum as it approaches what is the true end of Minor wave B and then a far more substantial decline Minor wave C will commence which is what the long-term forecast suggests should have already started.

 

Below is my long-term analysis for XJO which shows the preferred wave count. This chart has a lot of detail hidden that shows possible alternatives. It would simply be too confusing to try and discuss the alternatives and their pros and cons.

The preferred count is a large neutral triangle Intermediate waves (A) - (E) that started at the 2007 high. Intermediate wave (B) was a drawn out, time consuming bear market rally ending at the 2020 high. A problem with the count is that Minor wave B of Intermediate wave (C) has exceeded the high of Intermediate wave (B). This indicates strength to the upside which should then be followed by a weak Minor wave C which should not exceed the end of Minor wave A of Intermediate wave (C), whereas I have shown Minor wave C ending lower. Intermediate wave (C) needs to be larger than Intermediate wave (A) in a neutral triangle. A violent, fast decline has yet to signal the start of Minor wave C of Intermediate wave (C).

To fit with my long standing forecast that the residential property market will conclude its cycle in 2026 I've shown Intermediate wave (D) finishing in 2026. This is not an absolute requirement and the stock market and residential property market will not finish their runs at the exact same time.

 

Here's one alternative count for Minor wave A. Instead of comprising three Minute waves ((a)) - ((c)), it could develop into a seven wave structure Minute waves ((a)) - ((g)). This count assumes Minute wave ((c)) is over. If Minute wave ((c)) is over then there is good time similarity between Minute waves ((a)), ((b)) and ((c)). This is suggesting a structure where there is time similarity between a number of waves, for example a diametric where time similarity exists between at least five of seven waves.

 

The low of Minute wave ((c)) has been taken out, so it is possible to conclude Minute wave ((d)) is over. Minute wave ((d)) did not adhere to the time duration to maintain similarity to Minute waves ((a)) and ((c)), so this rules out the option shown above. It's more likely a triangle is forming, probably a neutral triangle. If this is the case Minute wave ((e)) must be shorter than Minute wave ((c)). Hence the level of 3470.81 must hold.

 

Perhaps some form of bottom forming here but no real right side of bases of leadership potential stocks have formed as yet, which means it would be prudent to wait and observe.

 

We are starting to see some positive reactions to earnings and stocks carving out the right side of bases. However, the market is still tricky for breakouts and it is a hard trading environment. This could be a bear market rally to the 200 daily moving average, or we may need more time for stocks to setup their bases before a true bull sets in.

Solar stocks are leading this move. ENPH is the leader.

 

No love for this thread

 

Not much to do as the bear grinds on. But what happens after a bear market ...



From: https://mobile.twitter.com/Mayhem4Markets/status/1585930340270755840

 

We are still in a bear market. The SPY can't stay above the 200 DMA and stocks under the surface are not acting well. Lots of breakouts that pop then get sold down. Very few, if any, growth stocks setting up.

 

From:

 

June 14

LATEST UPDATE XJO Subsequent price action (which is now labelled as Minuette wave (c) of Minute wave ((b)) told me that Minute wave ((b)) was not over as per my chart in the last update. Minute wave ((b)) was a neutral triangle where Minuette wave (c) was the largest wave. I'm now waiting for Minuette wave (e) to finish and then XJO will commence Minute wave ((c)). The black box is a worst case time duration for Minuette wave (e). I believe it will finish before this.



8 August 2023

We now have the advance faster and bigger than Subminuette wave x and Minuette wave (d) on the 450 minute chart (approx 1 week timeframe). However, it's easy to see that the current advance won't exceed Minuette wave (b)'s size and pace. Whilst not ideal it doesn't negate the possibility that Minute wave ((b)) is over. A change of trend can take place not technically achieving all levels of confirmation. This can only occur if the new trend takes on an expanding pattern (e.g. diametric). We must wait and see what happens in the next week or so and how severe the next down move is.



19 August

So there's been a real change of sentiment and the next downturn has seen XJO deteriorate. As the advance has collapsed I believe an X wave is underway. The X wave must be at least the duration of the shortest wave of the prior A-B-C and as can be seen it isn't at this point, so this would mean it's not finished. Another A-B-C must complete after an X wave, so I see XJO continuing sideways for a while, essentially up and down but going nowhere.