Are We There Yet? A Market Top ExposeAfter re-calculations and re-assessing, I think I am ready to move forward. I have moved off my position that the 2022 correction was a Supercycle 2 correction and macro market top. I would be on the bandwagon the market is primed to move up indefinitely if not for the massive amounts of debt and cautious discretionary spending. I am still in the camp of prices and wages requiring a re-balance. Companies will have to lower their prices to meet customers at a more realistic price point. The companies that fail to get to that price point will go out of business.
I am settling on the side of Supercycle I ending very soon and a larger corrective Supercycle II will take hold next. I am at this position due to the location of important wave 3s in the following chart:
My wave 3 indicator at the bottom will paint a light blue background at potential wave 3s. Close gaps between painted backgrounds are common at wave 3 of 3s as is observed by the yellow line around August 2021. The strongest point on the RSI and my wave 3 indicator generally occurs at wave 3 of 3 of 3 (and more levels of 3) which occurred with the white line in January 2018. Additional wave 3 indicators occurred in late 2013 and early 2014 which were likely in the fifth wave of Cycle wave 1. Based on this premise, Cycle wave 3 likely ended in January 2022 and the October low was Cycle wave 4. This would put the market in Cycle wave 5 currently. Cycle wave 1 lasted 5-6 years, while wave 3 did the same. Cycle wave 5 does not have to last long, but there is always a chance it does something similar. Currently, we are just over a year and a half into this wave which may be too quick for it to end.
So far we can see a 5 wave structure on the weekly chart. In this 5 wave structure, wave 1 had a wave extension, likely indicating waves 3 and 5 will be shorter in length. The wave 3 indicator has a gap between painted backgrounds in March of this year indicating this was possibly wave 3 and wave 3 of 3. Wave 4 likely bottomed with the low in April. This would place us currently in wave 5. The main question is if all five of these waves are Primary waves inside of the final cycle wave or if these are Intermediate waves inside of the First Primary wave.
The pullback in consumer spending has me believing we are closer to the end of a major cycle instead of in the early stages of a multi-year bullish cycle. Additionally, even though the year over year inflation rate is no longer as high of a number, inflation has not actually declined yet as prices continue constantly go up. Furthermore, the year over year inflation rate remains higher than the year over year retail sales numbers. If things were healthy as the talking heads make it seem, retail sales rate should be higher than the rate of inflation as this would show people are spending more money than they are losing to inflation. This is not the case which is why I think a major re-balancing (and yes recession) must still occur. I could be wrong as I have been, or my inaccuracies have been delayed to this point.
In trying to identify the current wave 5, I have switched over to the SPX500USD chart to find potential wave 3s and 3 of 3s.
The major wave 3s in this fifth wave are identified by the vertical white lines. It looks like the wave extension once again resides in the first wave. Wave 3 of 3 for wave 1 was on May 7th. Wave 3 of 3 of 3 was on June 6, and wave 3 ended on June 12. If these are true, the major fourth wave likely ended at the June 14 low. This once again places us currently in the fifth wave. This is the fifth wave of a wave 5. The question remains as to how large will the next correction be. The current top on the SPX500USD chart is 5530 from June 28th, but it will likely change before week's end with potential decreases in holiday trading volume.
On the main chart, I have plotted out potential Fib levels (noted on the right side) for a fifth wave extension if Cycle wave 3 ran from the 2016 low to the January 2022 top. 123.6% of this movement is where we currently are and can be a potential major wave 5 end point. The next Fib of interest would be 138.20% which is near 5967 (indicating much more bullish activity ahead). Regardless, a downturn is likely coming soon. If it starts within the next few weeks, the bottom could occur within the next 2-3 years. If the market blows past the current top, we will likely have a few more years of upward movement followed by a 3-5 year drop thereafter. A large drop now will not be great, but the economies of the country and world could "right themselves" in a quicker manner which would be best for everyone instead of longer and more drawn out. We shall see what happens, as I have been wrong plenty of times in the past. I can keep calling for a drop and will eventually be correct, but the batting average would not even be worthy of the minor leagues.
Modified_wave_theory
If History Rhymes, Here Is Top and BottomI am still quite confident the markets are set to drop significantly in 2024. I have studied correctional wave patterns that are similar to our current situation wherein the market topped on January 4, 2022 and began the corrective pattern.
**The pattern contains a wave B that is larger than wave A in duration and movement. The wave C then moves more than wave B**
The current case so far so the index drop 1,327.04 points over 195 trading days. As of the close on March 6, 2024, wave B has gained 1,658.09 points in 347 trading days (the current top for this calculation is 5149.67 on March 4.
CURRENT SITUATION SO FAR:
I have found similar conditions 11 times historically and studied how waves B and C reacted in those situations and applied it to the current case to determine where wave B could end and what wave C could do.
******2023******
This first event began February 24, 2023. I will use 6 minute bars for comparisons. This is an inversion to today's scenario as the B wave moved down instead of up. Waves A and B looked like this:
Wave A moved 74.97 points over 58 trading bars
Wave B moved 89.89 points over 193 trading bars
Wave C moved 150.33 points over 149 trading bars
Wave A was 30.05% the duration of wave B
Wave B moved 119.90% of wave A's movement
Wave A was 38.93% the duration of wave C
Wave C moved 200.52% of wave A's movement
The full inverted movement picture was this:
If we apply the data explicitly to the data from our 2022 wave A, wave B could last 647 trading days gaining 1,591.14 points placing the market top at 5,082.72. Wave C could then lose 2,660.98 points in 501 trading days.
******2018******
This next event began January 26, 2023. I have returned to daily bars for this scenario. Waves A and B looked like this:
Wave A moved 319.07 points over 44 trading days
Wave B moved 387.11 points over 121 trading days
Wave C moved 594.33 points over 65 trading days
Wave A was 36.36% the duration of wave B
Wave B moved 121.32% of wave A's movement
Wave A was 67.69% the duration of wave C
Wave C moved 186.27% of wave A's movement
The full movement was this:
Applying this data to our current wave A data, wave B could last 536 trading days gaining 1,609.96 points placing the market top at 5,101.54. Wave C could then lose 2,471.88 points in 288 trading days.
******2014******
This next event began July 24, 2014. I will use hourly trading bars for this example. Waves A and B looked like this:
Wave A moved 82.38 points over 73 trading hours
Wave B moved 110.25 points over 205 trading hours
Wave C moved 198.6 points over 129 trading hours
Wave A was 35.61% the duration of wave B
Wave B moved 133.83% of wave A's movement
Wave A was 56.59% the duration of wave C
Wave C moved 241.08% of wave A's movement
The full movement was this:
Applying this data to our current wave A data, wave B could last 548 trading days gaining 1,775.98 points placing the market top at 5,267.56. Wave C could then lose 3,199.23 points in 344 trading days.
******2011******
This next event began January 19, 2011. I will use hourly trading bars for this example. Waves A and B looked like this:
Wave A moved 23.34 points over 6 trading hours
Wave B moved 31.41 points over 22 trading hours
Wave C moved 26.17 points over 4 trading hours
Wave A was 27.27% % the duration of wave B
Wave B moved 134.58% of wave A's movement
Wave A was 150% the duration of wave C
Wave C moved 112.13% of wave A's movement
The full movement was this:
Applying this data to our current wave A data, wave B could last 715 trading days gaining 1,785.93 points placing the market top at 5,277.51. Wave C could then lose 1,488.01 points in 130 trading days.
******2005******
This next event began March 7, 2005. I will return to daily trading bars for this example and the rest after this point. Waves A and B looked like this:
Wave A moved 89.47 points over 31 trading days
Wave B moved 109.64 points over 73 trading days
Wave C moved 77.44 points over 50 trading days
Wave A was 42.47% the duration of wave B
Wave B moved 122.54% of wave A's movement
Wave A was 62.00% the duration of wave C
Wave C moved 86.55% of wave A's movement
The full movement was this:
Applying this data to our current wave A data, wave B could last 459 trading days gaining 1,626.15 points placing the market top at 5,117.73. Wave C could then lose 1,148.55 points in 314 trading days.
******2000******
This next event began March 24, 2000. Waves A and B looked like this:
Wave A moved 784.24 points over 639 trading days
Wave B moved 807.46 points over 1259 trading days
Wave C moved 909.3 points over 352 trading days
Wave A was 50.75% the duration of wave B
Wave B moved 102.96% of wave A's movement
Wave A was 181.53% the duration of wave C
Wave C moved 115.95% of wave A's movement
The full movement was this:
Applying this data to our current wave A data, wave B could last 384 trading days gaining 1,366.32 points placing the market top at 4,857.90. Wave C could then lose 1,538.70 points in 107 trading days.
******1990******
This next event began January 3, 1990. Waves A and B looked like this:
Wave A moved 40.76 points over 19 trading days
Wave B moved 49.95 points over 115 trading days
Wave C moved 75.27 points over 62 trading days
Wave A was 16.52% the duration of wave B
Wave B moved 122.55% of wave A's movement
Wave A was 30.65% the duration of wave C
Wave C moved 184.67% of wave A's movement
The full movement was this:
Applying this data to our current wave A data, wave B could last 1,180 trading days gaining 1,626.29 points placing the market top at 5,117.87. Wave C could then lose 2,450.64 points in 636 trading days.
******1979******
This next event began October 5, 1979. Waves A and B looked like this:
Wave A moved 13.1 points over 11 trading days
Wave B moved 21.16 points over 79 trading days
Wave C moved 25.99 points over 30 trading days
Wave A was 13.92% the duration of wave B
Wave B moved 161.53% of wave A's movement
Wave A was 36.67% the duration of wave C
Wave C moved 198.40% of wave A's movement
The full movement was this:
Applying this data to our current wave A data, wave B could last 1,401 trading days gaining 2,143.57 points placing the market top at 5,635.15. Wave C could then lose 2,632.85 points in 532 trading days.
******1968******
This next event began December 2, 1968. Waves A and B looked like this:
Wave A moved 40.76 points over 368 trading days
Wave B moved 53.13 points over 665 trading days
Wave C moved 60.78 points over 437 trading days
Wave A was 55.34% the duration of wave B
Wave B moved 130.35% of wave A's movement
Wave A was 84.21% the duration of wave C
Wave C moved 149.12% of wave A's movement
The full movement was this:
Applying this data to our current wave A data, wave B could last 352 trading days gaining 1,729.80 points placing the market top at 5,221.38. Wave C could then lose 1,978.88 points in 231 trading days.
******1965******
This next event began May 13, 1965. Waves A and B looked like this:
Wave A moved 9.95 points over 32 trading days
Wave B moved 13.99 points over 156 trading days
Wave C moved 22.44 points over 168 trading days
Wave A was 20.51% the duration of wave B
Wave B moved 140.60% of wave A's movement
Wave A was 19.05% the duration of wave C
Wave C moved 225.53% of wave A's movement
The full movement was this:
Applying this data to our current wave A data, wave B could last 950 trading days gaining 1,865.82 points placing the market top at 5,357.40. Wave C could then lose 2,992.87 points in 1,024 trading days.
Based on all of these instances, some are too far off to rhyme to our current situation when it comes to likely duration of wave B or top while others have options in play in the very near-term. With our current high 347 days into wave B, the next likely duration candidates are: 352, 384, 459, 536, 548, 647, 715, and 950. With only one top more than 300 points ago, nearby tops for wave B are at: 5,102, 5,118 (twice), 5,221, 5,267, 5,277, 5,357, and 5,635.
One of the historically similar instances possible in the near-term for both the duration and top are from 1968. A replication or near similar movement could place the top on next Monday at 5,221. This happens to be the day prior to the next CPI reading. A CPI increase could further delay or altogether push rate cuts off the table this year. If this is the exact top, the bottom could occur 231 trading days later near 3,242.50. This level aligns very near my original forecasted low below 3,300 (granted I figured the top would have been in well before now). The bottom could be around February 10, 2025 which is also in my semi-wide ballpark of the original market bottom forecasted on July 4, 2022.
The highest retracement for wave B's movement in relation to wave C is 161% from 1979, while most reside in the 119%-135% range. We have currently retraced (over extended) around 125% of wave A's movement.
We shall see what occurs as time moves on. If a drastic falls is still set to occur, it will take cascading events likely to the finance and technology sectors to make it so.
Will The Federal Reserve Or Earnings Slow Down Amazon Next Week?Our quick look tonight is at Amazon.com stock. 17 January brought us a bearish signal at the closing price of 151.71. Of the 242 studied similar occasions, the stock successfully reverses downward 95% of the time over the next 10 and 25 trading days. For this instance to be successful, the stock will need to move below 151.71. So far the stock has basically ignored the signal and powered higher. Another thing I have noticed during my research is what I call a signal delay zone. This is when the signal fails to take hold right away, but the stock eventually abides by the signal. Today is currently 6 days post-signal and only have 4 days left to make the 10 day study a success.
The largest delay from a percentage standpoint has been a 2.097% move upward from the signal, before a success was still achieved within 10 days from the signal. The latest a 10 day signal saw the highest delay price and still was successful was eight days after the signal. We are currently 4% above the signal price which does not bode well for a drop over the next four days. Day 10 is January 31st, Federal Reserve decision day. Also after the close on February 1st is the annual earnings call.
There are three likely outcomes, AMZN continues to move up without looking back, the day 10 study fails and the day 25 is successful, or both day 10 and 25 studies become successes. A success will be logged if we reach and cross below the dashed yellow line. I have placed the 10 day success box on the chart as a yellow square. This box is the target bottom for 50% of all successful signals. The other larger green box is the 50% target box for the 25 day study. This provides most of February for AMZN to come down and remain successful in the study.
Applying my modified wave theory to the AMZN chart. My overall outlook is:
We are likely in the final fifth wave of the fifth wave of wave C in wave B. This basically means the stock and market are about to start more prolonged downward movement. This is bearish through the end of 2024. Not sure if we the debt bubble bursts, rate cuts are taken off the table "for now", shipping disruptions in the Red Sea come up during earnings calls or the Fed press conference, or something else causes the foreseen market disruption.
This week’s top will depend on….The Minor wave 4 end point will determine if Minor wave 5 (and Intermediate wave A) ends this week. This corrective wave has been tremendous, but possibly too fast. Minor wave 3 thus far has already broken above the preliminary estimates for the end of Intermediate wave A. The initial Intermediate wave A locations were based on the idea Primary wave 2 would last 278 hours and gain a total of 307 points from the low of 4103 as outlined in this idea:
The movement thus far about the initial Intermediate wave A endpoint indicates the final market top is now above 4416 as opposed to around 4385. Intermediate wave A is also on pace to finish this week which is a week early. This earlier finish could point to the final market top occurring in early- to mid-December instead of the final week.
Minor wave 4 does not appear to have occurred last week. The hourly chart continued to achieve wave 3 signals until the final hour of trading on Friday (visible in the EW_3_V2 indicator at the bottom of the chart when the green bars stopped painting a light blue background). This appears to indicate the final 30 minutes on Friday began Minor wave 4 downward. This analysis will project Minor wave 4’s movement based on completed waves to this point. The new derivative model indicates likely movement zones based on historical data. The small green box is based on median move and duration data, while the yellow box contains the first through third of historical quartile data. The white box should contain the overall end point as it is comprised of all common historical movement. The percentage levels to the right are based on another model-type of relational wave data. The most specific quartile data are the pink levels with the top one at 38.01% being the first quartile, middle one of 47.67% as the median and the 72.04% level is the third quartile. The historical maximum wave 4 retracement is the red level at 84.72% and most likely will not come into play for the pending wave 4 down. The next slightly broader dataset are the light blue levels and the yellow levels are the broadest dataset used. Based on these models Monday should be somewhat of a downward moving day. I would speculate the low and end to Minor wave 4 occurs on Monday, but there is a chance it happens early Tuesday as well. Once Minor wave 4 is completed, Minor wave 5 should take the market up.
A general Elliott wave principle is use nearly all of the time is the length of a third wave cannot be shorter than waves 1 and 5. Right now Minor wave 1 was 16 hours and wave 2 was only 14. This would indicate Minor wave 5 must be 14 hours or less. This means the market top for this week should occur prior to the close on Wednesday and then the market will begin Intermediate wave B’s downward movement for the next week and change. In the event Minor wave 3 did not end on Friday, then the market will likely achieve another high greater than 4373.62 within the first hour or two on Monday and then begin Minor wave 4’s downward movement. A new high after the first hour of trading makes Minor wave 3 equal to or longer than Minor wave 1’s movement and no longer restricts the length of Minor wave 5.
Based on the accelerated pace and high achieved in Minor wave 3, Minor wave 5’s top this week likely wont go above 4420, but that will be determined better once Minor wave 4 has completed. Although a new high should occur this week, it does not appear this week will continue the red hot movement from last week.
METHODOLOGY:
I operate a modified wave theory composed of Dow Theory and Elliott Wave Theory. All data is determined from comparing current wave locations with historical wave relationships. The listed percentages are based on previous movement extensions and retracement quartiles of the data. There is too much data to list all points but overlap of the quartiles based on specific relationships tends to point to more likely targets. The light pink levels are based on most specific data, light blue is slightly broader, and yellow levels are the broader set of data used. A red level typically indicates maximum historical move for the current wave throughout the historical data.
Derivative models take the annotated waves from the above methodology and compare specific ratioed-relationships to predict future movement based off of smallest standard deviations in processed models. ***Currently in beta testing to determine efficacy***
Market Top Soon, Bottom Next and Santa RallyTarget boxes are based on derivative analysis of historical waves performance. This will be the first use and test of the new analytical toolset. According to the tool, Intermediate wave 4 does not have much room for the top, looks like ceiling is 4402, which is less than originally expected. Next reversal point will be a low around 4180 which is much higher than originally expected. The timeframe for this low is also pretty quick as Intermediate wave 5 is only expected to last 34-54 trading hours, when Intermediate wave 1 was 112, and Intermediate wave 3 was in the 150s. Once the bottom is in, it will end Primary wave 1 meaning a corrective wave upward will occur over the following weeks which should take the market up through mid- to late-November. 2023 could end on a positive note, however it is masking the damage Primary wave 3 down will do through the first to second quarter of 2024.
Next Leg Down, Top Next WeekLooks like Minor wave A likely finished today, next up is Minor wave B. Models point to 18-22 hours of possible duration which will likely see the bottom on Thursday. There are a three pockets of interest for the bottom. I used the green box (4281-4294) for the more conservative zone, yellow (4255-4275) for the more aggressive zone and my target is the white box (4270-4285) straddling both boxes. Depending how Minor wave B plays out, Minor wave C and Intermediate wave 4 are currently projected to end early next week between 4355-4390.
METHODOLOGY:
I operate a modified wave theory composed of Dow Theory and Elliott Wave Theory. All data is determined from comparing current wave locations with historical wave relationships. The listed percentages are based on previous movement extensions and retracement quartiles of the data. There is too much data to list all points but overlap of the quartiles based on specific relationships tends to point to more likely targets. The light pink levels are based on most specific data, light blue is slightly broader, and yellow levels are the broader set of data used. A red level typically indicates maximum historical move for the current wave throughout the historical data.
Green to start week, low by ThursdayAs a future learning lesson, the below image signaled wave 3 of 3 of 3, wave 3 of 3, and the beginning of the end of Intermediate wave 3 as soon as the Intermediate wave 3 signal ended, I should have known Intermediate wave 3 was over as historically this is the signal. The bottom was inline with historical endpoints, however, I expected it to go about 50-70 points lower.
Assuming Intermediate wave 3 is indeed over, it ended higher than originally expected which means Primary wave 1 could ended higher than expected too. I missed the beginning of Intermediate wave 4, but this analysis should assist in pinpointing the end of it. The Intermediate wave recap is:
Intermediate wave 1 lost 271.76 points in 112 hours.
Intermediate wave 2 gained 205.94 points in 76 hours.
Intermediate wave 3 lost 324.80 points in 151 hours.
This idea had quality data to forecast the top of Intermediate wave 2:
This idea from August 31st forecasted the bottom of Intermediate wave 3 around October 6, which now appears to be 3 days late:
Although the length pocket called out 149-156 hours long, it was a tertiary model. The answer was there but I will see if I can provide stronger forecasts in the future.
I originally expected Intermediate wave 4 to last a week or two and rise toward 4450, but some of the following analyses do not favor this expectation. The initial models based on historical retracement levels for Intermediate wave 4’s top puts the maximum upward move at 4448.57, although most models place the maximum possibility no higher than 4429. A majority of movement retracement models place the top between 4355.74-4364.70 which is not far from Friday’s close. The overall movement models have strong pockets for the top between 4370-4380 and 4400-4409.
Duration models are strongest at 76 hours (length of wave 2), 112 hours (length of wave 1), and 38 hours (half the length of wave 2). It is unlikely any of these will be the duration, simply because the relationships of 1:1 and 1:2 are more common in micro waves and not in macro waves. For instance, a micro wave that is 10 hours could have a wave 4 that is 5 or 10 hours because the possible duration value is limited. Macro waves which are much longer typically don’t have the perfect 1:1 or 1:2 relationships. If we keep these durations in mind, but discount them when looking for others, the models next agree the most at 56 hours, followed by 37 hours, 25, 51, 101, 30, and then 67. Intermediate wave 4 is currently 23 hours long as of the close on Friday.
56 hours ends on the afternoon of October 13.
37 hours would be in the final hour of trading on October 10.
25 hours would be within the first 2 hours of trading on October 9.
51 hours would be in the final hour of trading on October 12.
101 hours is around the early hours on October 24.
30 hours would be the final hour of trading on Monday, October 9.
67 hours falls in the early hours on October 17.
THEORY 1: END OF INTERMEDIATE WAVE 4 IMMINENT
Keeping these durations in mind, I have attempted to figure out which waves have already been completed in Intermediate wave 4. A 25-30 hour theory would make the assumption that Minor waves A and B are completed and Minor wave C is not, Minor wave C could do the following.
Models call for a duration between 8-11 hours and the current length as of Friday’s close was 5 hours. The movement extension models call for the high at levels at or below 4317. The three historical outlier datapoint levels could have the highs at 4320, 4361, and 4427. With the majority of realistic levels all being breached, it appears unlikely Intermediate wave 4 is nearly over. Based on the levels forecast for Minor wave C in this case, it is more likely Intermediate wave 4 ended at 4324.10 in the second to last hour of trading on Friday which seems way too fast and is a red flag that this theory is unlikely. Confirmation of this theory is downward action breaking below 4216.45 this week.
THEORY 2: EARLY STAGES OF INTERMEDIATE WAVE 4
If longer duration models are more accurate, the index may only be in Minor wave A and likely just completed Minute wave 3 based on the wave 3 signal at the bottom of the chart. If this holds true, the following should occur next.
First we will forecast where Minute wave 3 should end based on Minute waves 1 and 2. The current median levels based on historical models place the high between 4322.98-4329.85 which is where the current high achieved on Friday. The third quartile levels are between 4368.99-4388.60 while the three highest outliers sit between 4426.30-4445.64. A strong majority of duration models have Minute wave 3 lasting 4 hours or less. The only other pocket of strength is at 8-9 hours long. At the very least, it is already 5 hours and is either complete, or will complete within the first few hours of trading on Monday.
No matter what, it appears the next movement should be downward. Unfortunately, this downward movement is required for both models and the only difference is the first theory would see continued declines into Intermediate wave 5, and the latter theory would see continued upward movement after a Minor wave B decline concludes. Tomorrow likely has three possibilities:
(1) The index opens down in the first hour before it climbs up toward 4330 and end Minute wave 3.
(2) The index moves up toward 4330 and end Minute wave 3.
(3) The index moves down and does not recover on Monday.
The market will then move downward to complete Minute wave 4 likely lasting at least the remainder of Monday and possibly beginning of Tuesday. After Minute wave 4 completes, Minute wave 5 and Minor wave A will end somewhere between 4340-4370 before midday Wednesday. Minor wave B would then take the market down until late Thursday or early Friday. Minor wave C will take the market upward into the middle to end of next week around 4385. I plan to continue monitoring and updating throughout Intermediate wave 4. The current placement of Minute wave 4, Minor waves A & B, and Intermediate wave 4 are nominally placed and not the final forecasted placement.
METHODOLOGY:
I operate a modified wave theory composed of Dow Theory and Elliott Wave Theory. All data is determined from comparing current wave locations with historical wave relationships. The listed percentages are based on previous movement extensions and retracement quartiles of the data. There is too much data to list all points but overlap of the quartiles based on specific relationships tends to point to more likely targets. The light pink levels are based on most specific data, light blue is slightly broader, and yellow levels are the broader set of data used. A red level typically indicates maximum historical move for the current wave throughout the historical data.