My interview on KFNN taped yesterday and was already played today. Sorry many of you missed it but we have a tape of it and will post it to the website very soon. Those of you who heard the interview this afternoon, this is the last several weeks of the free newsletter that began over 4 years ago with my very first appearance with Sinclair. The format will be changing in September.
You now have the latest projections for the NASDAQ and so what I want to do tonight is make you aware of the SMALL DETAILS. Small details are so important in every walk of life. We can master the small details in certain areas but not others. The point is we are better at some things than others. When I discuss wave counts with different Elliotticians they'll tell me they think such and such an index is doing XYZ. For instance, I'm told the NASDAQ is in a Grand Supercycle B wave. That may very well be the case, but does it really matter? And if it is in a GSC B, how do you explain the Dow being so far above its old all time high?
Let's face it, a bear market is a bear market. In terms of gold and the US Dollar, the Dow may be worth 5000 or whatever the conversion would be. The point is social mood has been rising these past few years and if we are to judge this rally by put/call statistics, what we've had is anything but a recreation of the old bull market. In case you didn't know, that is what a B wave does. It recreates the sentiment of the old bull. I can look back at almost every single pullback since 2004 and good technicians, myself included thought the top was in. We've never really had the kind of euphoria last seen in 1999. I go to the wine and cheese parties and NOBODY discusses stocks. All they want to talk about is real estate, even now. Only now are some of these so-called real estate pros learning belatedly what they didn't learn in the NASDAQ....that 4 letter word called S-E-L-L.
So if we are going to talk GSC B waves, does it really help our trading/investing to know the NASDAQ can someday get to the 61% price retracement of the top? Did it really help any of you in 2004 to know the NASDAQ may one day get to 2645? I suppose it might have been helpful to have a crystal ball, but what if you trade a basket of semiconductor stocks? What if you trade something like the BBH which topped a year and a half ago?
The point is I believe we need to take things one step at a time. Markets can and will do whatever they want but when we understand market logic it brings us into focus with what the higher probability moves can be. This is the 3rd time I'm mentioning this in the past week but the most important lesson I learned in this whole era from 2002 is the behavior in the SP500. The SP500 finally took out the 61% retracement level of the bear market in the fourth quarter of 2005. But if you remember as we lifted off the August 2004 pivot we got up to 1229 before we fell back to 1136. We were within 25 points. Then we got up to 1245 before falling back to 1168. The next lift finally did it. My question to you is, did any of you really anticipate we would ever take out the OLD CLOSING HIGH? If you did you should have been holding your Spiders all the way down to 1136 and then 1168 but I'd bet none of you did. I wouldn't expect you to.
But if we understand tendencies and probabilities, once we take out a certain technical landmark, it implies we are going to the next one. In the case of the NASDAQ, once we took out the 2006 high of 2375, only then did getting to 2645 become a practical expectation. In recognizing the struggle of the S&P 500 with a key Fibonacci level, did it allow me to come here without the emotion that goes with all of these twists and turns to tell you we'd get there, even when it looked like the market came close to jumping over the ledge.
That's where the small details come in. Realize that major turns come in on good price and time clusters and one is missing, the high is likely to be taken out. Look at the major turns in all of these markets and the vast majority of them happen because of some combination of a Fibonacci retracement or extension. When you look at these markets from retracement or extension level to the next.....When you look at the time function from one window to the next, you will find yourself having greater precision and accuracy than you ever thought possible. This goes for every single chart you follow.
THE STOCK MARKET
And just as soon as it looked like things could boomerang out of control, the Yen chart did back off a bit, enabling traders to put off the storm for another day. Remember what I told you about THE DOLLAR CRISIS where Duncan states the day of reckoning can be put off for a period of time. I do think this Yen carry trade issue is going to severely impact this rally at some point.
We came to the 89 day window off the March 5th pivot and it produced a low. But that does not mean we are out of the woods by any stretch of the imagination because we have another 89 day window off the March 14th pivot coming by the end of next week. Remember, understanding these cycles isn't the tooth fairy, especially when we have to deal with conditions like double tops and bottoms (which is what the March period was). These markets are similar to novels in the way that what happens on page 30 does pay off at page 230.
Our first point of interest was the low at the end of June. The little pullback retraced just 23% in the NDX and just a hair under 38% in the NASDAQ. We never even made it to the larger calculations off the March pivots. I believe giving you the larger degree 38% levels was a bit of caution that was warranted, even though we ended p with a day like today.
The Dow TOOK OUT 13753! Folks, that is HUGE! I've stated that IF the Dow can take out THAT level, its going to be good for another 800 points as it will likely then make a charge at the 1.618 extension of the bear market. This is significant as it has kept us on track with the Dow since February. Now we've finished high enough that I can raise the bar and tell you the 1.618 extension is a real possibility. The actual number is 14563. That calculation is looking like the next significant form of resistance. It could stall out at 1.46 or 1.55 but 1.44 (where we just passed) is a huge Fibonacci number and the fact it couldn't contain the action is one of those small details they aren't going to tell you on TV but may be the most important detail ON THE CHART.
As an aside, I just had a discussion with a business columnist who writes about the stock market for a major metropolitan newspaper in this country. I'm not going to mention the city or the paper. This individual told me he doesn't think technical analysis is important to the individual investor and has little regard for it overall. Here you have people who report on stocks in this country who know virtually nothing about the stock market. I'm telling you this because it never dawned on me just how brainwashed with misinformation the average person really is. And that's just a discussion of technical analysis, forget the high degree of precision many of you are now learning that we cover here. An astute reader just asked this week what happens if everyone started following these cycles. Don't worry about, its not going to happen. But I do have my theories about the FED, who always seems to have an interest rate meeting near important turn windows.
The mitigating factor for a real pullback was the SOX which has set up shop above recent highs. As long as it doesn't violate it has the potential to flip the polarity and make the 510 area support. If that happens its going to be a long, rest of the summer for the bears. It hasn't happened yet as these things take time but the SOX has spent so much time over the past year challenging the 510 area that this is actually the first time in a LONG TIME to contribute something really bullish to the market. But it was a good deal higher today, right? That it is but I'm talking one degree larger and an inevitable pullback can retest the area. The big bullish development on the chart today is it took out a key 1.618 extension relationship with the pullback from December to late January.
Our Futures column centered on the NASDAQ 2679 level which was part of Tuesday night's calculations. Remember we fell seven points short of the mark, that is also important. We've taken that out and now are headed to 2709 which has a greater degree of importance. Remember the verdict on Tuesday? The last high came in on a questionable calculation on the hourly chart which could have led to a pullback one degree larger than the one we got but likely wasn't the high we were looking for.
BOTTOM LINE: Yesterday we had a mild wash and rinse low that evaporated the selling action. On the NQ day session we then hit 48-5min bars to an intraday high, a 13 bar pullback into the 61 bar cycle and we've been off to the races ever since. This leg is very well organized in terms of where the bars are topping and intraday pullbacks are ending. In fact, they are of the textbook variety. Today's high comes at the close of the 88-90 day time window off the March 5 low and next week we get to do it all over again with the March 14th low.
In the action leading up to yesterdays 61 bar, the p/c was operating at a high level near 1.05 (intraday). Today was the polar opposite as the intraday readings were in the euphoria zone near .70. Now we are getting to euphoria but I think in the bigger picture we are looking at NASDAQ 2709 and the all time high in the S&P 500. We could get by the morning or take the whole week. Don't laugh, the NASDAQ was at 2672 and needed to get to 2679 and that took a few days. A pullback is due after these past few days if only because the p/c is at a place that won't allow the market to go much higher. If we were to top within a point of the calculations presented here, take it seriously. The SP500 is testing all time resistance finally so things could come to a grinding halt temporarily right here.
AUSTRALIA
So much for going to the bottom of the range. Price action stopped on the 50dma and reversed back up largely because the Yen stalled out. Technically, Wednesday's gap down ended up being an ABC with an advanced 1.618 extension and that was it. As you probably know, our markets were up really big. Your little correction this week is very similar looking in size and calculation to the NDX and NQ leg down this week. You should get an immediate retest of the highs if not higher but what is uncertain here is whether its going to take on the characteristics of the Dow (great deal higher) or S&P 500 which is having trouble taking out the all time high.
GOLD, SILVER AND THE XAU
Today was the second day of our window as we monitor the XAU. We had an acceleration to the upside late in the move at least on the hourly basis. We are back at the December high so we are testing some serious resistance here. We are at a very tricky point as we are testing resistance that has stood up for the better part of a year but we also have extension relationships that could take us back to a retest of the top. However, we need to get beyond these levels first.
On the gold chart, it took out the $665 level I felt was very important because it was a retest of the gap down back in June. For good measure, yesterday's close was the end of a small consolidation that concluded on the 61st hour of the leg, a bullish development. If I'm an attorney and the XAU time window is the trial, these developments on the gold chart may be a clue that the XAU leg has a chance to break its year long pattern of making pivots on high to high Fibonacci cycles. But like the discussion about the SOX chart above it would still have to prove the 665 area can flip and turn into support. That may take some time.
US DOLLAR
We covered the longer term conditions Tuesday night. Now the chart hit the 1.618 extension of the leg up from June 5-13. Why does it have a chance of rupturing long term support? This extension only covers the SECOND HALF of that bounce leg. A 1.618 extension of the move up from the late April low takes to 79.60 and if we get there isn't the cat really out of the bag? It would open up other larger extension possibilities that could take prices down to the 76-79 natural support range. A couple of points might not seem like much but because of where we are in the longer term picture, this could have a huge psychological impact.
YEN
Not much to add here yet. We've slightly backed off the parabolic move up from earlier in the week. For those of you who are new, we are watching the Yen futures chart as a proxy as earlier in the year when the Yen rallied the markets pulled back in a developing inverse relationship due to the Yen carry trade situation. This chart is due to bottom at some point and whatever caution was discussed here on Tuesday is a result of the parabolic move that may be a kickoff to a new trend. The Yen backs off for two days and you see the result
BONDS
The sideways pattern I anticipated is developing. The reason of course is hitting a target in terms of price but not time. We've been in this range for about a week. We gapped down on the 3rd, gapped up on the 8th, filled original gap by the 11th and today filled the gap back up. The result is we are sitting at intraday support near 106. We are also at the 143rd hour of this trend so this needs to find a low in this general area and turn back up tomorrow to keep the sideways action going. So far, from the high on July 3rd we've had 2 thrusts down where the first one has a 1.618 relationship with the second smaller (.618). If this continues, it looks like a B wave triangle that will resolve itself to the upside, thus at least giving me the retest of the high we discussed last week. Triangles have a way of blowing out before they totally develop but with the information here, that's what it looks like.
CRUDE OIL
Today we hit the 1.618 price extension of the corrective action from April and May. Once again the chart tried to roll over but stalled at intraday support. At day 122 up we remain at risk for a high. If we go any higher from here it will invalidate the 1.618 calculation and open the door for a bigger resistance zone from 75-78 which is the overall 78% retracement level up to the 2.618 extension of the April-May period. Here's the bottom line: we are at a point on the chart where the time element can top anywhere between here and day 127 (a week from now) with overhead resistance. The exact calculations if today's high is taken out is 75.17 and then 78.27.
HUGE Warehouse Sale For those of you who are new, we have an online bookstore attached to the website and we are running some incredible specials up to 90% off. Whatever discipline you follow, there are excellent additions to your library.
HYPERLINK "http://www.futuresmag.com/cms/futures/website/home" \o "http://www.futuresmag.com/cms/futures/website/home" futures home page This is the link to Futuremag.com home page where I have a weekly column that appears Monday's in the little Marketwatch box. Its free to sign up and there are also other excellent contributors.
The content in THE FIBONACCI FORECASTER is for educational and informational purposes only. There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information is the opinion of Jeff Greenblatt and subject to change without notice. Please be advised to consult your investment advisor, attorney or tax professional before making any investment decisions. Jeff Greenblatt will not accept any responsibility or be liable for any investment decisions based on the information discussed here.
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