I’m back from the beach which is the first real vacation I had since the book came out over two years ago. When you consider it took almost two years to put the book together, I can‘t remember the last time I had a real vacation. Whatever the case, I’m geared up for whatever the markets are going to throw our way this fall.
The final result on our August time windows is since price action made both a high and a low is we’ve had a small inversion, which is why prices are higher still. Inversions are confounding to anyone who has to work with Quantum Physics because what happens is ‘an extra cycle’ is thrown into the mix. Have any of you ever read Wilder’s Delta book? Then you know the biggest challenge facing those who use that methodology are the inversions which makes it difficult to solve for Delta.
For my purposes, for the most part I don’t care what the action does as long as I can understand the implications of what materializes. Inversions mean continuation of the trend and the best one that comes to mind in recent memory is the one on the sugar chart back on June 17 at 161 days. The difference between the charts is sugar had a lot of room to run and so it did. The stock market does not if you look at it from one methodology.
But before I get to that we have to have our weekly obligatory therapy session concerning the U.S. dollar. Yes, the dollar is trying to find a bottom. No, it can’t get out its own way. It tested support three or four times in the past week which has to be an unofficial record. I’m sorry to be the broken record but at 3% bulls how much more can it really fall? Lately, it has had every opportunity to break support and refuses to do so. If this were any other chart besides the dollar it would have rallied much more by now but it is guilty by association.
And that’s the point.
Finally, I heard the Fast Money traders talking about how nobody other than a few institutional banks would care to own the dollar at this point. Remember, this is financial markets we are talking about. This is the time of opportunity. It’s no big deal to buy the greenback by the time it gets to 85 or 87. Mind you, I’m not advocating you should buy the dollar although it wouldn’t be a bad idea to take an exploratory position if it forms a base here and starts to follow through. What I am saying is sentiment is so negative these are the kinds of conditions that make for juicy turns. Unless you have access to an institutional size bankroll you might to let the big boys jump on board and ride their coattails.
So for all the negativity, the dollar refuses to break. For my part, I’m not looking for a deflationary scare, just a trading leg.
If that’s going to happen then the stock market is going to have to take a break. This is now a market that stubbornly refuses to come apart. We’ve now reached the conclusion of the summer trading season without any pullback. Market leader NDX has even taken out the 50% retracement of the bear market, even if it has done so only marginally.
But for those of you who are strict Elliotticians, we have the acid test of the wave count right in front of us. If you believe in the strict 4th wave overlap rule, the NDX has finally come all the way back to the wave 1 low in March 2008 at 1668.57. The print high for the week is 1668.01. What that means is if this is a 5 wave impulse bear market of at least super cycle degree, the March 2008 low will not be violated. If it is we can start seriously thinking about calling whatever has materialized since March a real bull market.
Technically speaking, this pattern still has the ‘look’ of a bear IF it drops back right here but it is marginalized by the fact this purported 4th wave is almost twice the size in terms of points and if we consider the NDX low in November we have a 40 week move compared to about 11.5 for the March-June 2008 period. But when we look to the March 2009 until the present period we are looking at 24-25 weeks which is only slightly more than double so that is still acceptable. The point is this move off the bottom is almost too big to have any relationship with what some in the Elliott community is calling the 2nd wave up. But all of that talk is subjective. What isn’t subjective is the overlap rule. That is an iron law. IF we spike up higher, not just ‘graze’ this level, odds increase dramatically for the termination of the bear market. Since the 200 week moving average comes in at 1693, which is all the flexibility I have with the overlap condition. Strict Elliotticians have NO flexibility in this issue but those of you who’ve ever sat in on a Nison advanced seminar have had the opportunity to learn what the Japanese think of us ‘Westerners.’ They think we are obtuse and should be looking to the spirit of the rule as opposed to some strict, by the book interpretation.
But whether you go by a strict interpretation or not, coming up to the 200-week moving average is quite an accomplishment and once broken on the downside last year confirmed a recession months before the government said we were officially in one.
I don’t really expect much to happen this week as we get closer to the Labor Day holiday. Many on the East Coast have seen their last couple of weeks of summer interrupted by storms, first by Bill and then by Danny. I think people are itching to get their last vacations in before the fireworks starts in September.
I have some news on an interesting new webinar I’m doing in October.
You can either go to the home page just above and click on EVENTS or those of you who have the September issue, turn to page 38 and you’ll see a nice promo for an event I am headlining on October 28. This will be a complimentary webinar sponsored by Global Futures and ICE Futures US. It’s called “The Fibonacci Code: Unlocking the Secrets of the Russell Index.” I am honored to have been selected to do this event there certainly will be a something in my bag of tricks that you won’t see in my book or any other seminar I’ve done. But as time gets closer I’ll tell you more about it.
Jeff Greenblatt, trader, author of Breakthrough Strategies for Predicting Any Market (Trader’s Library), a regular contributor to Futures Magazine and an expert in Fibonacci analysis in the markets, will be presenting a Web seminar on Oct. 28 titled, The Fibonacci Code: Unlocking the secrets of the Russell Index. Sign up now for this web seminar where you’ll learn how to apply Fibonacci analysis techniques to the Russell Index on a short term-basis.
