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Where’s the Bottom? – Cycles Paint A Clear Picture

Has the selloff ended?  When will it end?  What will the bottom look like and am I at risk of taking further losses?  What should I do?

Do you want to take a guess at how many of our friends and family members are calling us over the past week or so asking these questions?  Personally, I get bombarded with dozens of emails every day from friends and other family members asking “where’s the bottom?  What should I do?”.

This post is going to help you understand the structure of the markets and what is really happening.  Price always attempts to seek out new price highs or new price lows.  In this case, we are seeking out new price lows with a downside price rotation.  Price structure, which is normally discussed in Elliot Wave structures is the process of setting up new higher high or lower low waves as price rotates in a defined wave structure.  Keep in mind the broader wave structure that is currently unfolding.

Over the past 16+ months, we’ve suggested that the price rotation in 2018 was a Wave 4 downside price rotation of a Wave C upside price structure.  If our analysis is correct, the last rally we just experienced (ending near February 1, 2020) was the end of a Wave 5 upside price move that completed the Wave C upside price structure.  This would indicate a very real possibility that the current downside price trend is a Wave 4 downside price move.

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For readers that are not familiar with the Elliot Wave process/structure, each major wave (1 through 5 or A through C) can consist of various types of minor wave structures (as you can see from the middle chart in the example above.  The major wave 1 could consist of a 5 wave minor wave structure (as shown).  The major wave 2 could consist of a 3 wave minor wave structure (as shown) or even a downside 5 wave structure.

Going even further, each of these minor wave structure could consist of even smaller price wave structures.  These types of price rotations often populate in 1, 3, 5, 7, 9, 13 and 21 wave structures.  Unlocking the major wave count and minor wave count can help us unlock swing trading and day trading opportunities.

So, to put into context what we are attempting to convey to you is that we believe the peak in early February 2020 was the end of a major wave 3 and the start of a major wave 4 (to the downside).  Because the upside price wave 3 originated after the 2009-10 price bottom, we believe true support in the markets is likely the midpoint of the 2018 price rotation range or near the low price levels of 2018.  These price levels represent a very clear support level and low price target level that continues to follow the price structure rules of Fibonacci and Elliot Wave.  If the 2018 lows are breached and the markets continue to push lower, then we fall back to the 2016 price lows and midpoint level.

WEEKLY YM CHART – DOW JONES

This Weekly YM chart highlights the two lower MAGENTA lines that we believe represent clear price support for the Dow Jones (24,000 & 21,450).  At this point, the YM has already moved below the 24,000 level and closed trading on Monday, March 9, near 23,900.  Although this price level has breached the 24,000 level, we do not consider “support” a hard level (like concrete).  It is like water in many cases and it matters what price does when it reaches this level.  If price finds support near this level, it will begin to bottom out and potentially trade sideways before attempting to move higher.  If not, the price may stall near this 24,000 level before breaking down to the 21,450 level (or lower).

We do believe the INDU/YM will put in a bottom before the ES and NQ do.  Thus, we believe support will be found in the INDU/YM well before support is found in the other major US stock market indexes.

SPY WEEKLY CHART – S&P 500

This SPY Weekly chart highlights the same setup with the two MAGENTA lines we’ve drawn.  The first level of support for SPY is $261~$262.  We believe this midpoint of 2018 high to the low trading range will offer a fairly strong support level for the SPY to attempt to set up a price bottom.  Below that, the $234 level (the lower range of the 2018 trading year) would provide very clear support for the SPY.

The same type of price theory and expectations are at play on this chart as with the YM chart above.  The YM has already reached our first level of support, yet the SPY is still $12 away from this first support level.  This would suggest the YM may begin to set up some type of price support while the SPY may continue to trail a bit lower over time.

If this first level of support does not hold, then we would be looking for the 2018 price low levels (near $234) to become the next target for support.  Ultimately, the price must either continue to attempt to break previous low price points as it attempts to establish “new price lows” or, at some point, it will fail to break past lows and that is where it will find support.  The midpoint, often called the “belt line” (a Japanese Candlestick term) is used by technicians for two reasons: first, it represents 50% of a defined price range and, second, Japanese Candlestick theory teaches us the BeltLine is “the center of control” or price.  Once price breaks this level, then further trending may continue.

NQ WEEKLY CHART – NASDAQ

Lastly, this NQ Weekly chart with the three MAGENTA lines drawn on it.  The top line is the 2018 price peak level.  The middle line is the midpoint of the 2018 trading range.  The lower line is the bottom of the 2018 trading range.

The NQ has been the high-flying sector in the US stock market for many months.  You can see the massive rally that took place near the end of 2019 pushing the NQ up to nearly 10,000 before the recent correction.  Compared to the YM and SPY charts, it is easy to see the NQ rallied much stronger than the others.  This is why we believe the downside price move in the NQ could also be far greater in scope than the YM or SPY.

If the NQ falls to our midpoint level (near 6795), the NQ must call another -1100 points to reach this level.  Whereas the YM has already reached this critical price level and the SPY is only about $12 away from that same level.  Therefore, the NQ, in our opinion, could continue to trend broadly lower throughout Q1 and possibly into Q2 before finding any real support.

The low price range of 2018 puts final support for the NQ near 5,832.  From current levels, if price falls to this support level, it would total an additional -2066 point decline (-26.11%).  It would also represent a massive -40% selloff from the peak set in February 2020 (near 9763).

Where’s the bottom?  What’s next?  Our advice would be NOT to chase this selloff and NOT to attempt to bottom pick this move.  We believe the Covid-19 virus event will last well past April/May 2020 and we believe both Q1 and Q2 results will be far below expectations.  Therefore, we don’t believe any real bottom will setup before May, June or July of 2020 – after Q2 earnings are announced and contingent on the virus event subsiding and earnings starting to recover.  Otherwise, we could be “searching for a bottom” for quite a while yet.

Still, massive price rotations are taking place in the major markets and various sectors.  If you are a skilled trader and are able to manage risk properly, you should be able to identify multiple opportunities over the next 90+ days for incredible trades.  We know we certainly are finding them.

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for short-term swing traders.

Visit my ETF Wealth Building Newsletter and if you like what I offer, and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
www.TheTechnicalTraders.com

Gold and US Stock Election and Decade Cycles

Recently I have been trying to show all the different angles to look at and analyze the US stock market and the precious metals sector. At the end of this report, I will share with you several other crucial angles and charts you must see for our self.  There are several very intriguing things unfolding right now which are interconnected in ways you may not have known.

Gold Years and Seasonality

Let’s start off with the price of gold and what it typically does each month during the presidential election year, which is this year 2019. The graph below shows the average price movement during the elections since 1971 and I think the chart speaks for its self.

What I get from this, is that investors become uncertain with the future and accumulate gold. This years election I feel is much like a Midterm election. With recent past presidents, they have been in for two terms so this election, in my opinion, is much like a Midterm election if Trump stays in power.

This next chart is the seasonality of gold. Meaning which direction gold trades during each month on average every year. This second chart along with the election chart above both show gold tends to pull back the second half of July, so don’t be alarmed if it happens.

Dow Jones Election Years

The US stock market in general, but in this case, I’m using the Dow Jones industrial average you can see where stock prices should move during the rest of this year as we go into the November election.

Dow Jones Decade Cycle

As you may or may not know, I have a thing with cycles when it comes to trading. Yes, it seems a little far fetched and can be perceived as Voodoo to some people but statistics don’t lie and I have made an incredible living from the financial markets incorporating cycles in all my trades from long term investing right down to my 30-minute trading charts.

The website SeasonalCharts.com shares this really interesting information and chart about the decade cycle and I want to share it with you here:

“The stock market appears to follow a 10-year cycle. During the first half of the decade, equity prices on average do not increase, however in the second half they clearly do. In addition, U.S. equities have demonstrated very good performance in years ending with the number 5 (e.g. 1995 or 2005). Their average profit amounted to 30 %. That equals 40% of the average profit for the entire decade! 

The decade-cycle chart of the Dow Jones shows the average 10-year trend of the index over the last more than 100 years.”

As you can see from those four graphs the odds are pointing towards a market top in the US stock market based on statistics and long-term cycles. And for gold to become the investment of choice and rally the second half of this year.

Below are several other eye-opening charts about gold and US equities. You should take a quick look at each because what I’m sharing in this post and links below is more than enough to know where the markets are headed next. No need to look anywhere else and I think you will agree after you review each section. My analysis is logical, proven, and easy to understand the big picture trends no matter if you are a total newbie to the trading and the financial markets.

Top 5 Important Gold And Stock Market Analysis Posts

In early June I posted a detailed video explaining in showing the bottoming formation and gold and where to spot the breakout level, I also talked about crude oil reaching it upside target after a double bottom, and I called short term top in the SP 500 index. This was one of my premarket videos for members it gives you a good taste of what you can expect each and every morning before the Opening Bell. Watch Video Here.

I then posted a detailed report talking about where the next bull and bear markets are and how to identify them. This report focused mainly on the SP 500 index and the gold miners index. My charts compared the 2008 market top and bear market along with the 2019 market prices today. See Comparison Charts Here.

On June 26th I posted that silver was likely to pause for a week or two before it took another run up on June 26. This played out perfectly as well and silver is now head up to our first key price target of $17. See Silver Price Cycle and Analysis.

More recently on July 16th, I warned that the next financial crisis (bear market) was scary close, possibly just a couple weeks away. The charts I posted will make you really start to worry. See Scary Bear Market Setup Charts.

On June 17th I showed my chart of the transportation index forming a double top formation. It’s known that the transportation index leads the broad stock market and if the transports are breaking down then we must expect the bear market is close. I then went on to talk about the precious metals breakout with silver and silver miners leading the way. Gold miners broke out as well while gold continued to hold its bullish formation. See Transportation index double top.

Concluding Thoughts:

In short, this years election I feel is much like a Midterm election in terms of what stocks and gold should do. With recent past presidents, they have been in for two terms so this election, in my opinion, is much like a Midterm election if Trump stays in power. you should now have a firm grasp of where stocks are headed along with precious metals for the next few months and beyond. The next step is knowing when and what to buy and sell as these turning points take place, and this is the hard part. If you want someone to guide you through the next 12-24 months complete with detailed market analysis and trade alerts (entry, targets and exit price levels) join my ETF Trading Newsletter.

This bear market has been a long time coming, but finally, almost all the signs are showing that it’s about to start. As a technical analyst since 1997 having lost a fortune and made fortunes from bull and bear markets I have a good understanding of how to best attack the market during its various stages.

Be prepared for these incredible price swings before they happen and learn how you can identify and trade these fantastic trading opportunities in 2019, 2020, and beyond with our  Wealth Building & Global Financial Reset Newsletter.  You won’t want to miss this big move, folks.  As you can see from our research, everything has been setting up for this move for many months – most traders/investors have simply not been looking for it.

Join me with a 1 or 2-year subscription to lock in the lowest rate possible and ride my coattails as I navigate these financial market and build wealth while others lose nearly everything they own during the next financial crisis.

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities starting to present themselves will be life-changing if handled properly.

FREE GOLD or SILVER WITH MEMBERSHIP!

So kill two birds with one stone and subscribe for two years to get your FREE PRECIOUS METAL and get enough trades to profit through the next metals bull market and financial crisis!

Chris Vermeulen – www.TheTechnicalTraders.com 

Gold May Give Us One More Chance With New Lows

Our proprietary price cycle tool is showing us that the Daily Gold cycles may dive a bit lower, possibly into the $1250 to $1265 level, over the next 3~7+ days before reaching an ultimate low.  We’ve been covering the precious metals markets like hawks because of our proprietary price modeling tools that suggested the April 21~24 dates as an ultimate low/momentum base pattern.  This new cycle formation highlights the potential that a deeper price low in Gold may set up over the next 5 to 7 days and it may become an incredible buying opportunity for skilled traders.

Taking a look at this cycle chart, we can see the deep price low that may target the $1270 levels or levels just below the $1270 price area.  It appears that this new price low may form somewhere near the end of this week, May 3rd, or early next week, May 6th or 7th.  Please pay attention to this potential price move as this may be the last low price reversal before a very strong upside price move.

 

You may remember our analysis from January 2019 regarding the ADL price predictions for Gold (the chart is below).  Pay very close attention to the “April/May 2019” dates as we are targeting that low price level right now and the upside price potential showing predicted price levels well above $1400.

Skilled traders need to try to understand a move like this in Gold will likely be predicated on some external global news events that create a level of fear in the markets.  We don’t know what they may be at the moment, but our suspicions are that they are going to be related to the EU and/or China (or both).

This is it.  This should be the last low price rotation (if it happens) before Gold begins to skyrocket higher.  Pay attention and remember we were very early in making this call – so it will be an incredible run if it happens as we predicted 5 months ago.

With a total of 55 years of technical analysis and trading between Brad Matheny, and myself Chris Vermeulen, our research and trading signals makes analyzing the complex and ever-changing financial markets a natural process. We have a simple and highly effective way to provide our customers with the most convenient, accurate, and timely market forecasts available today. Our stock and ETF trading alerts are readily available through our exclusive membership service via email and SMS text. Our newsletter, Technical Trading Mastery book, and Trading Courses are designed for both traders and investors. Also, some of our strategies have been fully automated for the ultimate trading experience.

Chris Vermeulen