If you have FOMO on the stock market you better watch this video because it will make you feel better if what is unfolding is exactly what I have been talking about for the past week. The Short/FOMO Squeeze!
Please take a moment to visit www.TheTechnicalTraders.com to learn more. I can’t say it any better than this… I want to help you create success while helping you protect and preserve your wealth – it’s that simple.
Chris Vermeulen
Chief Market Stragist
Founder of Technical Traders Ltd.
We find it interesting how researchers attempt to compare history, sometimes ancient history, to the applicable functions of today’s world and to attempt to translate the decline of empires in the past to what is happening in today’s world. Ray Dalio appears to be suggesting the rise of the Chinese economy and economic capabilities is going to threaten to unseat the US as a world super-power.
Within Ray Dalio’s article, he suggests the following which seems to sum up his cycle theory:
“In brief, after the creation of a new set of rules establishes the new world order, there is typically a peaceful and prosperous period. As people get used to this they increasingly bet on the prosperity continuing, and they increasingly borrow money to do that, which eventually leads to a bubble.
As the prosperity increases the wealth gap grows. Eventually the debt bubble bursts, which leads to the printing of money and credit and increased internal conflict, which leads to some sort of wealth redistribution revolution that can be peaceful or violent. Typically at that time late in the cycle the leading empire that won the last economic and geopolitical war is less powerful relative to rival powers that prospered during the prosperous period, and with the bad economic conditions and the disagreements between powers there is typically some kind of war. Out of these debt, economic, domestic, and world-order breakdowns that take the forms of revolutions and wars come new winners and losers. Then the winners get together to create the new domestic and world orders.”
Our own research team has completed quite a bit of research into cycles and super-cycles and, although we agree with Mr. Dalio that past Empires have collapsed and been replaced with more efficient and emerging soon to be a new world leader. Yet, in every instance in the past, the world has been transitioning from a rather disconnected economic structure where ancient empires, or rather the last gasps of ancient empires and wealth, have become threatened, gone to war, and declined.
WWI initiated with the assassination of Archduke Franz Ferdinand in Sarajevo on June 28, 1914. Nearly a month later, the great powers of Europe were aligned into two coalitions: the Triple Entente – consisting of France, Russia, and Britain – and the Triple Alliance of Germany, Austria-Hungary, and Italy. Thus, the lines were drawn between ancient European empires that led to the beginning of a new structure of world empires.
Throughout history, the biggest world empires are structured, grow into superpowers, and begin to decline. Most of these last well over 200 to 250+ years.
The Ottoman Empire started in the early 1300s and ended in the early 1600s because of a war with Persia – more than 300 years.
The Arab Empire, Mohammed, started in 632 and ended in 1258 – more than 600 years.
The Roman Empire began in 753 BC and ended in 23BC – over 700 years.
Chinese Qing Dynasty started in 1644 and ended in 1911 – over 250 years.
Chinese Ming Dynasty started in 1368 and ended in 1644 – almost 300 years.
America’s strength as a nation started to build in the late 1800s/early 1900s. Our rise to a world power came at a great expense in the 1930s and 1940s – fighting Hitler and the Japanese while saving most of Europe and SE Asia in the process. Then, we managed to rebuild most of these areas over a very short period of time.
Additionally, the idea that the current world would allow a nation like China to become a world-power – threatening world-order, capitalism, democracy, and current global geopolitical order seem alien to our researchers. There is one thing Mr. Dalio seems to ignore in his theories – the world has a choice in the matter – just like we did when Adolf Hitler threatened western Europe and with Hideki Tojo threatened the US and most of SE Asia. We have a choice in how we address the rise of China and how we protect our freedoms, rights, and futures from any threat China may present.
Currently, the world is moving away from a China-friendly relationship after the COVID-19 virus event has wreaked havoc across the globe. China’s rise over the past 25+ years has mostly been on the success of selling China as a cheap manufacturing center for the US and other stronger economies. The process of growing China has been to take advantage of the relationships they’ve built with foreign business/banking. This is all starting to come to a sudden halt which may put extreme pressures on China’s banking and credit systems over the next 20+ years.
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Our research team put together this chart to highlight the past 100+ years of cycle/super-cycle trends. When you review this chart, pay attention to the deep collapse of the heavy blue line from 1923 through 1939 – the span of the Great Depression. We’ve highlighted the area of the Great Depression in BLUE. We’ve also highlighted recessions in RED and MAGENTA. Red areas being recessions in cycle areas where the cycles are trending lower and Magenta are where recessions happened in upward trending cycles. Near the end, we’ve highlighted an area in YELLOW where we believe a new recession will emerge.
Now, as we align these cycle trends with price, we start to see a bigger picture emerge. This SPY Weekly Log chart illustrates how our cycle analysis aligns with price trends quite well over the past 45+ years. Our cycle research goes forward over 600 years and we can identify where and when price trends will likely set up, breakdown, or breakout as a result of our extensive cycle research.
Mr. Dalio’s comments, while somewhat valid in general scope, don’t necessarily translate into real-world processes. With the amount of wealth and new global alliances, inter-connected economies and the recent push attempt to right the many wrongs of the past 30+ years, the world appears to be much more aligned towards restoring some proper order and developing a real future where nations are held accountable and central banks may be forced to adopt a more conservative capital process in the near future.
Without giving away too many details, our cycles are point to a very important cycle event that will take place in the near future. Many people are completely unaware of when and how this event will take place. In fact, many analysts are simply guessing as to what may happen over the next 20+ years whereas we’ve actually mapped out 500+ years of detailed price cycles for the global markets.
If you want to gain insight into the markets next big move or learn how our researchers attempt to stay ahead of the biggest market trends, then you owe it to yourself to visit www.TheTechnicalTraders.com to learn how we help our members create success and find great opportunities.
We can promise you one thing right now – the global markets are going to continue to be very interesting for technical traders over the next 10 to 20+ years. You don’t want to miss the opportunities that are setting up in the global markets and we strongly believe everything you are reading about cycles from others is superficial in structure and content.
As a technical analyst and trader since 1997, I have been through a few bull/bear market cycles in stocks and commodities. I believe I have a good pulse on the market and timing key turning points for investing and short-term swing traders. 2020 is going to be an incredible year for skilled traders. Don’t miss all the incredible moves and trade setups.
I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts. These simple to follow ETF swing trades have our trading accounts sitting at new high water marks yet again this week, not many traders can say that this year. Visit my Active ETF Trading Newsletter.
If you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Long-Term Investing Signals which we issued a new signal for subscribers.
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
Chief Market Strategies
Founder of Technical Traders Ltd.
Our Adaptive Dynamic Learning (ADL) predictive modeling system has called some incredible moves over the past 24+ months. It predicted the moves in Gold moving from $1340 to $1750 – including many of the trend changes that took place over the past 15+ months. It predicted the collapse in Crude Oil back in July 2019 – even calling for a sub-$20 price collapse in March/April 2020. Overall, the abilities of this unique predictive modeling tool have been nothing short of incredible.
For many weeks, we’ve been suggesting the US stock market has entered a no man’s land after the bottom setup near March 20, 2020. The US Fed and global central banks have stepped in to attempt to support the markets and to take pressures off financial institutions and consumers. These efforts presented a very real opportunity for technical traders to attempt to “ride the Fed wave” over the past 3+ weeks. Right now, things appear to be a bit more fragile going forward into the Summer months and the ADL predictive modeling system is showing us what to expect.
One of the most important benefits of the ADL predictive modeling system is to identify “consensus” predictions of price activity looking forward in time. Sometimes, the ADL system makes very bold predictions – like the Crude Oil predictions. Other times the ADL system makes rather mundane predictions. Today, the ADL system is suggesting the US major indexes (and stock market) is about 10% to 15% overvalued and will attempt to revert back to fair valuation levels.
This prediction suggests that a downside price move, or price reversion, is likely to set up over the next few weeks where price level may fall to near (or below) the predicted ADL levels. When price reverts like this to a valuation level, it can sometimes move beyond the predicted price level before settling closer to the predicted ADL level. Price can also set up an “anomaly” pattern where it avoids the ADL predictive levels for a period of time, then aggressively reverts back to levels near the ADL predicted price levels. These anomalies can be really great trades for technical traders.
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WEEKLY S&P500 E-MINI FUTURES ADL CHART
This weekly ES (S&P500 E-Mini Futures) ADL chart suggests a downside price reversion totaling more than 14% is very likely over the next 3+ weeks. Should the downside reversion extend below the CYAN predicted ADL levels, this move could result in a 20% or more downside price collapse.
Notice how the ADL predictive price levels flatten out over the next 8+ weeks. This suggests volatility may increase as price attempts to form a sideways FLAG or other extended patterns.
WEEKLY DOW JONES INDUSTRIAL ADL CHART
This Weekly INDU chart shows a similar ADL price prediction – an 11% to 13% downside price move followed by moderate downside price weakness over the next 8+ weeks. Pay very close attention to the 21,000 level which appears to be lower support based on the ADL predictions. We believe any downside move in the INDU could attempt to breach the 21,000 level as it attempts to find and establish future support.
WEEKLY SPDR S&P500 ETF (SPY) ADL CHART
Lastly, this Weekly SPY ADL chart suggests a 13% to 15% downside price move is setting up which also suggests price may move beyond the lower ADL predictive ranges over the next 3+ weeks. If this happens, the SPY may collapse toward levels near $240~$245 (or lower) before finding any real support and moving back towards the ADL predictive price levels.
If you’ve been following our research and articles, you already know we’ve been warning about a “double-dip” move in the stock market and have also been advising readers to stay prepared for the incredible swings that are about to happen in the markets in 2020 and 2021. Our research team issued a Black Swan warning on February 21, 2020 – just days before the start of a collapse in the US stock market. We’d been warning about the setup and potential for this Black Swan event for nearly 5+ weeks before it happened.
This current ADL predictive modeling research suggests the US stock market will likely stall through the Memorial holiday weekend and begin next week with a measurable downside price bias – starting the move towards the lower ADL predicted levels. Now is the time to prepare for this move if you are long and holding any “at-risk” trades.
It is very likely, based on this research, that a downside price move to levels just above recent lows will take place over the next 5+ weeks. This will set up many great trading opportunities for skilled technical traders.
As a technical analyst and trader since 1997, I have been through a few bull/bear market cycles in stocks and commodities. I believe I have a good pulse on the market and timing key turning points for investing and short-term swing traders. 2020 is going to be an incredible year for skilled traders. Don’t miss all the incredible moves and trade setups.
I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts. These simple to follow ETF swing trades have our trading accounts sitting at new high water marks yet again this week, not many traders can say that this year. Visit my Active ETF Trading Newsletter.
If you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Long-Term Investing Signals which we issued a new signal for subscribers.
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
Chief Market Strategies
Founder of Technical Traders Ltd.
As technical traders and researchers, we’ve been paying very close attention to the GREEN ARC Fibonacci resistance level on the SPY as a key level for the US stock market and any hope of a continued upside price rally. The SPY has traded near this level for the past three weeks and appears to be attempting a bit of an upside breakout right now. Yet, we understand a long holiday weekend is upon us in the US, Memorial Day, and after a big upside GAP on Monday, the US stock market has stalled over the past few days.
Our researchers believe this GREEN ARC is still acting as critical price resistance and believe the SPY may sell off into the end of the week resulting in a failed attempt to breach this key resistance level. If this happens, the failed attempt to break this resistance could prompt a change in price trend and initiate a new downside price trend. If this resistance level is broken by the end of this week, then we have a pretty solid indicator that continued bullish price trending may continue.
Absent of any real news that may drive the market trend this holiday weekend and with most of the US still in shutdown mode, we believe the US stock market has continued to trade within this no man’s land area for many weeks now. From the end of April till now, we’ve seen moderate upside price action in certain sectors, yet other sectors continue to show signs of weakness.
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This Transportation Index Weekly chart is a perfect example of the weakness that is evident away from the S&P500, NASDAQ, and Dow Industrials. Compare the last 6+ weeks of trading on this TRAN chart to the SPY chart above. Notice that the TRAN chart shows a very congested sideways price channel (highlighted in YELLOW) as well as a much deeper upside price move from the lows near March 20. While the US major indexes have rallied substantially, the broader market indexes are not experiencing the upside price advance and continue to suggest overall weakness.
This disconnect in the markets suggests speculation is driving the US major indexes higher and not real fundamental appreciation based on earnings and revenues. When this speculation ends, typically when speculators realize the price has been driven a bit too high compared to reality, then the trend can change in an instant.
This IWM Russell 2000 ETF Weekly chart highlights a similarly week upside price rally since the March 20th bottom. The WHITE LINE on this chart represents a support/resistance level from early trading low price levels in 2017. Our research team believes these levels represent a very important support/resistance level for the Russell 2000 ETF as this level coincides with the GAP in price that was generated within the recent selloff on March 9, 2020. That GAP cleared this key support/resistance level with a very big downside price move. We believe this level will act as intense resistance as price attempts to fill the GAP.
Overall, the US stock market has continued to trade within this no man’s land recently. There have been some pretty decent upside price moves in certain sectors over the past few weeks. Precious metals, certain travel/leisure stocks, and, of course, technology and services stocks. Yet, we continue to warn our friends and followers to be very aware that the US stock market is far from immune to more downside price activity. A deep selloff like we experienced will very often react with a “recovery move” – a dead cat bounce type of move. While the NQ has been a big mover, these other sectors suggest we may be nearing a tipping point and we urge technical traders to stay very aware of the risks as we head into this long holiday weekend.
I’ve been trading since 1997 and I’ve lived through numerous market events. The one thing I teach my members is that risk is always a big part of trading and that’s why I structure all of my research and trading signals around “finding profits while reducing overall risks”. Sure, there are fast profits to be made in these wild market swings, but those types of trades are extremely risky for most people – and I don’t know of anyone that wants to risk 50 or 60% of their assets on a few wild trades.
You don’t have to spend days or weeks trying to learn my system. You don’t have to try to learn to make these decisions on your own or follow the markets 24/7 – I do that for you. All you have to do is follow my research and trading signals and start benefiting from my research and trades. My new mobile app makes it simple – download the app, sign in and everything is delivered to your phone, tablet, or desktop.
Please take a moment to visit www.TheTechnicalTraders.com to learn more. I can’t say it any better than this… I want to help you create success while helping you protect and preserve your wealth – it’s that simple.
Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com
I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts visit my Active ETF Trading Newsletter. If you are a long-term investor looking for signals when to own equities, bonds, or cash, be sure to look into my Long-Term Investing Signals.
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
Chief Market Strategist
Founder of Technical Traders Ltd.
As you may or may not know, the markets have a way of making it extremely difficult to trade in general almost all of the time if you do not have a trading plan.
One of the ways the market likes to pull money from traders is through morning opening gaps. For example, yesterday, the inflow of emails about gold, silver, and gold miners was insane. I keep trying to keep everyone in check with how to handle high-risk, high uncertainty, and volatile times, which, for our case right now, is a cash position for a few more days.
Unfortunately, big moves in price trigger emotions with some of you. It causes you to start trading just because you think you need to trade, which can be for many different reasons I won’t get into here. You should know my stance by now, which is cash is a position, and retaining our capital is more important than trading some times.
I know for a fact that all successful traders have a detailed trading plan, they can control their emotions, are logical, and they wait for opportunities vs. jumping at anything that moves more than normal.
Below is our portfolio equity curve, which we hit an all-time new high just days after the stock market started its crash. Maybe if you see what your portfolio growth curve would look like if you followed my trades, you will finally see the value in CASH.
I don’t trade a lot, and we are in cash when we don’t have any positions. Other times we will have 2 or 4 positions open, but it all depends on the market and volatility. You want trading to be simple, boring, and profitable, trust me on this.
Ok, enough of that rant, BACK TO MORING PRICE GAPS!
The stock market loves to do most of the day’s price range and profit potential in a way the average trader is not able to catch the move. Even more so, it is trying to get traders the worst entry or exit price.
New members over time will see and understand this when I talk about these gaps getting faded in my morning videos, which I will explain in a minute. For now, let’s take a look at the price of gold and the market sentiment from yesterday.
Yesterday gold traders were acting like a school of piranha’s. A big one day pop in price is like a drop of blood in the water, and it created a feeding frenzy. There was so much momentum going into the closing bell that the market makers will take advantage of this and walk the price up in pre-market trading the next day and try to reach the next resistance level before the opening bell.
This is what happened to gold, and miners this morning. Market makers know there are still a ton of gold and miner stock buyers out there who are going to BUY as soon as the market opens, so what happens?
The general public pays the high price, way up at resistance, and the market makers get to sell any access shares they have for a huge profit. After that, the price generally fades (falls) back down, and the majority of buyers that day just bought at the high because of pure emotions and a lack of understanding. This happens for gaps to the downside as well in a similar manner.
Now, keep in mind, this is a very short term price action. The gap may fade down over the rest of the session or a few days, but it does not mean the uptrend is the price is finished longer term.
My point is, the market has a way to get you a bad fill MOST of the time if you do not understand how and why the price moves the way it does. Even if you know all this, sometimes we have no choice to pay the price depending on the trade setup if we want to get into a position. I just wanted to share this small tidbit on how the market moves with price gaps because almost all price gaps fill, fade back down to the previous days high for the stock indexes. Commodities gaps don’t always fill, because they are a very different asset class than equities.
In short, gold is the only one in a bull market, and it’s been the definite leader time and time again for the past year almost. It remains in a bull market, and all the money printing/QE, and zero interest rate things are very bullish on metals long term. I like gold a lot, have for a while. I think it’s going higher still as I pointed out in yesterday’s afternoon video, $2600 is my primary target long term. If you didn’t watch yesterdays afternoon video be sure to do so here:
Members video: https://www.thetechnicaltraders.com/memberships/wbn/monday-afternoon-video-update/
As for gold miners and silver, well today is the same story as yesterday, everyone wants to own them and thinks they are missing the train. How you should see these charts and how to best trade them I tell you in yesterday’s afternoon video.
Trading now, in my opinion, is pure speculation and emotionally driven. Sure, you could be right, and this could be the bottom, but as technical traders using rules, logic, and a proven strategy, we are not cowboys trying to pick a bottom to be early. A broken clock is right two times a day. You may get lucky, but because bottom picking without any technical confirmation is a sucker’s (gamblers) game in the long run.
As our portfolio graph above speaks for its self, in that we do not need to catch every move, in fact, we just need to catch a couple of low-risk trades and slowly build our capital. I was told by one of my mentor traders years ago, once trading becomes slow and boring to you, that’s when you finally understand the market and have a proven trading strategy.
I hope you find this helpful, and if you want this type of info every day, plus my videos, and winning trading strategy, become a member right now!
Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTrader.com
Over the past 5+ days, a very clear change in market direction has taken place in the US and global markets. Prior to this, the US markets were reacting to Q4 earnings data and minimizing the potential global pandemic of the Coronavirus. The continued “rally to the peak” process was taking place and was very impressive from a purely euphoric trader standpoint. Our researchers found it amazing that the markets continued to rally many weeks after the news of economic contraction and quarantines setup in China/Asia.
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We believe a number of critical factors may have pushed global investors away from their comfortable, happy, bullish attitude over the past 5+ days – most importantly the reality that the virus pandemic was very real and would continue to result in a more severe global economic contraction process and the outcome of the Caucus voting where Bernie Sanders appears to be leading almost every early voting event. There are now two major concerns hanging over the global markets and the future of the US 2020 Presidential elections. These two major issues may be enough to change investor sentiment and present a very real volatility event.
Uncertainty breeds fear and can cause traders to move away from risk. We discussed these topics in research posts many months ago.
January 29, 2020: ARE WE SETTING UP FOR A WATERFALL SELLOFF?
November 11, 2019: WELCOME TO THE ZOMBIE-LAND OF INVESTING – PART II
September 24, 2019: IS SILVER ABOUT TO BECOME THE SUPER-HERO OF PRECIOUS METALS?
September 7, 2019: US STOCK MARKET HASN’T CLEARED THE STORM YET
Our researchers believe the underlying concerns that are becoming more evident to global traders are the very real facts that the global economy may continue to contract because of the spreading Corona Virus and risks of a global pandemic event and the fact that the US 2020 Presidential election process appears to be setting up to become a real battle between Donald Trump and Bernie Sanders. Our researchers believe the combination of these two unknowns is creating an environment where global traders are fearful of the future growth opportunities within the US and global markets.
Bernie Sanders has been dominating the Caucus events in the US as a Socialist/Progressive candidate. For many Americans, this is a frightening concept. Even early into the Caucus voting cycle, it appears Mr. Sanders has taken a very clear leadership role headed into the 2020 Presidential election event. Business and global investors are not going to like the concept of a Socialist/Progressive US Presidential candidate. This is going to cause investors and business owners to avoid engaging in projects and opportunities until after the November 2020 elections.
Add into this fear contagion the fact that the Coronavirus event may continue to add to the global fear component of the US and global economy. How much more risk is involved because of the spread of this virus over the next 12+ months and how will this concern complicate the concerns related to the US Presidential electing event?
This Daily Dow Jones Industrial chart highlights the huge Gap lower that took place early on Monday, February 24, 2020. This huge move resulted from an extended fear of a growing potential for a global pandemic event and a renewed fear that global economic activity may be greatly reduced over the next 12+ months. We believe the extended fear of a potential Socialist/Progressive Democrat candidate may be adding to this massive decline in the global markets.
The Transportation Index is an excellent measure of future economic activity expectations and investors belief that the global economy will recover from this potential contagion event. On Monday, February 24, 2020, the Transportation Index collapsed below 10,600 on a Gap Down move as the markets collapsed. This is a real sign that global investors suddenly believe the global markets will contract over the next 3 to 6+ months and are moving away from risky instruments in the US and global markets.
This Weekly Transportation index chart illustrates just how far the TRAN could move while still saying within the range of price activity from 2018 to 2019. The TRAN could fall all the way to levels near 8,800 before reaching the lows of December 2018. Thus, from current levels near 10,500, we could see a continued price decline in the global markets of at least 15% to 20% before we near the 2018 lows.
As our research team has been predicting, it appears a Waterfall event is beginning to take place. This Gapping downside move may become the catalyst top in the global markets that presents a broader market rotation/decline. As we’ve been warning, be prepared for broad sector market rotation and for precious metals to skyrocket as greater fear sets up in the global markets. We hope you were paying attention to our research over the past 5+ months. We’ve been all over this setup and have issued multiple warnings for all our friends and followers.
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 are massive/life-changing if handled properly.
I urge you visit my ETF Wealth Building Newsletter and if you like what I offer, join me with the 1-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. Join Now and Get a Free 1oz Silver Bar!
Chris Vermeulen
www.TheTechnicalTraders.com
Euphoria is a type of market rally where valuations, real market expectations, and global market concerns are pushed away from view while a trader based rush to rally takes place. One of the clearest examples is the 1995 to 2000 DOT COM US stock market rally. As the Internet burst into homes and businesses across the world, the US-led the way with dozens of new Internet-based IPOs touting glorious expectations, potential earnings and more. Everyone had the idea this new medium would dramatically change the economy for the better and breakthrough traditional economic boundaries.
The rally that took place in 1995 through 2000 was incredible. The S&P 500 rallied from 463 to 1535 – +235.57%. What we find interesting is the “price wave formation” that took place within that rally. There were a number of key price rotations that took place as the market continued to rally, we’ve labeled them A, B, and C. The first rotation, A, took place in July~Dec 1997. The second, B, took place from May 1998 to November 1998. The last, C, took place between January 1999 and November 1999. Technically, these rotations are significant because they represent “true price exploration” related to price advancement. The price must always attempt to identify true support/resistance levels while trending.
When we compare the rally from 1995 to 2000 with the current rally in the US stock market, we can see a defined level of euphoric price advance after the 2016 US elections. We must also pay attention to the previous price advance from the 2009 price lows as the global markets were struggling to recover from the Credit Crisis. Our research team identified the A, B, C rotations in the current price and associated them to the similar rotations in the 1995-2000 price rally as “key components of the current rally and a potential warning sign of a pending top formation”.
Our researchers believe the QE processes of the global central banks have set up a similar type of euphoric price rally in the current global markets even though current economic metrics are warning of weakening economic activity and weakening global market output. The US Fed and global central banks seem to want to keep pumping money/credit into the global markets to keep the rally going – most likely because they are fearful of what a crash/correction may do to the future growth opportunities around the planet.
Yet, our research team focused on the C rotation in 1999 and 2019 – a full 20 years apart. What interested our research team the most was the fact that the rotation in 1999 set up a full 21 months before the November 2000 US Presidential election. The current C rotation initiated in January 2018 – a full 34 months before the November 2020 US Presidential Elections. Anyone paying any attention will recognize the 21 and 34 are both Fibonacci Numbers – relating a 1.619 ratio advancement.
Are we setting up a massive top in the US stock market based on a Fibonacci price range expansion related to the patterns we have identified in this SP500 chart? Have we advanced from the 2000 peak and 2009 bottom in some form of Fibonacci Ratio expansion that aligns with the C rotation pattern we have identified?
The rally from Bill Clinton’s second term start date to the peak in 2000 totaled 932.9 pts – +153.61%. the rally from Donald Trump’s first term start date to our projected peak level totals 997.5 pts – +44.38%. The rally in 2000 peaked at a range that is 200% larger than the ration between the two separate percentage point ranges. Is this significant to traders? Does it help to align our peak with the 1.619 Fibonacci ratio?
153.61 / 44.38 = 3.4612
3.4612 / 2 = 1.7306
Given the alignment of these values with a potential 200% range expansion theory, we need to start to look at TIME/PRICE ratios to determine if these rallies are aligned efficiently.
The rally from 1995 to the peak in 2000 consisted of 63 Months. The rally from 2009 to our projected peak consists of 131 bars. This represents a price TIME expansion of 207.9%
The rally from 1995 to the peak in 2000 consisted of a price move of +1081.2 pts (+235.57%). The rally from 2009 to our projected peak consists of a price move of 2585.6 pts (390.49%). The ratio between these two price expansions is 1.657.
The correction from the peak in 2000 to the low in 2009 consisted of 109 months. The ratio between the 63 months (1995~2000 peak) to this correction time is 1.73. The ration of the 2009~2019 rally time span is 1.20. Thus, the correction between the peak in 2000 to the bottom in 2009 expanded at a rate of 1.73x the time it took to complete the DOT COM rally from 1995 to 2000. The recovery that has taken place from the 2009 bottom to our projected top in 2019 would expand at a rate of 1.20x the correction time rate. All of these levels align with common Fibonacci numbers and ratios.
In other words, we believe the current expansion in price is nearing a completed Elliot Wave/Fibonacci ratio peak (likely wave C) that maintains proper aspect ratios related to previous major price rotations.
Other major sectors and asset classes also look to be showing similar topping patterns like the real estate values and charts here.
Our Custom Volatility Index shows extended volatility is increasing with price nearing the upper range for December 2019. Notice the increase in the range of these bars since the just before the peak in January 2018. This increased range suggests extreme price volatility has been pushing the markets for the past 24+ months. If this volatility continues into early 2020 as our projected peak sets up, we may see some very big rotation in 2020.
This 2000 peak to 2019 peak comparison chart highlights the similarities in the C price pattern that has setup. In 1999, the C pattern set up with an initial peak, followed by minor downside rotation – just like in January 2018. The second peak was higher, followed by a much deeper downside price rotation – just like in Nov/Dec 2018. And the final rally broke upward after a Pennant/Flag formation pushing higher by +25% in 2000. The current upside breakout from the December 2018 lows suggests a 39.5% price peak – just above our predicted 32% scaled Fibonacci rally expectation.
The total scope of this price move over the past 40+ years is impressive. These longer-term patterns still drive the markets to establish major peaks and valleys. Take a look at this chart and try to understand the ratios that are being presented here. 21%, 34%, 50%, 62%, 100% and any combination of these levels using 2x, 3x or any multiplier constitute a Fibonacci structure. One of the most important facets of attempting to understand the Fibonacci price theory is that the ratios must be somewhat aligned.
Pay attention to the Fibonacci Price Amplitude arcs (the circles) drawn on this chart. They represent the price range from the peak in 2000 to the low in 2009. The reason this range is important to our researchers is that it will properly measure the previous upward price rally and the current price rally in terms of price amplitude. Pay attention to how the current price rally stalled and rotated near these arcs. We believe the upper GREEN arc level will operate as major resistance for the markets – possibly setting up another “rollover” type of top similar to the one in 1999~2000.
Skilled technical traders still need to be cautious headed into 2020. The current rally, and most of 2018 and 2019, have been setting up a very serious type of pre-top setup. Any downside rotation in early 2020 may attempt to move lower in multiple waves – possibly spanning multiple years.
Currently, our research suggests a limited 2.5% upside price range before the SP500 will reach the GREEN resistance arc. The US markets may reach this level before the end of 2019 and may begin a topping pattern before you finish reading this article. Please stay informed and understand the structures, trends, and dynamics that are at play in these markets to attempt to reduce your risk. Now is the time to trim your equity/stock positions and prepare for a much bigger swing in price/volatility.
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 are massive/life-changing if handled properly.
We’ll keep you informed as this plays out with Wealth Building & Global Financial Reset Newsletter if you like what I offer, join me with the 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. Join Now and Get a Free 1oz Silver Round or Gold Bar Shipped To You!
Chris Vermeulen
Founder of Technical Traders Ltd.
www.TheTechnicalTraders.com
We continue to alert our followers of the extended Wedge (Flag or Pennant) formation that has setup over the past 16+ months in most of the US major indexes. The reason these are so important for skilled technical traders is because the Apex of these formations typically result in a violent price move that may result in a dramatic profit opportunity (or massive risk event). The most interesting facet of the current Wedge formation is that it is happening just 12 months before the US Presidential Election cycle.
It is our believe that a major price reversion event will begin to take place over the next 2 to 6+ weeks and complete near the end of 2019 or into early 2020. This reversion event is and continues to align with our super-cycle event analysis from earlier this year. Our researchers believe this reversion event is essential for price to establish “true valuation levels” and to begin a renewed future price trend. We believe that trend will begin between June 2020 and August 2020 and will result in a strong bullish price trend. We also believe this bullish price trend in the US stock market may last well beyond 12+ months – well into 2021 and beyond.
This Custom Technology Index chart highlights the Wedge formation that is one of our main concerns. The Technology sector is one of the most heavily weighted sectors in the US stock market and the one that typically has the highest price to earnings multiple. Over the past 5+ years, billions have poured into the Technology sector chasing the rally and the security of the US stock market/US Dollar. A breakdown in this sector (like the DOT COM crash) could be devastating for the global markets. As you can see, the price is already very close to the lower price channel and could breakdown within the next 2 to 5+ weeks. Pay attention to weakness in the NASDAQ and/or the technology sector overall.
This S&P 500 chart highlights the rising Wedge formation that is set up and nearly complete. This Monthly chart also highlights the extended volatility within the global markets compared to levels prior to 2018. It is our opinion that the Apex of this Wedge will result in a breakdown/price reversion event targeting levels below 2600 on the SPX. This reversion could extend to levels below 2000 on extended price weakness. Our opinion is that the bottom will form sometime between December 2019 and April 2020 where a new Wedge formation will setup before reaching the Apex and starting a new upside price trend near August/October 2020.
We prepared for a very volatile price rotation/reversion event as these Wedges reach their Apex moment. Skilled technical traders should be able to find lots of opportunity for profits over the next 6+ months with these big price rotations.
The US Dollar will likely rotate within the Magenta price channel as this has continued to provide very clear price support over the past 20+ months. We don’t believe the US Dollar will decline by more than 5% to 7% throughout the reversion event. The fact is that the US Dollar has regained a level of dominance within the world and the US Dollar may continue to strengthen for many months into the future.
Remember, these reversion events are essential for proper price exploration and future price trends to establish. They are fundamental to all price activity. A healthy price rotation will allow for future trends to establish and mature well into 2021~2024. The current Wedge formations must complete and the Apex rotation must happen in order for price to conduct “true price exploration” and “true price valuation”. From these levels, price will establish a new price trend that may continue for many years into the future.
We strongly suggest all readers consider the risks of their open portfolio positions and take steps to protect against any unwanted risk exposure. As we are suggesting, we believe the Apex event will begin within 2 to 4+ weeks – possibly sooner. If you want to know what we are advising our clients about this event, visit www.TheTechnicalTraders.com to learn how we can assist you.
I urge you visit my Wealth Building Newsletter and if you like what I offer, join me with the 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. Join Now and Get a Free 1oz Silver Round or Gold Bar!
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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 are massive/life-changing if handled properly.
Chris Vermeulen
www.TheTechnicalTraders.com
