S&P Long and Medium Term Outlook

A favorite discussion the internet often likes to do is to debate whether we are in cycle, supercycle or grand supercycle degree in Elliott waveterms. Honestly for the immediate life of most of us it matters less, unless we plan to live over 150 years!

 

For those not familiar with Elliott wave terms, the basic idea that growth or demise happens in 5 waves, with waves 1,3, and 5 are in the direction of the trend and are called actionary waves, and waves 2 and 4 are counter-trend or corrective waves. The pattern is fractal meaning whether you zoom in or out, the pattern is repeating itself at every level. Whenever a 1, 2, 3, 4, 5 structure is completed, it would consist an actionary wave of a larger degree and what follows is a correction at that higher level that unfolds on in corrective patterns.

That said, the analysis drawn is based on the idea that we are in a wave 3 supercycle degree that started in July 2010, after wave1 supercycle degree started in March 2009, and wave 2 supercycle degree ended in July 2010. Since Feb 2016 we are in wave 5 cycle degree that would complete the wave 3 supercycle degree and open way for wave 4 supercycle degree. Within the wave 5 cycle degree we have just completed wave 3 at primary degree, and witnessed the start of wave 4 at primary degree that would last for a good time ahead before opening way for wave 5 primary degree leading to all new highs to conclude wave 3 supercycle degree and lead us to wave 4 supercycle degree. What we are witnessing now, that could well last for a good chunk of 2019 and could extend in 2020, is setting ground for a good last short term run in growth (wave 5 primary degree), before another bumpy correction. What I am saying it is a rough ride ahead with lots of ups and downs.

In later posts, I will note short term possible set-ups that could be of interest, however environments of wave 4 are usually hardest to trade, as there is lots of indecision and wild volatile moves. Zooming on short term level, once could still find opportunities to ride short term trends.

 

S&P Weekly Count

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S&P Daily Count

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Long Term Outlook on USD Index

In the two charts below, is the long term outlook on the USD presented. The USD has seen a remarkable run over a period of about 9 months. That has pushed several currencies of developing economies lower which only added pressure to international commodity trade that has already been suffering for several years. The Good news is that usually after such a run, whatever the instrument it is, what follows is a last swing before the trend reverses.

Below I present my preferred count. The alternative count is not much different, however it would indicate that the top is already in place at 100.390 on March 13th, 2015. However, judging on the price action after that point, I am tending towards having one more swing higher that will push the Dollar Index beyond 100.390 putting further pressure on developing currencies and possibly commodities.

As discussed in the last post, relation between USD Index and commodities is by no means linear, however considering the overall fundamentals and general sentiment of the market, I would view that any news on strengthening USD will push traders to sell commodities. A relation that probably will be best displayed in Oil prices in the near term future!

Before I present the chart, I can only say, hold your seats and brace for impact, who survives will be seeing better days soon. 🙂

USD Index Weekly Count

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USD Index Daily Count

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