Are the World Indexes close to a Huge peak?

[elliottwaveforecast]

Since the correction between the year 2000 and 2009, many traders around the world have developed an idea of bearish World Indexes with more downside to come. With Fed driving Market, everyone is under the idea that Global Indexes are inflated and will crash again resulting in another decline like the one seen in 2008. Traders, first of all, need to understand that the Market does not move in a straight line, it has never moved in a straight line and never will, consequently correction in different degrees always will take place. It is understandable that the biggest correction we have seen so far was the one that happened between 2000-2009 and someday a correction even bigger that that will happen. It is important to understand that corrections are needed, otherwise there would be no losers and no profit takers. We believe that the Indexes trend will always be Bullish in the Century and Yearly time frames and will do corrections in weekly, monthly and even yearly degree at one stage. We follow all Indexes around the World and apply a system in which we ride the trend is over and market said correction has started and then, we locate the degree and we adjust the counts according to the degrees. We use Elliott wave Theory to count the waves and gather directions, also to explain our ideas to members and followers, but we use several other tools like correlations, sequences, cycles, time and distribution to increase accuracy of our forecasts.

In 2015, we knew it was time for a correction in Daily Time frame and we warned members and followers about it. Read this blog $NIFTY reaching a Warning area for Indexes Bulls and see how the $NIFTY from India was the one that called the extreme in time and price and we knew that was the time for the World Indexes to make a daily correction and pull back in 3 swings at least or extend into 7 or 11 swings. However, at that moment, we also knew that the dip was another chance to buy into the all-time 100% in most World Indexes. Now the World Indexes are not yet at risk of another major peak and any dips should still be considered another chance to buy in 3, 7 or 11 swings.

FTSE Swing sequence from the All Time Low

Since the all-time low and following the sequences in 3 different degrees Black/ BLUE /RED, it is clear that Price has not yet reached the 100% Fibonacci extension area between 9109-10000 area and neither time has matched the 1=3 in RED degree, nor 1 Blue = 3 Blue within RED 3. the idea is that soon, market will pull back in 2 BLACK within 3 Blue but still both price and time are calling for stronger Indexes into the years 2022-25 and that’s when there would be a chance of a nice correction either to correct the cycle from 2009 low i.e. 3 RED or the whole cycle since 0 RED. By then, we will get a perfect hit of 3-3-3 and the Index should be ready for at least a Weekly correction. As we mentioned earlier, a big Illusion has been created that a huge Crash needs to happen in the World Indexes but the Reality is that someday a big correction will happen, but picking tops against a clear Bullish trend it is not the right trade. In 2022 the time will be equal from 2009-2015 and 2016 to 2022 which will be equal cycles of 6 years and also if price has reached the 1=3 RED and then 1=3 in BLUE, there will be chance of weekly correction to take place in the World Indexes, until then our strategy remains to buy the dips in 3, 7 or 11 swings and not pick the tops.

[elliottwaveforecast]

ZN (10 Year Treasury Note) and SPX

Many traders around the World keep picking the top in Indices and fail to capitalise on the trend which is to the upside. Recently, we did a blog to explain World Indices could see another huge peak around 2020 – 2022, of course there would be corrections in between but they should offer nothing more than a buying opportunity in the sequence of 3, 7 or 11 swings. Advantage of trading with technique is that even when the trend is extreme, you are trading with a defined risk and get a chance to eliminate risk on the trade as the market bounces from extreme areas after 3 swings, 7 swings or 11 swings. In this video we explain the relationship between ZN (10 Year Treasury Note) and SPX.

ZN (10 Year Treasure Note) and SPX Overlay

Above chart shows ZN (10 Year Treasury Note) has ended the cycle from 2007 low and most likely from 2000 low as well and as far as bounces fail below 2016 and more importantly below 2012 peak, 10 year note prices can drop towards 117 – 114.19 area to finish correcting 2000 cycle and then turn higher again for another monthly cycle or make a larger 3 waves bounce at least. We can see in the above chart that 10 year note formed a peak in 2012 and dropped and SPX rallied. Then we saw another secondary peak in 10 year note in 2016 which was a low in SPX and caused another rally. While below 2016 peak, 10 year note prices should drop further and that should cause SPX rally to extend and it could reach as high as 3133 area by the year 2020 – 22. Therefore, we don’t like picking the tops in Indices and expect buyers to appear in the dips after 3, 7 or 11 swings. When 10 year note prices reach 117 – 114.19 area, Indices would have a chance to form a huge peak and start a larger pull back and that should be a good time to buy 10 year T-note.

[elliottwaveforecast]

Nifty-NSE: Next Warning area for bulls

In June 2015, we mentioned that Nifty-NSE from India was in a warning area for the bulls and a larger correction was expected to take place. Over the next 12 months, Nifty lost 25% dropping from a high of 9119.20 on 3.4.2015 to a low of 6825 on 2.29.2016. However, as we keep mentioning World Indices trend remains up and dips are nothing more than buying opportunity in the right areas, so this dip in this Indian Index was another buying opportunity in the blue box between 7459 – 6721.

Nifty-NSE buying area down from 3.4.2015 peak

Index found buyers in the blue box shown on the chart above and rallied. Index has already made a new high above 9119.20 (3.4.2015) and has opened the next bullish extension. Index is currently showing an incomplete Elliott wave sequence up from 2.29.2016 low which calls for dips to find buyers in the sequence of 3, 7 or 11 swings for extension higher.

Nifty-NSE 10053 – 100562 is next warning area for bulls

Index is showing an incomplete Elliott wave sequence which means dips should remain supported for more upside. As dips hold above 5.24.2017 low and more importantly above 4.19.2017 low, expect the Index to find buyers in the dips in 3, 7 or 11 swings for extension higher towards 10053 – 10562 area. This area is close to the upper channel line as well and could contain the rally in the Index or at least slow it down. This means bulls should stay in control in rest of the Indices also like $SPX $INDU $FTSE $DAX $NASDAQ and $IBEX etc until Nifty doesn’t reach the above mentioned area. From 10049 – 10557 area, we can see a larger 3 waves pull back in the Nifty to correct the cycle from 2.29.2016 low or at least from 12.26.2016 low.

[PanchoVilla84]

I have no experience with elliot wave, but this was a very interesting read.

And with respect to your thoughts on the major indexes being inflated, I agree and whenever the bubble pops, I expect it to be very similar to the correction that happened in 08 and 09.

[elliottwaveforecast]

NASDAQ Composite Index should pullback soon

The following chart shows NASDAQ composite index. The index has a tremendous rally since the lows around 1975 which is pretty close to the zero level. The index has reached the bottom of the blue box at 6219 area. The question then is whether the index will extend higher or start correcting lower as the minimal target has been reached. As we often say, Elliott wave theory by itself is not enough. In this case, we can see that from the zero line, we can count the index as a completed ABC. However, we can also count it as an incomplete ABC with a black((4)) still to happen. In the Elliott wave theory, any five waves structure always at one moment is a three wave move. It is therefore too early at this stage to determine if the rally will develop into a five waves move.

In Elliottwave-forecast, we have implemented new ideas and tools to make the theory a more reliable tool. We use cycles, sequences, distributions and momentum indicators to increase the accuracy of Elliott wave theory. As we show in the chart, the RSI (Relative Strength Index) indicator is still showing a divergence compared to the peak in 1999. One of the rules that we introduced in the new Eliott wave theory is that a three waves move can not have divergence in any single time frame. Looking at Nasdaq quarterly chart, we can observe the divergence between momentum and price action. Thus, the index still has scope to extend into the areas of 7431 minimal or even reach the 9391 area before the 2009 rally is complete.

The five waves move in blue degree is now about to end. But we feel very comfortable to say that the pullback will be another buying opportunity. It is very easy to trade following our forecast. We always prioritize the trend and we use a distribution system and a series of pivots and cycles to prioritize the trend. In conclusion, even though the index has reached the minimal target, a multi market correlation and simple indicator like the RSI are calling for a pullback soon into a wave four but more upside to follow afterwards.

Long Term Nasdaq Elliott Wave Path

[elliottwaveforecast]

The Big Long in World Indices

Since the decline starting from year 2000, the world has been calling for a huge crash in world indices. The world indices did in fact corrected nicely in the year 2000 and 2009. The correction took the form of a FLAT Elliott wave structure and reached 50%-61.8% of the all-time rally in most of the world indices. This correction is even recorded in a movie titled “The Big Short” telling story about a group of traders shorting the market.

The crowd does not have enough with the 50%- 61.8 % correction between year 2000 and 2009, which is almost 9 years of correction. People want more and they want a crash after another crash. However, the reality is that the Market does not work that way. Most traders do not have a long career as most believe that the World Indices trend is bearish following the 2009 decline. This is a wrong bias which has cost traders billions of dollars.

The World Indices trend will always be bullish because it’s simply the Human nature. We used to live in the cave, but now we have a nice house, hotels and many other development to make our lives more comfortable. This is called progress, and by nature, we humans always will look for something better and the Indexes are a reflection of the Human progress. We understand that corrections are needed and they will always be a part of the Market. We can say that traders who shorted in 2007 – 2008 and caught the move lower got very lucky.

The World Indices ended the all-time cycle until that moment at 4.2.2000 and pullback in 7 swings into the 776 area using the $SPX as reference. By 2002, the correction has reached 50% of the all-time rally ina corrective 7 swing structure, and technically the correction was enough and a new bullish trend could develop. The World Indices even made a new high in 2007 and then crashed into a C wave completing a flat structure. Selling wave B at 2007-2008 high into wave C lower with a new high above the previous peak at 2000 is luck. Yes the move lower happened, but selling is against the trend at that time, and whoever caught that short got lucky.

It sounds and looks easy in a movie, but it is a wrong trade. It is a mass crowd trade, and we know better. We proposed “The Big Long” instead, which is more natural and easier to trade with no pain. The Index has rallied since 2009 and this rally is the good side of the Market, the one with no pain. The trend is always smoother and more natural, but most of the time the crowd does not see the trend. We do understand The Big long has reached the minimum target at 2234, if it is labelled as an ABC or a corrective sequence. However, the Market is saying more upside is possible and 3197 can still be reached if the Big Long becomes an extended Big Long.

Trading is about reading the Market and understanding the natural path and not forcing against the trend. We keep and will keep calling extension and buy into The Big long because we understand that pickers got it right one time and wrong 9 times. We would rather get it right 9 times and wrong 1 time. As we always said, nobody is 100% correct and it is impossible to be perfect, but when you trade the trend it becomes easier. The Big Short which everyone is waiting is a crowd and popular trade. The reality is that few people look the other side which is the Big long. This side is not over and can become extended Big Long.

SPX Elliott Wave Chart

[elliottwaveforecast]

World Stock Index has much more upside

The Hang Seng Stock Index is a free float, adjusted market capitalization, weighted stock Market Index in Hong Kong. The Index records and monitors daily changes of the largest companies of the Hong Kong Stock Market. It is the main indicator of the overall market performance in Hong Kong. These 50 constituent companies represent about 58% of the capitalization of the Hong Kong Stock Exchange. At Elliottwave-Forecast, we have been tracking the Index sequences together with the FTSE 100 (The Financial Times Stock Exchange 100 Index). FTSE 100 is the share Index of the 100 companies listed on the London Stock exchange with higher market capitalisation.

The Hang Seng Index and FTSE 100 both are showing the same sequences since the all-time lows and both are showing an incomplete sequence since the lows at 2008-2009 range. Today, the Market today can advance in 2 types of sequences. The first type is 5-9-13 or motive sequence and the second type is 3-7-11 or corrective sequence. Both the Hang Seng Index and the FTSE 100 advance in a corrective sequence and both have not reached the 100% from all-time low.

The Market by nature will always runs in one of the 2 sequences above. Both Hang Seng and FTSE 100 are showing the same outcome which is an extension to the upside within the cycle since 2008-2009 low. The charts below show the extension target in both indices, and the upside in both indices will drive the rest of the World Indices higher. This means that SPX 500 (The Standard & Poor’s 500), which is the market capitalizations of the 500 large companies in the United States, has scope to rally into levels which not many people are expecting such as 3245 or even the 4000 levels.

The rally in SPX 500 from all-time low can become a 5 waves impulse if SPX 500 can break above 3245 before the Hang Seng and FTSE 100 reach the 100% from all time low and finish the blue sequence as charts below show. At the end of the day, the world indices are here to extend and contrary to many popular street opinion, they will remain a buy in the dips in all time frames until Hang Seng and FTSE 100 reach their target.

Hang Seng Stock Index Monthly and Weekly

The Hang Seng Index is showing 5 swings from 2008 lows, which should result in more upside within the blue sequence into the all time 100%. The invalidation for this view in daily degree is the blue 4 low (18278.80) while the invalidation in weekly degree is the black 4 low (10676.29).

FTSE 100 Stock Index
The Index took the 2000 peak, which suggests the bullish sequence from all-time lows is incomplete. In addition, we could also see 5 swing bullish sequence in blue degree from 2009 low, which favors more upside.

The following chart below shows that both Hang Seng and SPX 500 have the same trend

At Elliottwave-forecast, we believe that there’s only one Market. Having 2 Indices calling more upside mean the whole group will trade higher. We believe in cycles, distribution and many other tools in addition to the classic or new Elliott wave Principle.

[elliottwaveforecast]

Elliott wave: Are the Indices ending 5 waves or not?

Elliott wave: The 5 waves advance

The Elliott wave Theory is a famous trading tool and is based in the idea that the Market advances in 5 waves and corrects in 3 waves. The Theory has some basic rules which are listed below

1. Wave 2 never retraces more than 100% of wave 1.

2. Wave 3 cannot be the shortest of the three impulse waves, namely waves 1, 3 and 5.

3. Wave 4 does not overlap with the price territory of wave 1, except in a diagonal formation.

Elliott Wave Theory: A 5 waves Advance

These rules are the ones which appear in a 5 waves advance but also the one that make traders around the globe to be misled into trading on wrong side of the Market. Many traders develop the habit to pick tops and trade into corrections when they see what looks like a 5 waves move and believe that a pullback or sell off is imminent. The reality is that those 3 rules are not enough and we have been saying for years that the Theory is too simple and too old to be used without any other tools. We have added several new rules or conditions to validate the Market and consequently gain an edge over the Market and the theory itself. In this blog, we will explain why the YM #F which is the Dow Jones Futures is being wrongly counted as a 5 waves move from 2 significant lows i.e. the 2009 cycle and the 2.2016 low cycle. We believe wave 5 in an advance needs to provided momentum divergence against the peak of wave 3 , otherwise the move is either corrective and ending a 3 waves advances or even more powerful when the market is still within the wave 3 with the waves 4 and 5 to come. Let’s now take a look at the charts below

YM#F Cycle from 2.2016 low: 5 Waves or not?

The Chart above is showing the cycle since 2.2016 low and if we look at RSI at the bottom of the chart, we can see that move from 8.2017 low has erased RSI divergence with respect to 3.2017 peak , in other words RSI is currently at the highest level since the move started from 2.2016 low so we are either ending the whole cycle as a 3 waves corrective sequence or still within wave 3 of a 5 waves advance.

YM#F Cycles from 2009 low (Price and RSI)

The Chart above is showing the cycle since lows at 2009 and we can see how the price have erased the divergence within the cycle and showing 5 swings, meaning it’s not a 5 waves advance. We can see how both cycles have erased divergence compared to the higher read within the cycle which mean that current rally is the peak in both degrees and more upside should happen in the long term cycles. The Market is a combinations of cycles and time frames and traders need to upgrade and downgrade the Instrument be able to provide a reliable forecast or wave count. We are always trying to help members and non-members to understand the Elliott wave Theory and applying it to according to the current times instead of following the theory in it’s original form which is too simple and without additional tools, doesn’t help to avoid falling into the traps laid out by the Market every day. The Relative Strength Index (RSI), developed by J. Welles Wilder, is a momentum oscillator that measures the speed and change of price movements. The RSI oscillates between zero and 100, the instrument gather the strength of the move and we used every day in our charts and forecast, we always aid a wavers without the RSI won’t be able to get the desired results and today the proof is that, we are not ending a 5 waves move in the YM# F (Dow Jones). We are either ending wave 3 with 4 and 5 to come or we are ending a correcting advance since the lows at 2.2016. We do understand the optical view of the 5 waves advances but the RSI is denying the notion of 5 waves so it’s better to find a count which fit the criteria instead of forcing and eventually falling into the trap. The cycle from 2.2016 can end soon and provide a pullback and another chance to buy, but if the pullback happens without a 4-5, then the structure will become corrective from 2009 and 2016 cycle.