Summary for week of October 16, 2017

The market continued its strong trend and we saw only 2 days of weakness into last Monday from the 11-12 day cycle high. We do have a potential 11-12 day mid cycle like August 8th that could take us down 50 points over 2-5 days and this would align with the possible 5 day Low-High-Low-High last Friday? cycle. We would need to break below SPX 2540 by Tuesday for this decline to occur.

The VIX is back near 9.5 after a record closing low at 9.19 which is also similar to the August 8th high in the SPX and could take us down 50 points this week and 70 points down over the next 3.5 weeks. The new Highs have declined for the last 8 days and the Put/Calls are as low as the Jobs report of August 4th which gave us a 70-80 point drop.

With Barron's cover this week discussing a crash, do not expect such an event to occur this year. However, this article may be enough of to trigger some selling in anticipation of a crash by those who expect one.

The Cumulative New Highs have turned back up and are making higher highs which is bullish. However the Aroon Oscillator turned down for the second time in the last 6 weeks increasing the odds of a 10% correction to the 2,300 area this year.

5 min. is near a 5 day cycle In a strong trend, short term cycles like the 3/6 day have little effect. The best fit is a 5 day cycle that gave us 2 days of weakness 5 days ago and suggests another 2-5 day of weakness this week. The Ticks and Momentum indicators are weak and New Highs have been declining for 8 days.

10 min. is near a mid-cycle With moves of 2.4%, 3.2%, 4.3%, 3.5% and 5.8% from the 2322 low the SPX is accelerating higher. With highs every 11 days, last Friday was a possible mid-cycle high like August 8th and we could see a 50 point drop mid-week followed by a 40 point rebound into Monday the 23rd.

60 min. is near a top channel With moves of 9.3%, 7.5%, 7.2% and 5.8% from the 1810 low the SPX may be close to a high near 2557. The Ticks and StochRSI are declining which gave us 50-70 point drops 3 out of the last 4 times. The 28 day cycle of September 18th was a failed high but the next cycle of October 26th will probably be a low. If we do not drop below 2525 early this week, then the October 26th cycle will likely turn into a high near 2570.

Daily may be headed for 2600 With moves of 301, 202, 317 and 236 from the February low of 1810 the SPX may be headed for a 300 point move to the 2622 area. The smaller moves of 193, 167 and 168 now suggest a 167 point move up to 2584. However, the Call/Put ratio is high and overbought, and a move down of 50 or 75 point to 2500 or 2475 is possible. The next 9.5 week cycle is near October 16th and is probaby a high.

News of Interest

No Fear: Stock market's main measure of volatility posts lowest close ever
The CBOE Volatility Index, or VIX, ended Thursday at 9.19, its lowest close ever. The S&P 500 benchmark notched its sixth-straight record high on Thursday.

$7 Trillion To Manipulate Prices
As shown below, through the second quarter of this year, reported EPS, which includes “all the bad stuff,” actually declined in the latest quarter and has remained virtually unchanged since 2014.

The one thing Robert Shiller says is preventing a 1929-like crash
"The market is about as highly priced as it was in 1929," said Shiller. "In 1929 from the peak to the bottom, it was 80 percent down. And the market really wasn't much higher than it is now in terms of my CAPE [cyclically adjusted price-to-earnings] ratio."

Black Monday 2.0: The Next Machine-Driven Meltdown
In the rise of computer-driven trading, some hear echoes of the stock market’s 1987 crash. Beware the feedback loop.

The Volatility Indexes The VIX remains near the 9.5 level where we typically see weakness for 2-5 days.

Unemployment and Sentiment The Continuing Claims and Michigan Sentiment are bullish but near extremes.

Highs/Lows and Put/Calls The Nasdaq Highs/Lows and Equity Put/Calls are turning bearish from oversold and suggesting a return to 2500.

The Up/Down Volume The 90 day Nasdaq Up/Down volume is turning bearish with the 10 day Nasda Trin turning up from overbought.

McClellan Indicators The McClellan indicators are turning a bit in overbought like late February which saw a 70 point move down in 6 weeks.

Cumulative Highs The New Highs are bullish but the Aroon Oscillator is turning down near the 21 month cycle that could take us down 10% to 2,300.

Gold and Silver

Gold and Silver are turning bullish from the 8 week cycle of early October. Gold should resume its move upwards into the next 8 week cycle high of late October and 6 month cycle of January 2018.

The 8 year cycle lows in Gold of 1985, 1993, 2001 and 2008 suggests that the 2016 low of 1045 will probably take Gold higher into the 40 year cycle of 1960, 1980, 2000 and 2020. Assuming the first move up from 253 to 1923 was a 760% Wave 1, the next move up from the 1045 low should take us to the 1045 x 7.6 = 7,942 or even to the 12,000-15,000 area.

US Dollar

The US Dollar is turning neutral past the 16 week cycle low of August 8th and has probably ended three waves down to 91.2 With 3 year lows in 2005, 2008, 2011, 2014 and possibly 2017, a December 2017 low could target a July 2019 high which is also the target of the 17 year cycle high. However, with moves of 12, 20 and 12 points from the 72.7 low, we may have seen the high and only see a rebound back to the 100 level in 2018 before a decline to the 77-80 area by December 2020.

Euro

The Euro turned bearish after exceeding its May 2016 high of 1.16 by 2 and 4%, and should decline to the 116 area probably after the 4 week cycle of September 18th and/or the 3 month cycle of late September. It should then continue higher from a mid-November low into the next cycle of early January 2018.

Yen

The Yen turned bearish from the 4 week cycle of September 7th, and should reach the 87-88 area by the next 8 week and 3.5 month cycle of October 10-17th before heading higher. The Yen should make a lower low than 80 into the next 17 year cycle of 2019 and should not exceed the 95-97 and 100 levels in this rebound.

Canadian Dollar

The Canadian Dollar turned bearish from the 4 week cycle of September 11th, and could reach the 78-79 area by the next cycle of October 5th and/or the 3 month cycle of November 14th. The Canadian Dollar should then head higher once more and may even reach the 88 or even the 94 area by the next 3 month cycle of mid-February 2018 and/or the 8 year cycle high of January 2018.