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6/20/08 - Equities, A Tale of two Markets
As was discussed in my Newsletter of June 6th, "Capitulation is in the Air" the Nyse broke the 62% retracement level and has begun a capitulation wave led by the banking sector. It appears we are now in Wave 3 of 5 of that fifth wave, therefore volatility should be very high this week as we end wave 3, rally for wave 4 and turn down again to make a final low. Many cycles converge this week, the Cardinal date of June 20th, the 72 trading day cycle of Monday June 23rd, the 110 TD cycle and the Fed meeting of Wednesday June 25th, and the 37 TD cycle, end month, end of quarter and end of first half all next Monday June 30th. My logical choice is to see the market make a low Monday June 23rd to finish wave 3, rally for 2 days into the Fed meeting of Wednesday June 25th, then turn down for wave 5 possibly all the way into next Monday June 30th. Charts courtesy of StockCharts.com Nasdaq is building a descending wedge
The Nasdaq seems to be oblivious to all of the trouble in Nyse land, as it is building what could be interpreted as a bullish descending wedge. If the Nyse completes its capitulation next week, and the Nasdaq remains within the wedge boundaries, this would put this index into a very strongly bullish position to begin July. However these wedges are most often seen at lows, and not near the highs, and they can easily evolve into a parallel structure when they break dramatically as shown below. A big warning sign to be cautious in seeing this as a bullish wedge, is the fact that the White Tick line is as high as it was near the Nov 07 top, and a level where most serious declines start. We may see the Nasdaq join the Nyse in a capitulation style sell-off to reach the lower parallel channel. Charts courtesy of StockCharts.com Beware of the 2 year cycle lows
The 2 year cycle is less well known than the 4 year cycle, but it should be since it produces very good trades in the most volatile issues, like the Nasdaq. Since we are heading for an August low, and this indicator has turned down from a cluster of resistance, it would suggest that the Nasdaq will join the Nyse in a sell-off before a good low is made. Charts courtesy of StockCharts.com The Cardinal New Moon of July 2nd
The word cardinal comes from the Latin cardo for "hinge" or turning point, and that is why we refer to the turn in seasons as Cardianl dates. We are all affected to some degree by the beginning of a new season, and this is often reflected with a change in psychology and corresponding pricing of risk. Chris Carolan 1998 award for his work on Panics showed that they almost always occur on a Cardinal Moon. While 1929 and 1987 style Panics are rare, smaller versions of the same phenomena occurs quite frequently as shown in the Cardianal Moons chart below. In any case, the Moon Cycle Trading chart shows that it is always best to be aware of the Moons, especially when the market is volatile and/or trending heavilyt towards one of these Moons. The Cardinal New Moon of January 22nd tought us that support levels can be broken violently under these Moons, with the proper news and/or rumours to set them off. Under these conditions, it is advised to be careful until the New Moon of July 2nd is behind us, or the market recovers for more than a few days. Charts courtesy of StockCharts.com 6/20/08 - Currencies, US Dollar capitulation
Martin Armstrong's discovery of the PI * 1000 days cycle or 8.6 year, is one of the most fundamental discovery in the workings of time and seasonal events. The 2nd sub-harmonic of this cycle is 4.3 years long or 1,571 days, and can be seen clearly in the chart below. From the low of Apr 19, 1995 to the Oct 14, 1999 low, wecount 1,639 days or 4 x 17 = 68 days over the ideal 1,571 days. The next low occurs on Feb 18, 2004 and 1,588 days from the previous low, or 17 days over the ideal 1,571 days. Adding 1,571 days to the Feb 18, 2004 low gives us June 24th, and allowing 68 days over brings us to Aug 14th. Since the March 17th low was 90 days before the ideal low of June 24th, I doubt it was the low of 2008 for the USD. I would expect to see more news coverage of the demise of the US Dollar or even magazine covers, before such an important cycle low but instead, it is Oil that is on the June cover of "The Economist". I expect Oil to eventually decline significantly because of this cover, and in a reverse way this may imply strength in the USD, but they do not always move in opposite direction. Charts courtesy of StockCharts.com A struggle to test previous lows
The US Dollar has rallied three times since the March 17th low, but has yet to even test the previous low near 75. Since 3 months is about the longest time for a counter trend rally, it should fail very soon if we have not seen the 4.3 year cycle low for 2008. The Commitment of traders shows that large traders have the most long positions in over two years, and should they have to unload, the USD could fall quite a bit. Since the Euro is almost 60% of the USD index, a long term chart of the Euro/DM may help us to pinpoint the high, and the 170 area appears likely before a big pullback. Charts courtesy of StockCharts.com Euro and Yen may be turning
Both the Euro and Yen have cycles and support structures suggesting higher prices. In contrast to the USD index, the Commitment of traders on the Euro and Yen shows very little open interest, something that often occurs near turns. Charts courtesy of StockCharts.com 6/20/08 - Commodities, Oil Crisis in the News
Oil made it to the June cover of "The Economist", another sign like the recent largest one day gain ever that a top of significance is imminent. The geometry looks complete in the monthly chart and both the 170 day cycle low in mid July, and the 5 year cycle low in December are likely to pull Oil down significantly this Summer. Charts courtesy of StockCharts.com 6/20/08 - Bonds, Between a Rock and a Hard place
Charts courtesy of StockCharts.com |
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