FOR THURSDAY: (8/10) Cycles are less volatile Thursday/Friday so we’ll give a chance for secondary high to come in on stocks. Still, at some point, the tension is going to escalate with North Korea into Aug. 21-26 and the cycles remind me of the Gulf War in 1990 where the markets fell and then we won big and everything reversed sharply. Possible scenario into next week.
SEPT. E-MINI S & P 500
TRADING RECOMMENDATION: Stand aside.
S & P ANALYSIS FOR THURSDAY: (8/10) Three waves up on cash would project 2477-78 and futures completed 3 waves up. Given the way this market comes back from the dead. We have to be open to the secondary high at 2492-93 as late as Monday and will look for overnight action to decide. Until 2455 on futures comes out, the market will do what it does best. We had mentioned this morning that without a close below 2455, the market could still do a divergent high into Aug. 15 toward 2492-3. Still, the market continues to show signs of topping and a Bradley signal was due to day and came in yesterday as a cycle high.
OVERALL: While the type of key reversal signal that traders like to see happened on the S & P yesterday, we still need a bit more confirmation. The largest retracement we have had since July was 30 points from July 3-7 and that has just about been matched. Taking out 2455 would issue a stronger sell signal and negate a double top to 2490-3.
So often you get these signals and a secondary high which is why we are always a bit gun shy to chase the first signal. We have had a target of 2420 into August 21st and it could go as low as 2400. Its is possible based on patterns that would be a 4th wave and that a new high to 2500-2520 would be possible in September. In the end we still see only 2300-2320 as a fall correction target with a multi-year high due into 2018.
NQ always tends to give it up more easily these days. We had suggested a 250 point correction would happen on NQ this month at least and at the rate this market falls, that may be nothing.
OVERALL: At some point next week, some major event will start impacting the markets and give a tired market a chance to fall. We estimate a drop to 2420 quickly into Aug. 21 once this market tires out. Cycles today are sideways but could turn more bearish late in the afternoon. Given ranges, we’re not quite at a point where we’re expecting any big flushes but when they do happen, they happen in thin volume and are bought back. Overall this market won’t be a major sale until after Aug. 15 but we’ve seen these markets top out early. We wonder if it seem like the tensions building up into the Gulf War in 1990 where the market fell sharply into the fear and then rallied sharply when it was clear we would win. The parallel cycles the next few weeks are strong if we do take out North Korean missile launchers.
SHORT-TERM: Possible that the summer high came in on July 27 but the DOW is still making new highs, as sector rotation is happening as funds look for something to buy. We’re in the process of doing a series of secondary highs that should complete by Aug. 15 and then start a break first to 2420-2400 and more likely to 2320 into October or early November. Chances for new highs are possible if 2520 into September if there’s some bizarre good news like passing health care. Week of Aug.15-22 seems lower. Looking at cycles and patterns, it could be that the S & P does a 4th-wave minor fall of 60 points toward 2420 into Aug. 21 and then recovers out of there into September we could still get to 2520, and that the biggest break to 2320 might happen in October and into early November. We have to see the context and see how bad geocosmic events are going into Aug. 21.
PATTERNS: We’re not closed to new highs to 2493, as we have seen these 4th wave fake-outs happen before the greed and smart money will keep buying. If we hold 2450 and make a divergent high to 2493 by Aug. 15, we may have a move ideal price and time situation.
CYCLES OVERVIEW: Congestive topping into Aug. 12-15; lower into Aug. 21.
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