FOR MONDAY: (8/14) Markets remained bid in the direction of the crisis but were hoping that diplomatic solutions would develop over the weekend. If they do then most of our positions are in jeopardy. Patterns suggest another high on gold to 1306 and another low on S & P to 2417 or 2410 and another low on the dollar to 9239 so I suspect that the crisis will not abate until those patterns are complete.
SEPT. E-MINI S & P 500
S & P ANALYSIS FOR MONDAY: (8/14) Aug. 9th was Bradley Major turn date that we had seen for weeks and the high on the S & P came in at 2488.75. The break has fallen about 59 points. Five waves down project 2417 with lower support at 2410 and 2400. We would think that the lower target needs to come in and then we’ll get a 3-wave bounce before another push lower. If that comes in quickly on Sunday night or Monday, we could get a strong bounce out of there next week if there are signs of a diplomatic solution.
We’re so used to sucker punches from the Plunge Protection team that we never quite trust the bears lead on this one. Korea hangs in the balance but Russia and China are trying to prevent a military confrontation and the Secretary of Defense continues to pursue diplomatic ties. We have more cycle lows than cycle highs dominating into Aug. 21st but the way news goes, if there is a sudden diplomatic solution, the market will take off.
OVERALL: We are assuming with cycle lows into Aug. 21 that a deeper break toward 2320 could happen by then if 2300 comes out. The 5665 region is very key on NQ 100 futures and that will have to be watched carefully also. We don’t want to move into Chicken Little territory but the cycles building up to Aug. 21 will create that energy much like we saw before the January 1990 Gulf War attack.
There is a small possibility that based on patterns that the current fall is 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.
What’s next? Our geo-political cycles are still intense until Aug. 26 but things may not seem to ease until Labor Day so without N. Korea stepping back in a big way or China showing who is the Big Daddy, 2414 will come in quickly and that leaves 2320 to coming in sooner.
OVERALL: We estimate a drop to 2320 quickly. We wonder if it will be similar to 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.
CYCLES OVERVIEW: Lower into Aug. 21.
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