MCP Market Update: July 6th, 2021 – Mid-year Review: Extend and pretend

by Mars Capital Partners | Jul 6, 2021

It’s time for our mid-year review to update and augment our outlook for the second half of 2021. This follows on from our year ahead review posted on January 4th (see here). Our key stagflation themes and outlook remain unchanged…

“As we head into 2021 with the tailwinds of historic fiscal and monetary stimulus coupled with a speculative “Tulip” mania (see Bitcoin, SPAC, Robinhood, etc) it is important to take note of WHERE we are in the cycle. We are nearing the very end of a super-cycle degree equity market rally.

What if we see global stagflation? Then we should expect to see a continued strong rally in commodities that will likely lead to a sharp reversal in rates, pressuring the CB’s to reverse the QE course, cost push pressures negatively impacting corporate earnings at a time when balance sheets are impaired with historically high debt levels. The result – rallying commodities, strong commodity currencies, sharply rising rates and bearish equities.“

Key Themes:

• Equities remain in extended 5th waves as we look for a super-cycle top
• VIX is providing the opportunity for long term portfolio insurance
• Rates remain pinned by CB’s with no confirmation of a bigger picture change in trend
• The DXY continues to hold important support and is threatening to break higher
• Commodities remain in big picture bull markets but are at risk of near term exhaustion
• Gold remains within a larger corrective decline

Equities completing a super-cycle top

Wave 5 of V of (V) continues to extend in 2021 with no evidence of trend exhaustion or a tradable top. Speculative debt fuelled bubbles will continue until hope fades and with retail traders now fully on board, we are nearing the end of this super-cycle degree trend.

The SPX continues to impulse higher in what we expect to be an ending wave 5 of V of super-cycle degree. Wave (5) has pushed through initial measured equality targets and continues to subdivide higher with no evidence of weakness. The bulls remain in control until proven otherwise – the question for the 2nd half of the year is whether we are completing wave 3 of (5) or all of (5)? The bull count shows we are in wave 3 of (5) with a final cycle peak not due until the end of the year. We will continue to monitor the progress of this bull market until we have a reason to fight it.

The Daily SPX cash chart highlights the near term trend supporting this bull market. Note of particular interest the rising blue trend line from the November 2020 lows and 50 day sma support. The recent rally has broken up and away from support in either a 5th wave blow-off or 3rd wave trend continuation. The bulls remain in control until this trend support breaks. We will remain vigilant in trying to identify any evidence of a change in trend. In the meantime, the trend is your friend until it bends.

ES trading remains muted and only slightly net long. All the institutional and retail activity appears to be in physical stocks.

The Russell 2000 continues to provide the clearest wave structure with 3 waves up from the March 2020 lows. This structure still requires a 5th wave higher to new ATH’s to help complete wave 5 of (5) of V. Until the Russell makes its final push to new ATH’s, it will be premature to call an end to the bull market.

The IWM / RTY continues to stall at overhead resistance and while wave 4 may become more complex, the structure will not be complete until we see a strong wave 5 to new ATH’s. Any near term failure here will likely find strong structural support in the 205 area of underlying trend support and the 200 day sma for a more complex wave 4. We remain bullish the small caps from a structural perspective.

RTY traders remain net short potentially providing fuel for the 5th wave rally to new ATH’s.

The Nasdaq / QQQ continues to extend higher off trend support in what is expected to be wave (v) of 5 or more bullish wave (iii) of 5 that extends higher later in the year. There is no evidence of a tradable top as rates remain muted and investors refocus on long duration assets. Importantly, the bullish trend remains unbroken with the series of higher highs and higher lows continuing throughout the year – until this changes, the bulls remain in control.

The bigger picture Nasdaq / NDX shows a wave (5) extension that continues to hold above its trend channel breakout. We continue to count this rally from the 2020 lows as an ending 5th wave given its overlapping wedge structure and wave count from the 2009 lows. Likely a blow-off rally until we see evidence of trend exhaustion and reversal later in the year.

The VIX closed the gap we highlighted at the start of the year and continues to wedge lower into trend support. Despite equities at new ATH’s, the VIX continues to hold above the 2017 lows providing a bullish non-confirmation. We continue to see this wedging decline as an ending pattern but we have no evidence of a bullish turn. Patience is required as equities grind higher. Alternatively, we have the opportunity to buy long dated portfolio insurance at cheap levels.

Bond markets and Rates

The bond markets as represented by the TLT are rebounding after 3 waves down of equality from the March 2020 highs. The decline is clearly corrective which calls into question the stag-flationary / inflationary outlook requiring higher rates. Central banks are attempting to pin rates at the lows given historically high debt levels globally. Bond bears need to break the March 2021 lows to help confirm a bigger picture change in trend.

The bearish case for bonds given the market structure is a potential leading diagonal that requires another wave down to marginal new lows. If the TLT continues to rally impulsively, we will need to reconsider our long term bearish outlook for bonds. No evidence yet of a bearish turn as the Fed continues to hold the line.

From a big picture perspective, the TYX has rallied in 3 corrective waves of equality from the March 2020 lows. Bulls need to extend this rally into 5 waves up for a change in the big picture trend to up.

Long bond traders have been squeezed out of their short positions and curve steepeners.

FX markets and the US$

To the FX markets and the US$ continues to hold support from the start of the year. January’s lows are our new Maginot line for the potential bull market in the DXY – below this risks a continued 3rd wave decline that breaks equality support in the 87.40 area and targets much lower prices for the US$. The recent compression is setting up a strong move in either direction – much will depend on Fed signalling through the end of the year. Strong resistance that DXY bulls need to clear remains in the 94-95 area.

The DXY long term bull case remains a strong potential if it can break up and through near term resistance while holding swing lows. This bullish outlook will likely require the Fed to shift its policy signalling to a more hawkish outlook.

DXY longs are trying to get up off the floor.

The USDJPY remains range bound and corrective following its impulsive rally from the 2011 lows. Our bigger picture outlook remains bullish for this pair as we look for a break up and out of this congestion. Our base case is that the USDJPY made a generational low in 2011 and the bigger picture trend has turned with upside targets in the 145 area.

Yen traders are now extremely short making them vulnerable to a near term correction.

The USDCAD met our measured downside targets in the 1.20 area from where we have seen an attempted rally. Structurally, we have a clear 3-3-5 Flat correction from the January 2016 highs. The onus is now on the USDCAD bulls to make a stand and hold the 1.20 major support zone – failure to do so will likely see an accelerated decline through support towards 1.04 and below.

CAD traders remain excessively long. Buyer beware.

The Aussie$ outlook is less clear having struggled to rally only in 3 waves into trend resistance so far from the March 2020 lows. The AUDUSD needs to rally immediately in wave 5 while holding 0.74 support to keep the bull case alive. Major resistance remains in the 0.82 area of the prior 4th wave.

Commodities

Industrial commodities confirmed our bullish outlook from the start of the year but may be nearing an end to the initial impulsive wave up. The rally is clearly extended and we now have enough waves in place for wave 1 / A up off major swing lows in 2020. We remain bullish commodities from a big picture perspective but are wary of any near term pullback setting up the next wave higher. No evidence yet of a tradable top and the big picture structure is clearly bullish.

Crude Oil continues to lead the way for our bullish commodities story with a strong impulsive rally from the April 2020 lows. The current rally is very extended so we should be alert to the potential for a near term correction within the bigger picture bullish trend. CL remains bullish from a structural perspective.

The CL bull count remains intact as wave (iii) of 5 continues to extend higher. Note the importance of trend support and the 50 day sma. Any close below support will likely signal an end to the initial rally up from the April 2020 lows. Ideally, we’d like to see another small degree 4th and 5th wave to end the rally but the structure remains bullish until proven otherwise.

CL bulls continue to press into the highs. Very one-sided trade at the moment.

Gold failed to break higher and remains within a corrective decline from the August 2020 highs. Last week’s impulsive decline into trend support warns that any break will likely see an extended decline. With the Fed minutes due out this week, a hawkish tone will likely sink Gold to a break below trend. Bulls obviously need to clear 1920 resistance to gain any upside momentum and risks failure below 1670. A lot will depend on the Fed’s near term signalling but Gold remains vulnerable here. No strong view but likely bearish near term.

Gold traders remain very long despite the pullback in price. May be some more pain to come.

Silver appears to be compressing within a triangle and has been range bound this year. While the structure appears bearish, triangles can thrust in either direction. A break down likely targets support in the 18.80 area for the 200 week sma and 61.8% fib retracement. Each way bet here with no clear near term direction. Bulls need to hold the 50 week sma support near term.

Crypto

Bitcoin met our wave 3 targets before reversing impulsively for what is likely to be wave (a) of an a-b-c corrective decline for wave (iv). The bear case is that this latest rally was ALL of 5 but will only be confirmed with a decline back below 13880 wave (i) overlap.

Bitcoin has enough waves in place to complete wave A of an a-b-c wave (4) corrective decline targeting the 23000 support zone. Any immediate decline back below 13880 overlap invalidates the long term bull count.

The Bitcoin bear case is for a completed 5 waves into the April highs followed by an impulsive wave down. Ideally, we see a corrective rally that targets the 47160-51500 fib resistance zone before the next wave down. Either way, we would like to see a strong counter trend rally that clears immediate resistance in the 36550 area. Near term bulls need to hold the wave (v) lows.

Wishing everyone a prosperous 2nd half of the year. Trade safe 🙂

MCP Market Update: January 4th, 2021- The Year Ahead: Super-cycle High

by Mars Capital Partners | Jan 4, 2021

As we head into 2021 with the tailwinds of historic fiscal and monetary stimulus coupled with a speculative “Tulip” mania (see Bitcoin, SPAC, Robinhood, etc) it is important to take note of WHERE we are in the cycle. We are nearing the very end of a super-cycle degree equity market rally.

What if we see global stagflation? Then we should expect to see a continued strong rally in commodities that will likely lead to a sharp reversal in rates, pressuring the CB’s to reverse the QE course, cost push pressures negatively impacting corporate earnings at a time when balance sheets are impaired with historically high debt levels. The result – rallying commodities, strong commodity currencies, sharply rising rates and bearish equities.

In this update, we will focus on the big picture macro charts defining the key trends.

Equities completing a super-cycle top

Our long term equity charts are warning of a super-cycle top at multiple degrees of trend. Our fundamentals analysis warns that this post-2009 rally is based on “hope”. Our sentiment analysis warns that in 2020, the retail investor finally joined the party – often the bag holders at the END of a speculative mania.

The SPX shows a clearly impulsive rally from the 2009 lows – last year’s (B) wave top and (C) wave low in March provided the platform for a wave 5 of V to new ATH’s to end the multi-year super-cycle rally. We are looking for evidence of an end to this post-2009 rally which is expected to be “fully retraced” in a sustained bear market. Near term, the question is whether we blow-off higher in an accelerated speculative mania to complete wave 5 or just fade out into the highs as the bubble bursts.

While our base case has us looking for an end to the big picture rally, there is NO evidence that the speculative rally has ended. While we continue to see higher highs and higher lows, the trend is your friend until it bends – note the 5th wave momentum divergence. Given we have achieved the minimum conditions for a final 5th wave rally (new ATH’s) we are now alert to the potential for a bearish reversal and market top. Our job is to try to identify the end when it occurs and NOT pre-empt a turn without price confirmation. We need to see a completed 5th wave rally followed by an impulsive change in trend – this is our goal for 2021.

The Russell 2000 / RTY probably provides the clearest wave structure since breaking out to new ATH’s in what appears to be a 3rd wave. This bullish chart argues for a continued bigger picture equities rally through H1 2021. This impulsive wave structure remains bullish while above our key 1650 overlap and would look best with a continued big picture rally. Trade back below 1650 invalidates this bullish wave count. While there are enough waves in place to complete wave 3 near term, we do NOT have confirmation of a near term top as the sequence of higher highs and higher lows continues within this breakout.

While equities have pushed to new ATH’s, the VIX remains elevated supported mostly by speculative call buying. While the VIX continues to compress in another declining wedge, we know that volatility compression leads to volatility expansion. We are looking for a bullish turn in VIX that will coincide with a bearish trend exhaustion in equities.

VXX wedging into the lows… note the bullish momentum divergence at recent lows.

Bond markets and Rates

Last year, the TLT spiked to new 5th wave highs as expected but the ensuing decline appears corrective. This structure keeps the door open to new ATH’s in bonds and new cycle lows for rates. Near term the TLT remains bearish as we look for a hard test of the 153 area support for a potentially completed correction. While we do have a completed 5 wave rally into the March highs, we cannot confirm a long term top in TLT. Near term inflection point for bonds.

Long term rates made new cycle lows as expected in March 2020 after a disorderly break of its long term declining trend channel. Rates have recovered “correctively” to retest the long term channel break. The structure of the rally in rates appears corrective and therefore it is likely we see new lows in rates before a sustainable low can be established.

FX markets and the US$

The DXY has declined impulsively from its March 2020 wave (B) highs. Our base case is that this decline is in the final waves of an a-b-c correction with the DXY turning bullish early in the new year. While minimum targets have been met for an impulsive 5 wave decline, our measured targets for wave (C) remain lower towards 87.50 where (A)=(C) and a 50% retracement from the January 2017 highs. We are now looking for evidence of a bullish reversal in the DXY to establish longs as we approach this inflection point.

DXY shorts pressing into new cycle lows…

What if we are wrong about the DXY? The Bear Case will likely see a continued impulsive decline for wave (3) towards 77.80 measured targets, changing the big picture structure to long term bearish US$. We have little evidence yet to support this outlook, but we should be mindful of the possibility if the DXY fails to hold measured support.

The USDJPY structure is defined by the impulsive rally from 2011-2015 from where we have seen a corrective (managed) decline. We are looking for an opportunity to go long USDJPY once the corrective decline is complete as we are bullish this pair from a structural perspective. Near term, we have no evidence of a tradable low. Patience.

The USDSGD supports our bigger picture bullish outlook for the US$ and is now approaching measured targets for a corrective a-b-c decline. We have layered support in the 1.30-1.31 area from where we are looking for a bullish turn. We have no evidence yet of a tradable low but we are alert to a big picture bullish turn.

The commodity currencies remain bullish with targets for USDCAD lower towards the 1.20-1.21 measured equality for an a-b-c decline with the potential for much lower. This wave structure supports our near term bullish outlook for Crude Oil.

Bullish Commodities

Are industrial commodities the next great trade? The CRB Index peaked in July 2008 at 474 before declining a fibonacci 78.6% to its major cycle low at 101 in April 2020. We now have what appears to be a completed zigzag A-B-C decline from the 2008 highs – this year’s impulsive rally opens the door for a resumption of the bull trend in commodities.

Crude Oil is representative of the bullish commodity story. We have a corrective 3 waves down of equality from the 2008 highs and small degree impulse higher from the April 2020 lows. We remain bullish commodities until proven otherwise.

CL could be in the early stages of a strong 3rd wave rally. Only trade back below November’s 33.64 low would invalidate the strong impulsive uptrend. We are buyers on any near term corrective pullback with a long term bullish outlook.

Gold / GLD is also threatening to break higher from its wave 4 bull flag. We had identified the recent decline as clearly corrective so we expect the rally to continue in wave 5 of (3) to new cycle highs.

While not the ideal wave structure, Gold has rallied strongly from our 50 week sma and trend channel support opening the door to a push to new highs. The recent decline was clearly corrective (bull flag) so while the count may be wrong, the bullish outlook remains in tact for Gold.

Bullish Crypto

Bitcoin, the very essence of a speculative mania is in the latter stages of a wave (iii) of 5 blow-off. This chart suggests the speculative mood and herd is not done yet and may be the last asset to top. Once this impulsive 5 wave rally is complete we should expect at least a 50% retracement of the entire rally. Our experience with Tulips warns that when the bubble pops, Bitcoin could decline 90%.

Our near term bullish outlook for Bitcoin remains in tact as we see an acceleration higher in wave 3 of (3). While fib targets remain higher, this parabolic move is not without risk of a sharp pullback for wave 4. Buyer beware that this is a speculative mania.

Wishing everyone a safe, happy and prosperous 2021. Trade safe 🙂

MCP Market Update: March 23rd, 2020 – Preservation of Capital

by Mars Capital Partners | Mar 23, 2020

Last week saw a continued liquidation of global risk. Our expectation was that the decline had not ended and we were looking for wave (v) of the decline. Last week’s 2-way price volatility warned of a likely 4th wave as the markets continued to stair step lower. We are now seeing bullish momentum divergence across the board as we look for a bottom in wave (v). This is NOT a given as liquidations could continue. The global policy response has been unprecedented as the enormity of this economic decline becomes clearer. We have been on the right side of this decline and capital preservation / risk management remains our primary objective. This is not a time for complacency and we are essentially flat across the board.

Last week’s continued decline in the SPX / ES invalidated the running triangle case and leaves two likely structures. Either way, we are looking for evidence of near term trend exhaustion and the potential for a counter-trend rally.
1. Bull Case – wave C decline to complete wave (4) of an expanded flat in the 2000-2100 area before a final push to new ATH’s (hard to see until Covid-19 is mitigated)
2. Bear Case – completing wave (v) of 1 down of a larger bear market that retraces the entire post-2009 rally.

While the minimum requirements for a 5 wave decline for SPX / ES have been met, there is no strong evidence of a tradable low. While bigger picture support resides in the 2000-2100 area, the next major support is at 1800 (prior 4th wave). We are flat here looking for evidence of a tradable low and bullish reversal.

The DJIA / YM also made new 5th wave lows but there is no evidence of a tradable low. This latest decline should be an ending wave (v) so we alert to the potential for a bullish near term reversal.

YM longs have left the building.

Similarly, the Nasdaq / NQ extended to 5 waves down but the near term structure is choppy and likely incomplete after tagging the 200 week sma. Looking for evidence of a tradable low but keeping an eye on MSFT which looks vulnerable if it breaks near term support.

MSFT is our canary in a coalmine and is threatening to break below shelf support. The question is do we hold support, gap and drive lower or see a false break and bullish reversal? Not pre-empting but watching closely for clues on the broader market. Today’s close will be very important.

The Russell 2000 / RTY is approaching strong fib and prior 4th wave support. Looking for potential trend exhaustion and evidence of a bullish reversal.

Like the Russell, the BKX, DJT and NYA (Composite) are all testing major fib and prior 4th wave support…. an area you would expect the bulls to try and make a stand.

The VIX remains elevated but we are seeing bearish momentum divergences as the markets try to hammer out a near term low. Ideally, a new 5th wave low in equities is NOT confirmed by a new high in VIX which would provide more inter-market divergence and bullish potential for equities.

VIX traders remain marginally short.

To the global equity markets and like the US, we see evidence of 4th wave consolidation prior to a 5th and final wave down. A 5th wave thrust to new lows in ESTX and DAX could potentially complete the impulsive decline as we look for evidence of a tradable low.

The NKD thrust to new 5th wave lows this morning and may have completed its most recent decline. Looking for evidence of a tradable / hammer low with upside follow through.

The EEM broke trend support and continues to be pressured by a strong US$. Despite minimum targets being met, this chart remains bearish until proven otherwise.

To the bond markets and last week saw a sharp decline as RV funds liquidated. The TLT appears to have declined in 3 waves of equality so far into the 61.8% fib support. This tells us that so far, the decline is corrective from a bigger picture perspective and the trend likely remains higher while last week’s lows hold. Obvious 2-way risk here given market volatility but prima-facie we should probably expect new lows in rates going forward.

The US 30yr / ZB decline appears corrective as it stair stepped lower last week. This is a difficult environment for bonds given the cross-currents of deflation and massive stimulus and forced liquidations. So far, it’s an a-b-c decline but bulls need to clear wave (b) resistance to confirm a corrective decline.

Last week saw a sharp decline in ZB longs.

The TY shows the same corrective decline of equality but needs to clear wave (b) resistance to help confirm. It could also be part of a larger correction so 2-way risks remain in these volatile times. Tread lightly.

TY longs and shorts have been liquidated.

To the FX markets and the US dollar is at a key inflection point across many crosses. The DXY broke higher above 100 as warned and is now testing major cycle highs. The US government will try to weaken the dollar so we should expect extraordinary measures to do so. Resistance is resistance until broken and the wave count is binary here. Bullish green count on a strong close above 104 likely sees a wave 3 extension higher. The red bear count sees an impulsive rejection of major swing highs.

DXY traders cut longs and shorts amid the volatility.

The Euro also broke near term support and is now testing major support (key inflection point). If support breaks it likely trades through 1.00 towards 0.95 but support is support until broken. Too much 2-way risk for me as we could break either way. If in doubt, stay out and let the market confirm.

Euro traders have been whipsawed over the last week.

The USDJPY continued to push higher above near term resistance and is retesting key swing highs for the triangle bear count. Trade above 112.30 opens the door towards 120 on a continued US$ rally. Key inflection for the dollar here against the Yen and it is unclear which way it breaks. Not trading this until I get confirmation either way.

The USDCAD also tagged major resistance last week, a key inflection point for the dollar.

The USDSGD met our measured targets and is trying to break through major swing highs. Reverse or continuation? We can make a case for both scenarios but risky either way.

To the commodity markets and CL is retesting swing lows after bouncing last week for what was likely a wave (iv). Ideally, we’d like to see a push to new cycle lows to complete wave (v) followed by a bullish reversal. We are approaching near term trend exhaustion in Crude as we look for a final flush and bullish reversal.

Crude traders remain too long despite the recent severe decline.

Gold consolidated above support last week after declining impulsively from recent swing highs. The bigger picture structure remains bearish but needs to break 1440 to help confirm the break lower.

Near term, Gold declined impulsively into shelf support from where we have seem a corrective rally. A close below 1440 likely triggers the next wave lower, either directly or after another rally towards 1575-1600 resistance.

Gold traders are starting to pare back longs.

Silver remains bearish and would look best with a wave (v) decline to new cycle lows.

Silver longs and shorts have liquidated.

That’s all for now folks. Trade safe 🙂

MCP Market Update: January 12th 2020 – The Year Ahead: In the Fed we trust???

by Mars Capital Partners | Jan 13, 2020

Note: Due to the continuing bush-fire threat in our region, Kim and I have decided to take a well earned vacation in the USA. We will be skiing for a few weeks in the hope that the fire threat will have subsided on our return.

One day this low volatility across asset classes will end – be prepared!

In early 2019, we correctly identified the prior corrective decline for the equity markets and new ATH’s have resulted. This is a liquidity driven market following the “Powell Pivot” and global central banks continue to pump prime asset markets.

As highlighted in last year’s review –
“The question is how long can the CB’s kick the can down the road? At what point do global markets call their bluff as market maker in chief? One thing is clear, central banks are manufacturing a world of increased societal acrimony through financial repression – how long can they continue to support the banking hegemony with disregard for societal inequality?”

Key Macro Themes for 2020:

• US equities are either completing a wave (B) high near term or extend higher into 5 waves completing wave 5 of (5) to end the post-2009 rally. Our preferred strategy is long term put insurance
• We remain bullish bonds as we look for new lows in rates
• Bearish Gold, Silver and Crude Oil against last week’s bearish reversals
• Yen and Swiss Franc setting up for a range break after a multi-year contraction (long dated puts and calls preferred)

Global risk as defined by the SPX has so far rallied in 3 waves from the December 2018 lows. We have been assuming that this rally will soon terminate for wave (B) of a running triangle wave 4. This analysis implies a choppy corrective sideways market for 2020 before a final push higher wave wave 5 to complete the bigger picture rally from the 2009 lows. The 200 week sma remains critical support for this structure.

This SPX Triangle implies a near immediate bearish reversal that trades back below the key 3030 breakout level. We now have enough waves in place to complete the wave C of (B) rally into the 61.8% extension. What we do NOT have is clear evidence of a bearish reversal and impulsive decline.

The bullish alternate SPX case is a continued rally that extends into 5 waves from the 2018 lows throughout 2020. While this is not our preferred count, we are mindful of the strength of herding behaviour and animal spirits of this Fed induced rally.

The key for this bull case is for the SPX to remain above the 3030 overlap and keep extending higher in 5 waves. This count assumes we are currently completing wave 3 of (3) of (5) which would likely mark the end of the post-2009 rally.

While lower probability, given extreme bullish sentiment and one-way trade, we must be aware of the potential bear case of an Expanded Flat wave (4). This would imply a strong impulsive decline back below the 2018 lows triggered by a break of the 200 week sma and long term trend channel. This is why low cost long dated puts or VIX calls may be a preferred strategy.

The ES has enough waves in place to complete the wave (c) rally. No evidence yet of a bearish reversal but we do have 5th wave momentum divergence at last week’s highs.

Futures traders remain flat with volumes traded at cycle lows. I suspect that this trend represents complacency and a focus on individual stock exposure. Futures traders are not driving this market melt-up.

The DJIA shows the same potential structures. So far, we only have 3 waves up from the December 2018 lows. While our base case remains a larger degree 4th wave triangle throughout 2020, the potential remains for a continuation of the bull trend to develop into 5 waves (green count) if the melt-up continues.

The YM shows momentum divergence at recent highs. We now need to see evidence of a bear reversal.

The Nasdaq shows the same potential structures with 3 waves up from the December 2018 lows so far. Last year we highlighted the expectation of new ATH’s for the Nasdaq indices. This index has a clearly definable trend channel for the post-2009 rally. The bulls remain in control while above the key 8330 breakout.

NQ now has near term 5th wave divergence. Bears need to break these trend channels.

NQ traders are slightly long but volumes are less than half cycle peaks. Traders just want to own stocks.

MSFT may be the best representation of the parabolic stock chase taking place supporting the Nasdaq. Parabolic runs always retrace violently so we will continue to watch MSFT for evidence of a tradable top.

Similarly, AAPL has more than doubled in price since bouncing off our 2018 support and is now in a parabolic rally. These individual darling stocks are driving the larger indices.

The Russell 2000 small caps have lagged the broader indices and remains below its 2018 highs. The corrective 3 wave decline in 2018 implies that we do NOT have a bigger picture change in trend and we should ultimately expect new ATH’s in 5 waves. So far, the rally is only in 3 waves so could still be part of a larger corrective wave (4). Bulls need to extend this rally into 5 waves to maintain near term momentum.

Complacency reigns as shorts hit new cycle lows.

The Fed has been successful in compressing volatility. The VIX is contracting sharply but remains above the 2018 lows forming an inter-market divergence. Portfolio insurance remains cheap given the over-extended nature of this rally. Extended volatility compression leads to sudden expansion. Forewarned is forearmed…

VIX volume is 39% below its peak.

To the global equity markets and we appear to be wedging towards major market highs. The ASX200 appears to be a good example now making new ATH’s in a clearly defined wedge. These are usually ending patterns so we are alert to a bearish reversal in the Aussie stock market.

Similarly, the Nikkei 225 appears to be in wave 5 of an ending wedge. We still need to see a final push above the wave 3 highs (24448) to help confirm this outlook.

The DAX also appears to be wedging into the highs but would look best with a final push higher towards 14500 as it is yet to break the 2018 highs. It is either completing blue wave 3 of (5) or all of red wave (5). Likely topping near term.

To the bond markets and last year we highlighted the probability of a new cycle low in rates given our bullish bond outlook. The TYX made a new low in September from which we have seen a corrective recovery. We remain bullish bonds until proven otherwise as we look for the 10yr and 5yr to confirm a push to new cycle lows. From there we would be looking for a trend reversal in bonds across the board as MMT is fully embraced.

The US 30yr / ZB should be ending its wave 4 correction as we look higher for a wave 5 rally to new cycle highs. The decline from the August highs appears corrective and continues to hold support in the 153-155 area. While we should allow a further decline towards 153, our bullish bond outlook remains in tact.

Traders are pressing shorts into support.

The 10yr / TY shows the same corrective wave 4 decline into strong support. We remain bullish bonds from a big picture perspective as we look for wave 5 higher from initial 128 support or secondary support in the 126’24 area.

The 5yr / FV remains range bound as we look for a wave 5 rally higher from 118 or 117 support. No reason to change our bigger picture bullish outlook given the corrective nature of the decline.

Traders are exiting both longs and shorts in the short end. Trading volumes have collapsed.

The Eurodollar continues to look bullish as it holds our initial support zone. The EDM20 would look best with a strong wave 5 rally to new cycle highs which would likely signal further economic weakness or risk-off.

To the FX markets and we have been looking for a bearish turn in the US dollar. We still do not have confirmation of a bearish trend change. Most major currencies remain range bound in this low volatility asset environment. We will remain bearish while recent swing highs hold but at this point, the structure is very low conviction.

The DXY does show a potential leading diagonal for wave 1 but it is not high probability. This near term bearish potential is invalidated at new cycle highs. Bears need to break the series of higher highs and lows since early 2018. This market remains range bound until proven otherwise.

Concerning for the US$ bears is that DXY longs have halved but price has barely moved in the last 12 months.

The Euro has been attempting to establish a base to rally from but the initial rally does not look convincing. The Euro bulls have not yet proven anything except hold the lows. We remain tentatively bullish but there is a high risk of failure.

Euro traders remain net short.

The Yen continues to trade within its bigger picture triangle. Near term, given last week’s bearish reversal, we should expect a retest of the lower trend line with potential towards Fib equality in the 0.8850 area.

Yen traders are flat.

The Swiss Franc remains range bound and controlled by the SNB. Compression usually results in volatility expansion and we should expect the Swissie to do the same. Tough to fight the SNB until we get a convincing trade setup with controllable risk. Option sellers have been rewarded for the last few years but I’d rather take the other side looking for a break when the opportunity presents.

CHF shorts have capitulated.

Despite Brexit and leadership challenges, the Pound continues to hold post Brexi lows. The recent impulsive rally off the lows argues for higher prices towards 1.45 once the near term correction is complete and it can clear 1.35 resistance.

The USDSGD is approaching a near term inflection point. Our base case (blue count) implies a corrective decline is ending (expanded flat wave b) as we look for a bullish reversal. The alternate red bear count suggests a continued US$ decline back towards 1.24-1.25 long term support. The impulsive rally from the 2011 lows keeps us bullish from a big picture perspective.

The USDCAD invalidated our near term bull case but the bigger picture remains bullish for the US$. Bulls need to clear 1.3800 major resistance for an extended rally. Strong support resides in the 1.2670-1.2870 area.

To the commodity markets and Crude Oil reversed sharply lower from resistance forming a weekly bearish engulfing reversal. We are bearish CL from a bigger picture perspective while last week’s highs hold.

CL appears to be in a wave B triangle before the next strong thrust lower. Looking to short a counter trend rally that does NOT exceed last week’s highs.

CL traders were pressing longs into that bearish reversal. Likely caught long.

Natty Gas continues to drift lower with long term targets towards 1.00 given the corrective rally from the 2016 lows.

Near term, the decline from the wave (c) of B highs appears impulsive to retest cycle lows. Note the bullish momentum divergence at recent lows that indicates a tradable low may be near. Ideally, I’d like to see a false break of 2.00 support and bullish reversal for a trade. No strong evidence of a tradable low. Highly speculative.

NG shorts are a very crowded trade. Avoid.

To the PM’s and Gold met minimum upside objectives for wave 5 of C before reversing sharply lower. The initial decline appears impulsive so we should expect further downside near term. The Bear count shows a completed 3 wave rally from the 2015 lows and the potential for a large wave C decline.

Remember, for the bear case to take hold we need to see an impulsive decline from the recent highs as shown above. The bullish alternative is that last week’s rally was only wave 1 of an extended wave (5). This would align with Silver’s bullish potential and see a retest of the 2011 highs..

Traders extreme long positioning in Gold favors the bear case.

Silver rallied impulsively from recent swing lows but did NOT confirm Gold’s push to new cycle highs. This either means that the rally was a bullish wave 1 of (5) with strong support at the 50 day sma (green bull case) OR Silver remains trapped within a wave 4 triangle (red bear case).

Importantly, like Gold, it is important what happens next for Silver’s big picture outlook. A 3 wave corrective decline opens the door to much higher prices while an impulsive 5 wave decline is far more bearish for the big picture trend. Important inflection point here for PM’s.

Traders caught long.

That’s all for now. I’m off for a well earned vacation so I’ll see you in a few weeks 🙂

MCP Market Update: November 25th, 2019 – Happy Thanksgiving

by Mars Capital Partners | Nov 25, 2019

Last week, equities saw a corrective decline in what is likely a continued bullish impulse wave C of (B). Bonds continued to rally to complete an impulse up from recent swing lows. The US dollar refuses to roll over, calling into question the bearish count.

The big picture rally in SPX / ES appears in tact as wave C of (B) targets remain higher. Last week’s decline was corrective in this seasonally bullish period. We have no evidence of a tradable top in equities – the bulls remain in control.

Last week’s decline in SPX / ES appears corrective for what is likely wave (iv) in an ongoing impulsive rally higher. Near term support resides in the 3075 area for the impulsive rally.

The very short term ES chart shows a corrective 3 waves down from recent swing highs. While the correction could be complete, it would look better with another wave c down to complete (iv).

ES traders remain flat and disinterested.

The DJIA appears to have completed a small degree wave iii in this ongoing impulsive rally. Near term support resides in the 27500 area for wave iv of (iii). Trade back below 27100 invalidates this nested bull count.

YM traders paring back longs and adding shorts.

The Nasdaq also shows the potential for a completed wave (v) (red count) but more likely a wave (iv) correction in an ongoing bullish trend (green count). No reason to fight this bullish trend until we see evidence of a bearish reversal – not just a pause within a bullish trend.

NQ traders paring back longs.

The Russell 2000 / RTY continues to trade sideways in what appears to be a bull flag prior to a range breakout. A strong close above 1616-25 resistance would likely trigger a chase higher for the small caps. In the meantime, resistance continues to hold.

RTY traders are flat.

Bitcoin broke our Fib and 200 day sma support and puked lower. This decline invalidated our near term bullish count. We no longer have a clear corrective count for BTC but the next ideal downside support targets reside in the 5400 area.

The VIX has shown no evidence of a bullish reversal and is threatening to break lower. With net short positioning at extremes the VIX is vulnerable to a short squeeze but the market has shown no evidence of trend exhaustion.

Net VIX shorts continue to press into extremes.

The global equity markets corrected lower last week but there is no strong evidence of a bearish reversal. The NKD declined into previous wave (iv) support then reversed higher. This opens the door to a more bullish interpretation of a wave (iv) correction before wave (v) pushes higher to retest swing highs.

The ESTX achieved upside measured targets but failed to sustain a reversal lower. The bullish trend remains in tact until we see a clear impulsive 5 wave decline to reverse this trend. Either way, longs should be very cautious here because at best any new cycle high will likely be a final 5th wave.

The Emerging Markets (EEM) continues to underperform and with only 3 waves up so far, it is unclear whether we get a final push higher towards ideal 46 targets. The EEM will continue to underperform while the US$ remains strong. Risks failure here given our bigger picture bearish outlook.

To the Bond markets and the TLT rally continued higher as expected from wave 4 support. Bulls remain in control while swing lows hold. Near term we should see evidence of a corrective decline this week.

The 30yr ZB shows an impulsive rally from recent swing lows. We remain bullish from a big picture perspective looking for wave 5 to new cycle highs.

The TY shows the same bullish potential with a potentially complete 5 waves up from recent swing lows. Near term bulls should hold the 128’25-129’00 support zone for wave (ii) of the bull count.

The TY also has a potentially bearish interpretation (red count) that while lower probability we should not ignore. That is because of the irregular swing low from an Elliott Wave perspective. Be aware of this potential if we see evidence of an accelerating decline.

The 5yr FV shows an impulsive 5 wave rally from the recent swing lows. Bulls need to hold the 118’10 area for wave (ii) of the bull count.

To the FX markets and the US dollar refuses to roll over. The monthly UUP chart is illustrative of the bigger picture field position of the dollar. October’s monthly bearish reversal is yet to see any downside follow through. We need to see a break of the October lows to gain any downside momentum.

The DXY was unable to break lower last week and remains range bound. The near term structure is unclear and while we maintain a bearish bias against the October highs, our confidence level is low as no key support has been broken. Maybe another push higher to complete wave (ii)? Risky

DXY longs have left the building.

The Euro bullish potential remains in tact but the recent deep retracement calls this count into question. The Euro has not been able to maintain any of its bullish reversals as yet – risky as the bigger picture bear trend remains unbroken.

The USDJPY also refuses to break down and held its 50 day sma. We do not have confirmation of a bearish reversal so the risk is another wave higher in what appears to be a wedge / diagonal. If in doubt stay out.

Yen traders only marginally short.

The GBPUSD failed to break out to new highs in wave (v) – bulls need to hold the 1.2700-50 area on any continued pullback and push higher to complete wave (v) for an impulsive rally. Remains bullish while above the 1.2580 wave (i) overlap.

The rally in USDCAD remains constructive but remains range bound from a bigger picture perspective. Our near term target remains 1.3400 but it has been unable to break through overhead resistance so far. We’ll be patient.

CAD longs getting nervous.

We continue to track the Singapore Dollar (USDSGD) as a proxy for the China trade deal. The structure would look best with another wave lower towards 1.34 to potentially set up a bullish trade.

To the commodity markets and Crude Oil continues to rise correctively. Strong resistance remains in the 59-60 area as we look for evidence of a bearish reversal. Bears need to break the sequence of higher highs and higher lows with trade below last week’s low.

The near term CL count continues to look like a complex correction. No strong evidence yet of a bearish reversal.

CL shorts squeezed.

Dr Copper appears to be in a near term wave (ii) correction before the next impulse wave lower. We remain bearish.

Copper traders closing shorts and longs.

To the PM’s and the recent rally from swing lows appears corrective and likely to fail. Gold risks another wave lower towards 1418 (red count) to flush out more of the gold bugs.

Gold traders remain too bullish for my liking – long side is crowded and risky.

Silver continues to look bearish near term as we look for wave (v) of C lower towards the 16.30-50 area.

Silver traders also too bullish here.

That’s all for now. Wishing all a happy Thanksgiving 🙂

MCP Market Update: January 22nd, 2019 – The Year Ahead: Hope springs eternal

by Mars Capital Partners | Jan 22, 2019

In 2018, we were looking for a topping equity market, rising rates and strengthening US dollar as central banks reduced liquidity. Global fundamentals of debt, deflation and slowing growth will continue to provide headwinds throughout 2019.

The question is how long can the CB’s kick the can down the road? At what point do global markets call their bluff as market maker in chief? One thing is clear, central banks are manufacturing a world of increased societal acrimony through financial repression – how long can they continue to support the banking hegemony with disregard for societal inequality?

Key Macro Themes for 2019:

Global equity markets either topped in 2018 or are in the process of topping. We have a potentially complete 5 wave impulsive rally from the 2009 lows that terminated in September 2018. However, due to the corrective looking 3 wave pullback into major support, we cannot confirm with confidence that the bigger picture rally is over. We expect a year of increased volatility as investor hope and faith in central banks is tested by the headwinds of debt, deflation and slowing economic growth in a distorted market.

In summary, 2019 is likely to be a trader’s market with high volatility across macro asset classes.
– we remain defensive equities and swing trading tactically;
– bullish bonds in a deflationary environment;
– bullish the US dollar (except against the Yen);
– bearish the Swiss Franc;
– bearish commodities; and
– longer term bearish gold and silver

I’ll start with equities – namely the S&P. I’ll spend some detailing what I see as the key scenarios to watch. The Dow, Nasdaq and Russell are likely to follow similar patterns, so these scenarios will apply more broadly to equity markets.

Our long term outlook is that the entire post 2009 rally in equities will be fully retraced. While I am bearish the longer-term, at this time, a bull and a bear case both remain possible. Both cases and potential roadmaps are outlined below.

Firstly, the bull-case. This will likely be more of a traders’ market than an investors’ market with increasing volatility. Our benchmark SPX has a potentially completed 5 waves up from the 2009 lows. What we do NOT have is confirmation of a change in trend so the potential remains for new ATH’s as shown below. As previously stated, we need to see 5 waves down from the highs to confirm a change in trend to DOWN.

So far the SPX bull case has 3 waves down of equality into structural support and what appears to be an impulsive rally off the lows. This implies either a completed 3 wave corrective decline for ALL of wave 4 or “part” of a larger corrective decline in a bull market. So in the bull-case, there are three possible paths to new ATH’s. In Elliott Wave terms, a correction in 3 waves is either:
– Black count: a completed zigzag correction for all of wave 4 and we push directly to new ATH’s in wave 5; or
– Blue count: completed wave A of a 3-3-5 (A-B-C) corrective Flat where we are now in wave B to test the ATH’s; or
– Pink count: completed wave A of a multi week / month 3-3-3-3-3 (a-B-C-D-E) triangle before a final thrust to new ATH’s in wave 5

From a near term perspective, the ES appears to be in an extended 5th wave after breaking above our 2645 resistance last week with targets in the 2700-10 area. Once this impulse wave completes for wave 1 / A, we should expect a corrective 3 wave decline prior to the next move higher to retest ATH’s. We are not chasing this rally but rather looking for a turn, the nature of which (impulsive or corrective) will setup our next swing.

The SPX Bear Case assumes that the 5 wave rally from the 2009 lows is complete and we have begun a bear market. There is little evidence to support this structure unless markets trade back below the December lows.

Given the initial 3 wave decline, the most likely bearish structure is a “leading diagonal – falling wedge” as shown below. The lack of 3rd wave price action suggests even this decline would be highly volatile (read choppy whipsawing) and take months to play out – this potential structure is invalidated at new ATH’s.

Another potential bearish SPX / ES structure (lower probability) is a rare expanding leading diagonal which requires an immediate bearish turn from the 2700 resistance area.

Given the number of price paths that are still valid/possible at this point in time, we expect volatility and traders should remain nimble and trade tactically.

The Dow shows the same structure from a big picture perspective. With only 3 waves down from the highs, we must allow for a potential push to new ATH’s while December’s lows remain in place.

Similarly, the Nasdaq indices only declined in 3 waves of equality into structural support opening the door for an eventual push to new ATH’s. The rally from recent swing lows appears impulsive for a direct push to new ATH’s or part of a more complex correction for wave 4 as per the SPX.

From a near term perspective, the NQ is tracing out what appears to be an extended 5th wave approaching resistance in the 6936 area (61.8% Fib retracement). The near term structure counts best as an impulse up from the lows as shown in the bull count. There is the potential for an extended wave (c) as shown in the red bear count but this appears lower probability. Either way, we should be fast approaching a near term correction so buyers beware.

The Russell 2000 also declined in 3 waves of equality into structural support. While there are enough waves to complete the post 2009 impulsive rally, we must allow for the potential of another push towards new ATH’s (green count).

Near term, the RTY appears to be tracing out the final waves of an impulsive rally from the cycle lows. Near term resistance resides in the 1500 area. The impulsive nature of this rally suggests it is either wave 1 or A of a larger rally to retest the ATH’s once its corrective decline is complete.

Another index we track closely is the Transports. It suffered a sharp 3 wave decline into structural support before rebounding strongly. Once again, given the corrective nature of the decline, we cannot discount the potential for new ATH’s as shown by the green count. This bullish count is likely invalidated below the December lows.

The VIX has been crushed since the Powell Pivot. Given the 3 wave nature of the most recent rally, it is likely that volatility continues to decline towards cycle lows.

We have been tracking the HYG and JNK indices for risk sentiment. Note the sharp rally since the Powell Pivot – this warns us that investor’s “faith” in central banks remains undiminished. We are fast approaching the weekly 50 sma which has held all rally attempts – key near term inflection point but the rally off the lows appears impulsive (bullish).

AAPL may provide an important tell for global growth – we have an impulsive (bearish) decline from the September highs that broke trend support but held its 200 week sma from where it is attempting to rotate higher. We should expect at least a counter-trend rally in AAPL here. A break below the December lows would be very bearish.

To the global equity markets and the ASX200 has two primary counts. Like the SPX, we have enough waves in place to complete 5 up from the 2009 lows and the decline appears impulsive into structural support. We are now entering the Fib retracement range from where the bears will need to make a stand. The bullish count is more complex and allows for a retest of the ATH’s before reversing sharply lower. This is not a time for complacency – the big picture risks far outweigh the upside potential for the Aussie stock market.

The Nikkei 225 appears to have completed 5 waves up from the 2009 lows. The decline from the highs is only in 3 waves of equality so far. While there is a small possibility of a push to marginal new highs, risks remain to the downside for the Japanese stock market.

The NKD is currently backtesting its break of support and 50 day sma. So far the decline from the highs is a corrective 3 waves of equality and bears need to extend this down into 5 waves to avoid new highs. The price action is too choppy for clear near term direction.

The European markets also bounced off structural support. So far we only have 3 waves down from the highs and this needs to extend to 5 waves down for a bigger picture change in trend. The DAX has strong resistance in the 11400-500 area from where the bears will need to make a stand. Immediate trade back above 12000 would invalidate the impulsive bear count.

To the Bond markets and we are a very important inflection point. So far we have a corrective 3 wave rally in rates from the July 2016 lows across 10’s and 30’s. Rates need to extend higher immediately into 5 waves up above the November highs to invalidate the bearish potential. I have highlighted both bull and bear cases for reference. Due to the impulsive nature of the recent decline from the highs, the probability is that rates are likely going to new lows consistent with the deflationary outlook. We are bearish rates (bullish bonds) until proven otherwise by a rally above the November highs.

The 30yr highlights the muted rally from the September 2017 lows and impulsive decline from the wave C highs consistent with a more bearish outlook.

The 10yr shows the same potential wave counts with 3 waves up of equality from the July 2016 lows. A strong close below 2.60 would be consistent with the more bearish rates outlook. The bearish count is wrong at new cycle highs which would indicate the bigger picture trend had turned UP for the long term.

The 5yr is more complicated as the rally in rates failed at our 161.8% Fib extension followed by an impulsive decline. Rate Bears have control while we remain below the September highs.

The bond futures tell the same story. The ZB shows a corrective 3 waves down from the ATH’s. This structure remains very bullish bonds while the October cycle lows hold. Ideal buying levels are closer towards 141-142’20 against cycle lows.

The ZN (TY) shows the same structure with 3 waves down from ATH’s and an impulsive rally from the lows. This implies that the bigger picture trend is up for bonds with support in the 119’23-120’15 area. Trade below the October lows would invalidate the bearish count.

To the FX markets and the US dollar strength continues. We remain bullish the DXY looking for a retest of the 2017 highs. The question is whether we rally immediately while holding recent wave (ii) lows (blue count) or we need a deeper correction towards the 92-93 area (red count) before the wave C higher can reassert itself.

The Euro shows the same structure having turned down from our initial 1.16 resistance as we target a break of 1.12 that should lead to a retest of the 2017 lows. The alternate green count requires a push higher towards 1.19-1.20 before the bear trend can reassert itself. We remain bearish the Euro.

The Yen remains trapped within its triangle consolidation since its 2015 lows. Note the compression in the weekly RSI below. Despite historic levels of QE and asset purchases, the BOJ hasn’t been able to move the needle on the Yen. As we’ve seen many times in the past, volatility compression ultimately leads to volatility expansion. Ideal targets for black wave E of (B) are in the 89.50-90.50 area for the Yen. We expect this triangle to break (likely higher) in early 2019.

Similarly, we are very bearish the Swiss Franc as we look for a break out of its 8 year consolidation. We are bullish the USDCHF near term against recent swing lows (red E). A break of recent lows targets the 0.94-0.955 secondary support zone from where we would look to get bullish once again.

The Aussie dollar has rallied nicely since its flash crash lows. Our upside targets for this counter-trend rally remain higher towards 0.744-0.760 as we look for the bear market to reassert itself. The only thing that is likely to reverse this decline is China Stimulus and trade war resolution. Until these themes change the Aussie$ remains bearish from a big picture perspective.

The USDCAD has rallied correctively from the wave C lows in what we expect to be wave A of an A-B-C advance. We are near term bearish against recent swing highs but not with a great deal of confidence. This pair has been range bound since the 2016 highs. With only 3 waves down from the 2016 highs we must assume the decline was corrective and new highs is likely (green count). Trade back above 1.38 will “lock-in” a corrective 3 wave decline implying a push to new multi-year highs.

The Singapore Dollar provides the clearest Elliott Wave structure with 5 waves up from the 2011 lows terminating into the 2016 highs. We are looking for evidence of a bullish turn for the USDSGD for wave (c) of B up to retest the 2016 highs. Strong support resides in the 1.334-1.344 area for a turn.

To the commodity markets and Crude Oil has pushed higher in wave (a) in what we expect to be part of a counter-trend rally. We expect this rally to be part of a larger wave B correction before wave C down. Ideal wave (c) of B targets remain in the $61 area. The rally off the 2016 lows is clearly corrective in 3 waves. The decline for the September 2018 highs is clearly impulsive so we would expect another wave lower of similar magnitude. We remain bearish CL from a bigger picture perspective.

Near term, the recent CL rally from the low is clearly impulsive and likely only wave (a) of an a-b-c correction higher. Ideal upside targets for wave (a) are 56-57.

Brent Crude shows the same overall structure as we appear to be completing wave (a) of an a-b-c rally for B in the $70 area before wave C down commences.

Natty Gas continues to trade within a larger decline with a corrective 3 waves up since the 2016 lows. We remain bearish from a bigger picture perspective and continue to look for new cycle lows in NG as long as the wave C highs hold to the upside. A break below 2.50 support would likely confirm our bearish view.

Near term, the NG bears need to break below the trend channel and ideally trade below 2.50 to confirm a change in trend to down.

To the PM’s and Gold remains trapped in its multi-year triangle. Our long term price objective remains in the $600-700 area for Gold. The question is only whether we go directly down from our $1380 resistance (black count) or push higher first towards $1500 for red wave B.

Near term, Gold turned down from the low end of our sell zone as it broke down from its triangle. It could still be a bull flag with ideal upside targets in the 1320-25 area. We do not yet have confirmation of a change in trend.

Silver also broke down from our 16.00 near term resistance and the rally is only in 3 waves so far. Trade back below 15.00 would imply the trend remains down with new lows on deck. Bulls need to hold the 13.60 support area or risk a breakdown towards the $8-10 area in an impulsive 5th wave decline. The bullish case is looking for a wave C higher towards the $20-22 area. Near term bulls need to reclaim $16 first.

Our bigger picture Silver buy zone targets remain in the $8-10 area.

In summary, 2019 is likely to be a trader’s market with high volatility across macro asset classes.
– we remain defensive equities and trade tactically;
– bullish bonds in a deflationary environment;
– bullish the US dollar (except against the Yen)
– bearish the Swiss Franc
– Longer term bearish gold and silver