T2W Trading Community

The purpose of the above chart is to show a very interesting similarity with the past. It is not a prediction. The chart below is a monthly chart of the S&P to date.

It shows a five wave rally into an upper channel line and a reversal. The yellow dashed line is my cycle projection date for the 4 year and 25 year cycle lows. I want to be aware of Mr. Schiller’s observation because it could certainly become a reality. My work at this time suggests that we have a rally starting later this week or early next week that runs into about July 10. If that is what happens, I would then expect the market to decline again. The next strong date that I have is at the end of August. I will have to wait until we get closer in time to determine whether it is likely to be a reliable date. I am neither looking nor calling for a crash in this market – I am certainly aware that one could happen for any number of reasons. In my work, the greatest likelihood for that type of scenario would follow my late August date.

Let’s revisit what is happening with gold. The following chart is a weekly gold chart that exhibits gold’s price action for the past six years. If you expand the chart to 200%, you will see an interesting pattern of seven waves that are then followed by a spike in price. The final spike was of a blow off nature that completed the expansive move in gold from July of last year. The dotted vertical line is when I expect this current decline in gold to complete. I am expecting an A-B-C type of decline where it is likely that we have completed the A wave. I would expect the C wave to complete in August. The circled white area is the price target that could be reached if gold happened to get a sharp sell off to complete the C wave. This could be the result of a strong dollar rally and/or another correction in oil. If neither of these events was to occur, it is reasonable to assume that a C wave decline would be supported by the red trend line and the .382 price retracement level at the $545 level.

In summary, the stock market should make a low late this week or early next week. Any rally will be limited by the change in investor psychology and primarily by continued contraction in long term liquidity.