Something Is Not Right
When I try to get a holistic view of the market and try to put all pieces of the puzzle together, something is missing, something does not feel right.
Let me share my thoughts on the recent developments in Yield, Dollar Index, Baltic Dry Index, S&P 500 and Dow Jones.
Bonds & Yield
Experts say that the bond market is always right.
A quick look at the yield candles tells us that yield is extremely bullish and has no intention to slow down. The daily candles climbed over the 100 DMA. The weekly trend most likely confirmed the reversal and is fully bullish now. The monthly trend bounced off the 8 EMA (as I forecasted 3 months ago) and is set to continue higher.
A few indicators support the hypothesis that the current daily wave is wave 3 of some degree, thus the agility.
This very long term projection stays as is. The 3M candle found a perfect support at the 100 QMA, and yield is now on track towards the 200 QMA. The angle of growth is impressive indeed, and it would not be very surprising if the FED resumes the aggressive rate hikes at their next meeting in the middle of March.
To summarize, yield is extremely bullish.
Dollar Index – DXY
DXY continues to increase the bullish odds.
The daily candles just formed a Rising 3 Methods on 8 candles after Three White Soldiers. The weekly trend is flipping bullish. The 15D candles formed a Bullish Engulfing and the monthly candles can repeat the 15D combo, elevating the bullish odds even more.
The long term chart which is 25 month old remains intact. Some technicals project a new high ($115 or more) in a few months.
DXY is very bullish, but not as bullish as Yield.
Baltic Dry Index
The BDI is often viewed as a leading indicator of economic activity because changes in the index reflect supply and demand for important materials used in manufacturing. In the majority of cases, the index is well correlated with the Market moves and is considered the canary in the coal mine for overall health of the markets.
Today BDI hit the third lowest level ever recorded, 541, and does not look like it is ready for a reversal.
From the Elliott Wave perspective, the ongoing BDI wave would typically terminate somewhere between 700 and 60. There is still some room.
I analyzed SPX, NQ, RUT and DJIA and only Dow Jones has a very strong candle pattern that can be used as a base for further projections.
Since the middle of December, DJIA has been forming a very complex corrective wave. Now it shapes up and is best viewed on the 3D chart. The index is possibly setting up for a Falling 3 Methods (blue oval) after Bearish Engulfing (BE).
The wave looks perfectly symmetrical so far (red oval). Note six 3D candles before BE and already 6 candles after BE. The seventh candle closes on Friday and it feels perfectly right to stay in cash, as David’s Live Trading System says.
There are two most probable paths.
Red: the correction ended in September, the ongoing wave is wave 2 with the target of $32k, or a loss of 7%.
Blue: wave iii of C is about to start. Possible target area for C – $29600-28000, or a 14-18% decline.
In both cases, the next wave is expected down, whether it is wave c of 2 or wave iii of C, and will be substantial and aggressive.
It does not feel right when Yield, Dollar Index, and Stock Market are going in the same direction. Something has to give, and I suspect it will be Stock Market which is represented by Dow Jones in my little analysis.
US10Y and DXY are very bullish and are very unlikely to change in the coming weeks and possibly months. The BDI, a harbinger, is bearish with higher chances to find an All Time Low. The Stock Market does not seem to have any chances to continue upwards in such good company.
US10Y Long Term Forecast – December 5th:
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