Sunday Update: 06 August 2017
Current Allocations: 50% C Fund / 50% G Fund
This rally is proving to be very resilient. In the big scheme of things, nothing has changed. We are still very close to a top, should see a consolidation lasting several months, then new highs going into 2018.
I expected to see a fall off this week and a close below last week’s low (2460). That would have confirmed the beginning of the upcoming multi-month consolidation. What we got was another triangle consolidation pattern which means another short leg up is very possible over the next week or 2. We will certainly see a break thru the triangle one way or the other. If the break is up and we close above 2484 then we likely run up to the 2528 area. If the break is down and we close below 2460 then the start of the longer consolidation will likely have begun.
We’ve been talking a lot about the Elliott Wave Pattern. Another very useful pattern is the AB=CD pattern. AB=CD can be used within multiple time frames and can help to identify possible tops / bottoms of trends. In the case of the C fund charts above and below, the AB=CD patterns within the various time frames gives us a likely top between 2525 and 2536.
The AB=CD pattern ranging from a very short term (2 months) to a long term (2 years) all have us topping out around 2530. This is not an exact science but, the more patterns that intersect the same point, the stronger the pattern. It all depends which way we break out of the triangle consolidation that formed last week… Stay tuned..
Long Term
The 2 year weekly C, S, and I charts below haven’t changed much in the past few weeks. The C is looking very toppy, the S is still in the up-trend but rolled over last week, and the I continues to out perform.
Final Thoughts…
While there appears to be some additional gains in the short term, the risk may not be worth it… We are entering into a traditionally very volatile time of the year. Right now volatility (fear index) is at almost 20 year lows! When this market finally turns, it is likely to drop fast! Here are a few articles with some great info to help balance out the risk/reward picture right now.
The market “seems” to be doing great but, what’s happening Behind the Scenes?
August can be a great month for stocks but, September…
Have a great week!
Jerry
With the consolidation you are talking about will you be thinking about moving completely to the G fund soon or is it something you think is several weeks off, I also heard comments from Alan Greenspan this week about the bond market and how he expects it to greatly effect stock prices soon. Do you monitor these comments, do they effect your decisions or do you go soley on the charts?
The short answer is Yes to both of your questions. If we break down out of the triangle consolidation this week then I will likely put out an alert and move to 100% G fund. If we break to the upside then I’ll stay at 50%C/50%G for the short term. If you are risk averse, now is a good time to move to the G fund. We may see some additional gains but there is definitely significant market risk right now.
I follow a ton of financial news outlets. The bottom line however is always reflected in the charts. The bond market is a significant concern, along with chairs shuffling around the White House and our foreign policy with respect to N. Korea, Mexico, Russia… It all gets thrown into the mix and ultimately reflected in the chart action.
sitting on pins and needles Jerry planing on staying in till the alert comes either way. but I, like never before i have been watching the close every day and I have you trigger points on a peace of paper right next to my computer. btw thank you for you hard work
Thanks Bob. Just keep in mind, patterns are not an exact science and this is not day trading. With the restrictions of only 2 moves per month, the goal is to get the majority of the gains while absorbing the least amount of loss as possible. Have a great week!