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..
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.
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?
Have a great week!