Edit: May 27 – We had the pop of +40% in VIX. Now the question becomes: will it happen one more time during June and hit 17-18? I do think so, see several patterns that point to a VIX from 10 to 17, so one more pop to test the 17 area (red trendline). I will update this strategy early June.
In this post I would like to share my current view on the markets and in particular the S&P500 and VIX.
For the S&P500, there’s an important cycle time window coming up, that starts May 8 and could signal a High to be formed this week. That matches the pattern that I see in VIX (the rounding bottom) and if that pattern repeats again, we could be in for a VIX of at least 14 and maybe even 17/18 over the next couple of weeks.
Feel free to ask questions if you have any.
Enjoy your weekend!
WEEKEND UPDATE MAY 7
During the week, I wrote this short update on my eToro feed and it is still valid, so therefor I will share it here again.
April 27 formed a short term High, May 3 the start of the break to the upside and now I’m expecting a High to be formed in the cycle time period of May 8-14, S&P500 2420-50 after which the odds for a sell off should increase and during May and June it might test my 1st target 2270-2300 into the next cycle time window of June 15.
I will explain my current short term trading view (short term sell the rip up, medium term buy the dip) with the help of the charts below.
Cash 50% (waiting to Buy the Dip in stocks), Short Equities 8% (CFD), Long VXX 2%,
Bitcoin & Ethereum 10% (wallet), Gold & Silver 20% (coins)
Short EU government Bonds 10% (interest rates up!)
Monthly & Weekly Charts US Markets
Based on the analysis of one of the few analysts I follow, May 2017 seems to be the 21st Month of the rally that started in 2015. The 21st month is an important Fibonacci Time Window and based on his Nasdaq100 analysis, May 2017 is likely to form a High 5600-5800 followed by a quick and rapid sell off into 5100-5300, a level that once again should be bought.
That’s basically also my view for the S&P500, read his Nasdaq analysis via this link. Different (interesting) methodology, same outlook: sell for the short term, buy the dip for Dow 40k in a couple of years! Really. Flight to private assets.
One other short term warning signal is the divergence between the Dow Jones Industrial and the Dow Jones Transport. The Sell signal is activated when the DJI forms a Higher High and the DJT a Lower High, check it out here.
Now, let’s take a look at the charts.
Nasdaq monthly chart seems a bit stretched to the upside, facing resistance. Dow Jones Transport weekly and monthly time frame lagging the Dow Jones Industrial….based on the Dow Theory that would lead to a Sell once the DJT forms a Lower High and the DJI a Higher High. Almost there. Not yet.
Daily Charts S&P500 and VIX
The last 3 times the VIX showed this pattern, the VIX exploded to the upside!
The pattern that I’m referring to is the Rounding Bottom, followed by a break to the blue box and a surge up to the red trendline. Besides Price, the RSI also shows a similar pattern like the last three times.
Will it happen for the 4th time in a row?
If so, then the targets for the VIX becomes 14 and 17-18.
S&P500 Daily Chart
Now that the S&P500 is likely to break the 2400 to the upside on Monday, assuming Macron wins, then the 2420 becomes the 1st upside target/resistance area –> the area where the former uptrend (green) and the arc (red) cross each other. A break above 2420 and the next target is 2450, the resistance line increases by 10 points a week, into 2450 May 25.
In my view, and based on cycles, this topping pattern could form a High this week and a 35 day drop into mid June.
A break below 2380 and it becomes more likely that the 2320 is to be retested. The 2270-2300 is still my 1st downside target for May/June. A retest of a 2100 area seems a bit too much in my view.
S&P500 Daily Chart
The S&P500 broke the upper part of the trend channel (1st blue ellipse) and found support at the lower trendline.
Now, the middle line should act as resistance @2425-50 for May.
Cycle Time Windows: May 8-14, May 24, June 10-15, July 13, August 17.
May 8 is March 1 (High 2401) + 70 Calendar Days.
May 8-11 is a cluster of cycle days, see here. May 12 is full moon.
Bradley Model Date June 21 & August 19.
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The UK100 is one of the few EU markets not able to form Higher Highs and the current pattern resembles a Shoulder-Head-Shoulder Pattern.
A break above the Head should be bought and a break below the neckline should be sold.
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The DAX uses the black line as a magnet and made it all the way back up to the trendline which could act as resistance @12.700.
SuperTrend is Buy > 12.400.
Bitcoin and Ethereum
I have 1 Bitcoin and 25 Ethereum, bought for a total value of $2k. Current value is almost $4k, so I almost doubled my investment in a short period of time. It’s an investment for the long term.
Both assets seem a bit stretched to the upside though, too fast too furious, so some downside pressure would not surprise me.
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Thank you in advance.