The gyrations continue as this market is having difficulty in making up its mind in which direction it wants to go. Right now the markets see no gloom and doom as the VIX resumes its downward march. I had this wave count once before, but now I will bring it back even if it is just temporary. It’s a diagonal 5 wave run, which is not finished yet, but a correction is due. We are near to completing a small 5 wave run, leading into an “A” wave peak.
In the short term bullish action would have us believe that the bull market is still on. I could be as some of these patterns are starting to fit into an ending diagonal. So for the short term, there are still too many different options which have to be reduced or eliminated. Sure fundamental news gets reported but that is a 24/7 on going event. There is no way we can pick out all the different fundamental news stories, that made the SP500 go up and then fall just as fast. Fundamentals in the world, is just “white noise” like us older folks used to get from B&W TV stations before they went off air. It’s the volume of the white noise that is important, not the specific noise. Even the DJIA is getting close to looking like the SP500, while the Russell 2000 and the Midcaps are battling for a potential triple top.
This could drag on until the end of the month, but if it breaks, and it’s a bearish dip, then no short term price support will hold.
I extended my Minuette degree wave 3-4 with this run into last night being one ugly 5th wave. Early this morning crude oil started to implode, which was also a diagonal. Trump dumps the Iran Deal and oil implodes. Of course, all the forecasts for higher oil prices soon emerged with one forecast at $82.50. I laughed when I read that as it is another example of consensus forecasting. This morning this June oil contract peaked at $71.80 and then started a decline.
Only time will tell if this peak will hold as my 4th wave in Intermediate degree might find a home for a little longer than just a few hours.
What is far more interesting, is what happened with the Gold/Oil Ratio as oil went vertical. We had a June Gold/Oil ratio managing to compress to a little over 18:61.
This morning the Gold/Oil ratio hit 18.35, which is still the most expensive ratio for this bull market so far. As the crude oil prices decline further, this ratio will start to expand again.
This crude oil bull market is one of the most lopsided trade setups that I’ve seen in years, as the professionals are geared for higher oil prices to come.
All these expert fund managers are already in, which has been reported on in great detail. From my perspective, there is no one left to get in as the “Greatest Fool” has arrived buying into crude oil at $71.80.
The Gold/Oil ratio is a powerful tool as it works on a mathematical base, which the majority ignore. Many of these extreme oil price forecasts mean nothing if you just make a simple ratio calculation. A $300 oil forecast would give us a $5400 gold price, which is not going to happen. A quick calculation will tell us that the $300 oil forecast is just a mythical dream, not based on reality!
Crude oil is very close to cracking the $70 price level again and that could be the trigger for “sell”orders to kick in.
This 10-Year T-Note bear market has now been going on since the 2012 peak, and it’s still not finished, just yet. I believe that T-Notes have been in a zigzag crash in an Intermediate degree 4th wave crash. To compound wave counts even more, we have to deal with all the diagonal wave patterns that are always present. The April peak was my diagonal 4th wave peak, which was followed by a decline that is not an impulse at all but must be counted like a diagonal.
The first zigzag looking crash looks like a zigzag, but I was trying to force it into an Impulse which never worked. Once I applied my standard diagonal count down, then things started to fit much better. All sorts of zigzags show up with the first one looking near perfect, but these zigzags stretch beyond anything ever described in the EWP. From the wave “2” top in Minuette degree. The wave 3 followed which also only contained “one” zigzag, with the “B” wave riding high in the wave 3 counter rally, followed by a long declining “C” wave stretching wildly in the process.
The reason for an extra explanation, is that the markets are full of these types of extended “C5” waves, especially when we are in a 5th wave as well. This is only one type of diagonal decline and probably one of the easiest to count out. From late April to our present May peak is another diagonal 4th wave rally, which must be followed with another zigzag in Minuette degree. This should take T-Notes to new record lows, but then smash into a 4th wave bottom in Intermediate degree (Red) In the next couple of years we should see the bulls return as there are just too many people forecasting rates to climb further.
On Current COT reports it shows the commercials in one second highest long position in over a year. This does not support a huge bear market in bonds, but rather supports a bullish phase to come. Most other types of bonds are also in net long positions, so it’s not just one contraian reading, as there are 3 or 4 other types of bonds as well.
All the bearish wave counts in the world will get trashed if we think that the “Big One” is here! The last bullish 5th wave in Intermediate degree should also represent a zigzag rally, but this could be so choppy, we will be convinced it’s not a bull market at all.
This decline could last until the end of May and until this bottoms, upward pressure on rates will remain.