This is the weekly chart of the June SP500 contract. Our present 2019 stock rally is about 43 points from breaking out but even it stays at the peak today, I will try my extended wave count.
It was the 2011 bottom that is important as it matched the “Peak Gold Mania” of 2011 as well. The other big event that happened at that time was that solar cycle 24 hit its first peak in September 2011.
Basically, I extended the Minor degree part which makes the 2015-2016 correction a wave 3-4 bear market. Since then this market just doesn’t want to stop, but I think resistance is building up. In the last 15-16 months, we are looking at a potential triple top.
The present top also could produce a “Right Shoulder” which if the SP500 is very bearish, the markets will not blast to another record high.
The hedgers are no help at all as the commercials only have a very small net short position.
On a daily chart, the SP500 is still in a golden cross position, but a good correction can produce a death cross with little effort.
The 4th wave bottom support in late December 2018 is also where the 200-day MA is sitting. In order for the SP500 to hit the 200-day MA again, the entire 2019 bull market must eventually be completely retraced. That would put the SP500 below the 2300 price level.
I use the Gold/SP500 ratio and it is always a good idea to make calculations when the markets approach record highs. The record expensive ratio was 2.41:1, with today’s calculation coming in at 2.28:1.
I do use trend lines but they can be so subjective that it can make them useless to use. I draw many different trendlines but I do not post most of them. In the case for GDX, we have a slightly down sloping trend while gold itself had more of an upward trend, since that June 2016 peak.
From the 2018 September bottom, the bullish move can fit well into a triangle, but it can also fit very well as a diagonal 5 wave sequence. Even W, X, Y, X, Z would work. In late February we had a peak after which GDX started a decline that can be part of another set of 5 waves in Minute degree.
Another 1-2 wave has to form after which we could see a huge spike to the downside develop. When that happens then a correction could be finishing and we should expect a huge counter-rally.
Gold has gone nowhere but down as the US dollar soared during the night. With the holidays and a full moon, it could give a small bullish price move, but otherwise, this GDX decline is far from over.
I do have a small GDX short position out which turned green a few days ago.
The Gold/GDX ratio is at 59.13:1 today which is only a bit cheaper than what it’s been most of this year. The more the Gold/GDX ratio spreads the better, as that would make gold stocks seem cheap again.
Stories that China, Russia, and a few other countries are buying gold sure does not confirm the bearish mood gold is in. They have to buy gold with US dollars as I’m pretty sure they are not going to use other currencies. They are trying to destroy the US dollar which has all been tired before in 2008!
The Nasdaq finally created a new world record high today at 7715. In the next day or so it still could push higher which would make the present spike a bit longer. The longer the spike the better as that usually indicates a longer impending correction. Correction? It all depends on how big any impending correction will be.
If all this bullish hype is going to continue then we should be just looking for a correction, right? The other side of the coin is that this bull market is coming to an end at a double top creating a big H&S at the same time.
A temporary correction would just create the “Right Shoulder” but then blast to another new record high. The 2019 rally was one vertical move as good subdivisions were hard to count out as it’s loaded with diagonal waves.
Easter will be a full moon so by next week it could get very interesting.
Commercials are barley net short so they don’t really confirm any bearish scenario I can come up with, but that also means this market can go in any direction. All it takes is some “Bad News” from any source in the world and the emotional investors could run for the hills.
Protective sell stops are stacking up below present prices, mostly around the bull market bottoms of corrections.
The Gold/Nasdaq ratio is more of an objective look at stocks if they are cheap or expensive when compared to the US dollar gold cash price. My record expensive ratio is 6.38:1, today this ratio sits at 6.03:1. The Nasdaq is about as expensive as it has ever been, so it sure would be ripe for a major correction.