I started with a bigger time chart of the VIX and have arrows pointing to many of the peaks where important turnings have occurred. Many times, turnings start to show well before the crowd realizes it, especially when solar cycle #23 ended in late 2008. When one solar cycle ends the next one starts, so by early 2009, solar cycle #24 had already turned the corner.
All stock markets that I cover, also found their bottoms in early 2009, after which they started a massive bull market. This was inversely reflected in the VIX as it started to crash.
I couldn’t resist drawing in the wedge as they can forecast a potential reversal that will surprise many. Also, the stock market bull run would keep right on going, if the VIX is not at record lows.
The last weeks COT report also confirmed, that the commercial traders are net long with their VIX bullish positions by a margin well over 2-1. Commercials added 9,930 long contracts, but at the same time they removed, 17,305 short contracts. This is a huge swing, which I expect to see happen when a reversal is getting closer.
When we look at the wave patterns in the VIX we can’t see those pretty impulse waves that Elliott Wave analysts love to make. From my perspective the VIX wave structure is all about diagonal waves, which can produce any of the overlapping, choppy waves that it can throw at us.
Without first looking at the VIX, the DOW chart below will make little sense. There is an inverse relationship that the contrarians understand, but the majority ignored the VIX just like all the expert wave analysts did.
Starting back in 1970 was not a Cycle degree 4th wave triangle, as 5th waves do not extend like this. With stocks, we should always look for wave 3 to extend and occasionally the 5th wave extends, but in the case of the DOW, it extended in Minor degree. When something extends, it is the smaller degrees that come out of hiding, and just because they look big and tall, does not mean they are huge degree levels as well.
The two parallel lines show that the 5th wave never even came close to touching the top trend line again, as the DOW started to roll over and away during the 2002-2007 bull market. It’s just another example how trend lines can screw us up before they ever help us. Besides, it’s not rocket science as even just a quick glance we can see the bullish trend. It still may take the rest of this month to get a better picture if a major top is starting to hold, as this market sure wants to move in knee-jerk violent moves.
When we look at many of the expert wave analysts, stock market charts, we see that the majority believe that we are in a SC or GSC degree type of a market. This can only happen when we count everything from the 1932 bottom as a 4th wave base in SC degree. I believe that a multi generational 5th wave can never extend like this, and through multiple solar cycles as well.
From the 2009 bottom to our present top is just “One” move, but it subdivides into a sequence of 5 waves. I don’t ever recall counting out any 8 year bear market rally before, besides a real bear market rally would’ve produced far more extreme swings than what we actually observed happening in the real world.
Insiders or smart money has left this market back in May 2017, so the only people remaining in this game are the emotional traders, investors and cheerleaders. I’m sure you have heard the expression, ” Elvis Has Left The Building”, well this is a shining example, when smart money has already, “Left The Market”. Only the fans remain, cheering for another encore!
The odds are still extremely high that a Cycle degree wave 3 may still be in the process of completing, after which we should see a big correction that the majority will call a stock bear market. This entire process can still take years, but the start of solar cycle #25 will kill any bear market already in progress.