A “Sell The S&P 500” Signal Was Given: Correction Underway

A little over three months ago, see here, I shared my S&P500 (SPX) “Buy/Sell” indicator, which had switched to a “Buy the SPX” on March 10. The index was then trading at SPX3950. Since then, it has gone through several more “buy/sell” signals, as you can see in Figure 1 below.

Back then, I was -based on the Elliott Wave Principle’s notion in that a 5th wave often equals the length of the 1st wave- looking for SPX4065-4185. The upper end was reached on April 16 when the index closed at SPX4185. A 6.0% gain in a month. Eventually, the index topped out June 14 at SPX4255 at the close, which is only 1.7% above my ideal target zone and thus within the +/- 2.5% margin of error I allow myself. Currently, the index is trading at SPX4200. Hence, another reliable forecast my premium major market members and you could trust and bank on.

Figure 1. S&P500 daily chart (blue) with overlayed Buy/Sell Indicator.

Sell signal supports the notion of lower prices ahead before the next rally

A month ago, I was looking for the index to reach ideally SPX4315 +/- 5. The S&P500 opened at SPX4257 on June 15. I was off by 1.2%, which is also within the acceptable margin of error as no one can forecast the exact highs and lows the markets will eventually make.

Thus, based on my previous two articles, I can say “mission accomplished.” The EWP count since the March low is complete (five waves up), while the forecasted upside targets were reached and slightly exceeded. Besides, with a “Sell the SPX” signal, I now expect a deeper correction lasting into the last two weeks of June. The exact date is unknown but should fall around June 23 +/- a few trading days. I continue to expect SPX4050+/-50 before the next rally to new ATHs starts. It should take the index to around SPX4500+/-100 by late July to early August. Once achieved, I expect a multi-month deep correction.

For a look at all of today’s economic events, check out our economic calendar.

Goldminers, GDX, Should Bottom Soon and Then Rally to $60

Using the Elliott Wave Principle (EWP) I will analyze the VanEcks Vectors Gold Miners Exchange Traded Fund (ETF, GDX) since its significant bottom in January 2016 and determine where it will most likely be headed next. See Figure 1A below. That bottom was blue Primary Wave-C. GDX then rallied into the summer of 2017 (black major wave-a). It took one year to correct as by the summer of 2018, major wave-b completed.

The ETF then rallied once again into early 2020 (major wave-c of Primary-A) and then crashed into the infamous March 2020 low (Primary B). The gold miners then staged a three-wave rally into -once again- the summer of 2020 (major wave-a). Yet again corrected for almost a year into the recent march low (major wave-b), and GDX has now staged a five-wave rally into its early May high. GDX is currently correcting and should ideally bottom around $35.30-36.50, but possibly as low as $33.30-34.30 before staging its next multi-month rally.

Figure 1. GDX weekly and daily charts with detailed EWP count and technical indicators.

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The Trend Has Changed From Down to Up

GDX held necessary support at $29-30, broke out of the downtrend channel it was in mid-April, retested that breakout late-April, and then also rallied above the critical 200-day Simple Moving Average (SMA) early May. Thus the trend changed from down to up. Besides, the Gold Miners are also back above the 20-week and 50-week SMA. The rally since the early-March low counts best as a motive wave: leading diagonal (red) intermediate wave-i, and the recent price action to the downside should thus be wave-ii.

We know from the EWP that after the 2nd wave comes the third wave, which makes sense from the bigger picture as GDX should now be in major-c of Primary C of Cycle-A and comprises five smaller waves: red iii, iv, and v. Strong support is at $34.40 to $33.30. As long as GDX can hold above it, the odds are excellent wave-iii can kick in to ideally the low to mid-50s and wave-v of -c of -C of -A to ideally around $60. Hence, the current correction should be viewed as a buying opportunity once the ideal target zones are reached, with a prudent stop level as mentioned above.

For a look at all of today’s economic events, check out our economic calendar.

Bitcoin Should Bottom at Around $26K Before the Next Rally Starts

Using the Elliott Waves (EWP), see Figure 1 below, I view Bitcoin (BTC) as completing the green (minor) wave-5 of red (intermediate) wave-c of black (major) wave-4. Since Elliott waves are fractal, BTC is currently wrapping up even smaller waves (grey minute waves-iii, iv, and v), with the ideal Fibonacci-based target zone shown for each, respectively.

Figure 1. Bitcoin daily chart with detailed EWP count and technical indicators.

Bitcoin should bottom soon and then rally to at least $50K, ideally new all-time highs.

As you can see, BTC has been chopping around since its mid-May low, in what is called a triangle in EWP terms. Once the triangle completes, which from a technical analyses perspective is called a Bear flag, the price will break down and travel south about equal in length to the triangle’s width: small red dotted down arrow.

That then targets right into the ideal (grey) minute-v target zone, as well as the perfect (green) minor wave-5 target zone: the 176.4 to 200.0% Fibonacci-extension of minor wave-1, measured from the top of wave-2. Note that the mid-May low was minor-3 and bottomed almost precisely at the 161.8% Fib-extension of wave-1. Then green wave-4 initially reached the 100% extension. Picture perfect so far, and thus I must anticipate a picture perfect wave-5 bottom until proven otherwise.

The technical indicators (RSI5, MACD, MFI) set up potential positive divergence (dotted green arrows), which means the currency is moving lower but on less strength, momentum, and money is moving back into Bitcoin. The latter is very important because liquidity drives markets.

When the five waves down complete, a larger irregular flat wave-4 should end, and I anticipate the next multi-month Bull run to $100K +/- 10K to start. Since the financial markets are all about probabilities of possibilities, the alternative (labeled as “alt: III, alt: a, alt: b”) is BTC will “only” rally -in three overlapping waves- to around $50K+/-5K for a bounce and then head south again. Why? Because after five waves down, one must at a minimum expect at least three waves back up.

Bottom line: BTC is IMHO fast approaching a tradeable bottom from where one can expect at least an almost doubling in price, preferably a quadrupling. As usual, I will continue to monitor the price action as we move higher to see which two it will become. I prefer the latter but will gladly also take the former. A doubling is nothing to sniff at.

For a look at all of today’s economic events, check out our economic calendar.

Gold’s Path to the Mid-2000s

Over the past few weeks, I have shared my views on GOLD’s potential path for attaining as high as $2100-2300. I showed the detailed daily charts in those articles, but today I would like to zoom out and assess the big picture Elliott Wave Principle (EWP) count using the monthly candlestick charts. See Figure 1 below.

GOLD topped in 2011 after an almost 700% (!) run since its early-2000s low. Thus, anybody who thinks GOLD is boring to trade and invest may wish to change that notion. These are cryptocurrency-like gains. After the 2011 top, the precious metal went into an almost five-year-long Bear market. It lost around 50% of its value when it finally bottomed in 2015.

Now GOLD is back at it and made a new all-time high summer of 2020, after which it went through an 8-months long correction. As I showed in my previous update, see here, GOLD should now be in a new Bull run targeting possibly as high as $2300+. Allow me to explain below.

Figure 1. GOLD monthly charts with detailed EWP count and technical indicators.

Dissecting a multi-month impulsive rally to ideally $2300.

Since its 2018 low, GOLD rallied in five larger waves (black major 1, 2, 3, 4, 5) to the 2020 ATH: blue primary III. It then declined in three waves (black major waves a, b, c) to complete blue Primary-IV. From the EWP, we know with certainty that in an impulse move, after the third wave comes a fourth and a fifth wave. So far, so good as wave-III and IV have most likely been completed. Now, wave-V should be underway (blue arrow) and subdivide into five smaller waves as shown in Figure 1; black dotted arrows.

Assuming standard Fibonacci-based wave-extensions and retraces, wave-1 should soon complete, wave-2 drop back to about $1800 before waves 3, 4, 5 take hold and bring the price to ideally ~$2300, $2100, and $2300+, respectively. Once Primary-V completes, another multi-year bear market should start (Red arrow). Given that there was no negative divergence on any of the technical indicators at the July 2020 ATH, strongly suggests GOLD needs to make new ATHs.

Bottom line. For as long as GOLD can stay above this year’s lows, it has outstanding potential to establish an impulsive wave higher to ideally $2300, possibly $2400+.

For a look at all of today’s economic events, check out our economic calendar.

Ethereum: Has the Run to $9000 Started?!

Almost two weeks ago, see here, I showed Ethereum (ETH), was according to the Elliott Wave Principle (EWP) in “[red] wave-v of [black] major wave-c of blue Primary-IV,” which “should ideally target between $1445-1850.” ETH bottomed on May 23rd at $1736. Right smack in the middle of my ideal (black) target zone. See Figure 1 below. It has since rallied and is now trading at $2750s—a 58% rise.

Figure 1. ETH daily EWP count and technical indicators.

Buy Ethereum with Binance

Long-term upside potential outweighs short-term downside risk

Last week I showed my Premium Crypto Trading Members ETH should ideally bottom around $2010-2325, and on Sunday, May 30th, it bottomed at $2275. Again, right smack in the middle of my ideal (orange) target zone. See Figure 1 above.

With two out of two forecasts correct, the EWP is once again an accurate and reliable forecasting tool. But then I always become wary as the winning streak always ends at some point. I.e., most analysts -including me- are right about 65-75% of the time.

However, if ETH can rally above the $2920 high made last week, without dropping below Sunday’s low first ($2275) and especially not below $1736, then it has great potential for the ideal impulse wave count as shown in Figure 1, and Blue Primary wave-V should then ideally target $8600-9200.

Primary-v will as shown, subdivide into five smaller (black) major waves. I have annotated where each of those waves should ideally top and bottom. Now we will let the market dictate if it wants to follow this typical Fibonacci-based impulse pattern or potentially go beyond those, i.e., extend. Wave-extensions can never be forecasted, only anticipated.

Bottom line: Two weeks ago, I correctly concluded, based on the EWP, “the downside risk from current levels is still almost 50% ($2700 vs. $1850-1445).” But also mentioned, “upside potential from current levels is now most likely 500+%.” ETH bottomed at $1736 and is up over 50% since. Suppose it can stay above critical downside levels, i.e., the lows made over the last two weeks and breakout above $2920 going forward. In that case, it has the potential to move to ideally $4400-4600 for wave-1 of wave-V, drop to $2800-3400 for wave-2 of wave-V and then rally to as high as $9200 for wave-5 of wave-V. From there, a multi-month correction will start.

For a look at all of today’s economic events, check out our economic calendar.

Ethereum: The Dreaded 50-70% Correction Came, But Is It Over?

In my previous update on Ethereum (ETH), I showed ETH was in Elliott Wave Principle (EWP) terms in an extended 5th wave. However, “It is hard to know where precisely an extended 5th wave will top, but a rally for another month to $5-6K cannot be excluded. ETH will need to see at least four consecutive down days or drop below $2644, with a severe warning on a close below $3185, to tell us the dreaded 50-70% haircut is underway. And make no mistake, it will happen as nothing goes up forever.”

Back then, ETH was trading at $4170. It topped two days later, May 12, at $4380 and plunged to $1948 a week later. A 55% drop in one week. Indeed, the “dreaded 50-70% haircut” I warned would happen had arrived and faster than you can say “sell.” However, I had given my Premium Crypto Trading Members ample warning already the week prior about the small upside potential vs. the significant downside risk. And what price levels to watch for to determine the odds of continued higher prices would diminish more and more: see the horizontal dotted colored lines in Figure 1 below, as well as my Tweet here.

Figure 1. ETH daily EWP count and technical indicators.

Long-term upside potential and short-term downside risk

When an extended 5th wave completes, the subsequent correction will, in a crash-like manner, bring the price back to about where the extended 5th wave started. Why? Because such an extended wave has gone too far too fast, sentiment is too Bullish, and indicators too overbought to allow for any more upside. A reset is necessary: when everybody has bought, all that is left is selling. And selling folks did!

Back to ETH. In this case, the extended 5th wave started, IMHO, from the late February low at $1280 (black major wave-4). Thus, please do not be surprised ETH can drop that low. Namely, the shorter-term EWP count shows ETH is likely wrapping up a five-wave sequence (black major wave-c) from the major b-wave high at $4176. Red intermediate wave-iii ideally completed yesterday. Intermediate wave-iv is now most likely underway, and wave-v of major wave-c of blue Primary-IV should ideally target between $1445-1850. Based on the 2013 and 2017 analogies (not shown here), I expect a triple-digit percentage rally for Primary-V. However, if ETH can close back above $3170 without moving to the mentioned lower target zone first, then I strongly consider the correction already as complete.

Bottom line: The dreaded “make no mistake, it will happen as nothing goes up forever” 50-70% haircut happened. As usual, forewarned is forearmed. However, with the recent plunge, the long-term risk-reward has now significantly shifted back towards the reward, while short-term there is still a considerable risk. In numbers, the downside risk from current levels is still almost 50% ($2700 vs. $1850-1445). But upside potential from current levels is now most likely 500+%. Thus, if you know your trading time frame well, this week should be seen as a gift, not a punishment.

For a look at all of today’s economic events, check out our economic calendar.

Gold’s New Rally to All-time Highs Continues

Last week, see here, when GOLD continues contract was trading at $1836, I was looking for a “top shorter-term around $1860, drop to $1745-90 before rallying to $2045-90.”

Today GOLD is trading at $1868. Thus, so far, so good. Ideally, the precious metal should top soon, fall back to around $1800-1765 support before rallying to ideally $2100-2200. See Figure 1A below. However, the late March low rally is a bit ambiguous upon further and more detailed inspection and could see GOLD rally as high as $1965 before seeing the more significant wave-2/b decline. See Figure 1B below.

Figure 1. GOLD daily charts with detailed EWP count and technical indicators.

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Drop now or later. How to know the difference?

If the Gold Bugs can hold the precious metal’s price above last week’s low (green minor wave-4 in Figure 1A and grey minute wave-iv in Figure 1B) at $1808 on any pullback, then the Elliott Wave Principle (EWP) option shown in Figure 1B becomes operable. That pullback would then be green minor-4 of red intermediate-iii of black major-1/a. If the price closes below it, then GOLD is making a lower low, will close below its rising 10-day and 20-day Simple Moving Averages (SMAs), and the technical indicators -such as the MACD, FSTO- will most likely switch from the current “buy” to “sell” sell.

Bottom line. With price now having broken out from the (grey) downtrend channel it has been in since the complex correction started late July last year and moving back above its SMAs, including the 200-day SMA (see green arrows in legend), it is apparent a new uptrend has started. But as described above, it is now a matter of the finer details on how this uptrend will unfold. I prefer the option shown in Figure 1A, but beggars cannot be choosers, and as always, I will let the market tell me which path it will choose. A break and close below $1808 from current levels will present an excellent low-risk buying opportunity, while if it holds, one can ride GOLD to at least the mid-1900s.

For a look at all of today’s economic events, check out our economic calendar.

S&P500 Last Chance for 4300s

Two days after that update, the index spiked to the (green) 138.20% Fibonacci-extension at SPX4214 (The index got to as high as SPX4219), and then dropped to SPX4128 on May 4, which is close to the (green) 100% Fib-extension at SPX4114. That sufficed for a classic Fib-based (green) wave-3, 4 structure. However, it then rallied to only SPX4238 two days ago and then dropped to as low as SPX4057 today. See Figure 1 below.

Figure 1. S&P500 hourly chart, the focus in this update is on the green and grey inserts

SPX4052 needs to hold to allow for SPX4315 +/- 5 to be reached.

The above-described path was less than ideal as the rally to SPX4238 fell short of the ideal SPX4375 target. This presents a conundrum. Was SPX4219 (green) minor-3, or was it SPX4238? Alternatively, did (green) minor-5 already top? The latter would be relatively short of its ideal target (3%), but nothing states the market must always follow an ideal textbook, patterns, far from it. The market owes us nothing. All a 5th wave does is make a higher high, and so far, it appears it did.

Now, if SPX4238 was indeed only minor-3, then minor-4 is now underway and likely complete as it must hold the 76.40% extension at SPX4052. This level is lower than the previously mentioned SPX4095 level because, in this case, minor-3 did not reach its usual potential (the 161.80% Fib-extension at SPX4276. Today the index dropped to as low as SPX4057 and thus essentially stopped right where it had to. This lower support level also means the S&P500 should “only” reach the 176.40% Fib-extension at SPX4315+/-5 for a typical “wave-5 = wave-1 “relationship.

Bottom line: With the lower than anticipated top and the index dropping to must-hold support, we will know soon enough the market’s intentions: below SPX4052 and the red arrow for (black) major wave-4 becomes operable, targeting SPX3725-3850 ideally. Or, back above SPX4215 targets, ideally, SPX4315+/-5 (green arrow).

Gold Setting up for a Rally to New All-Time Highs?

Previously I was looking for GOLD to rally to $1820+/20 and then drop back to “ideally $1680-1620 before staging a multi-month rally to new all-time highs. Conversely, this rally has already started, but the market has not given us the all-clear signal that is indeed the case.” The $1820+/-20 zone was reached, but the bears were unable to push GOLD’s continuous contract prices below $1745, which was required to usher in the move to $1680-1620, and instead, the Bulls took the ball and ran with it. Thus, the rally to new all-time highs -although originally stated as lower odds- has IMHO already started.

Figure 1. GOLD daily chart with detailed EWP count and technical indicators.

One last drop before the next rally commences.

As said in my previous article, see here, “The double bottom [in March] does present a bit of a twist. It can mean the entire correction has already been completed and blue wave-V to the low- to mid-2000s is already underway (exemplified by the blue dotted line).” Given the strength of the current rally, albeit it has not broken back above the 200-day Simple Moving Average (SMA) and the upper grey trendline of the downtrend channel price has been in since the July 2020 top, as well as the internal -impulse, looking- wave structure I view the double bottom in late March as the completion of the eight months’ long correction.

Ideally, but not necessarily, GOLD should soon rally marginally higher to around $1860 for a last, smaller wave-degree, 5th wave to complete (back) major-1/a. Then we should see a multi-week retrace back to ideally $1745-1790 for the major wave-2/b, before major wave-3/c takes hold and rallies price to ideally $2045-2090 depending on where wave-1/a tops and wave-2/b bottoms: see dotted black arrows in Figure 1 for the anticipated path.

Bottom line: The Gold Bugs were careful and did not allow GOLD one last time to ideally $1680-1620 before staging a multi-month rally to new all-time highs. Instead, they held the 50-d SMA and rallied price to new uptrend highs. This price action strongly suggests a new, more significant impulse move (see here) has started that should top shorter-term around $1860, drop to $1745-90 before rallying to $2045-90. As long as the Bulls can hold $1725 on any pullback, they are in control.

For a look at all of today’s economic events, check out our economic calendar.

Ethereum: How High Can It Fly?

While up to recently, Bitcoin (BTC) and ETH would pretty much move in unison, the former topped already on April 14 and is currently trading a the same price level it reached February 21. Meanwhile, ETH is 71% higher than on April 14 and gained almost 115% (!) since that same February date. Thus the two largest cryptocurrencies by market cap are heavily diverging. After running in parallel for many years, such divergence does not make my life any easier as an analyst. It means

  1. going back to the drawing board as all I can do is “anticipate, monitor, and adjust accordingly.”
  2. the more significant correction (50-70%) I anticipated in ETH has been postponed.

In my previous update, see here, I showed the monthly chart and how extremely overbought ETH had become on that time frame. But “overbought can always become more overbought” (the monthly RSI5 went from 98.7 then to 99.3 now), and, indeed, “in Bull markets upside surprises while downside disappoints.” I did not show the daily chart for ETH back then, but I would like to share it today.

Figure 1. ETH daily EWP count and technical indicators.

$2860 reached and exceeded by 45%, what gives?

Figure 1 above shows how I originally derived the $2700-2855 target zone. It was based on standard Fibonacci-extensions for a 5th wave (1.764 to 2.000x the length of the 1st wave, measured from the 2nd wave’s low). Given ETH topped right in the ideal Fib-based 3rd wave target zone/box mid-April, (red wave-iii), then bottom also right in the 4th wave Fib-based target zone/box a few days (red wave-iv) later, strongly and logically suggested the 5th wave would the top in the ideal Fib-based target zone too.

But no such luck, and ETH decided to present a very extended 5th wave. Thus, my work and method had it right two out of three times, which is about as good as it gets for us analysts. One can not get it right all the time.

Note, such extended waves can never be known beforehand. I only know they can happen, i.e., anticipate them, monitor for them, and if they occur, adjust according, which is what I am doing now. When 5th waves extend, it is even harder to forecast where they will top as then the sky is the limit. Will it end at the 3.0x wave-1 extension or the 4.0x or 5.0x extension? It is unknown. Accepting one’s analytical method has limitations provides the necessary humility and humbleness to remain objective.

Currently, this 5th wave is in an extension of an extension and can rally for another month to reach as high as $5-6K. It should now be wrapping up (orange) microwaves 3, 4, 5, to completed (grey) minute wave-v of (green) minor-3, followed by a minor-4 and -5 waves to ultimately achieve the important 3rd wave top I have been anticipating for some time.

Bottom line: The anticipated rally to the ideal target zone of $2700-2855 was completed in late April, but ETH presented us with a very extended 5th wave as it has so far added another 50% since. Meanwhile, BTC has done nothing. It is hard to know where precisely an extended 5th wave will top, but a rally for another month to $5-6K cannot be excluded. ETH will need to see at least four consecutive down days or drop below $2644, with a severe warning on a close below $3185, to tell us the dreaded 50-70% haircut is underway. And make no mistake, it will happen as nothing goes up forever.

For a look at all of today’s economic events, check out our economic calendar.

Bounce in Gold Complete: $1620s Next?

Two weeks later, in the follow-up update, see here, I confirmed this thesis and narrowed the bounce target to $1820+/-20. Gold rallied to as high as $1798 on April 21, 22, and has since started to decline. See Figure 1 below. Gold June 21 contracts are currently trading at $1767/ounce (not shown in Figure 1).

Figure 1. GOLD daily chart with detailed EWP count and technical indicators.

Did the bounce complete, and is the next move lower underway?

The thick dotted orange arrows in Figure 1 show the path I anticipated in early March. Besides the late-March double bottom, GOLD has followed along remarkably well. If the Bears can push the price back down $1745, the 50-day Simple Moving Average (SMA) increases the odds for a retest of $1680-1620, with $1620 preferred based on simple symmetry (C=A: black dotted arrows).

The aforementioned double bottom does present a bit of a twist. It can mean the entire correction has already been completed and blue wave-V to the low- to mid-2000s is already underway (exemplified by the blue dotted line). But for now, I consider this option lower odds, as it would require

  1. A daily close back above the 200-day SMA (now at $1857)
  2. A daily close back above the upper grey trend line of the downtrend channel GOLD has been in since late July last year.

Thus, there’s plenty of upside left (~25%) when GOLD checks the above two boxes, and I instead prefer to enter low risk, high odds trades than high-risk, low odds trades.

Back to the preferred view. The by now nine months’ long correction (!) GOLD has been subjected to, is, in EWP-terms, called a double zigzag (see here). Incredibly complex and frustrating, as I’ve had to navigate my Premium Members for many months through very erratic downward sloping price action. But now the end appears near, and my Premium Members are gearing up to buy GOLD. Are you ready too?!

Bottom line: The in early-March anticipated bounce may have completed $2 (0.11%) below the ideal target zone last week. It is hard to get more accurate than this six weeks in advance. Regardless, if the Gold Bugs are not careful, GOLD should drop one last time to ideally $1680-1620 before staging a multi-month rally to new all-time highs. Conversely, this rally has already started, but the market has not given us the all-clear signal that is indeed the case.

 

Ethereum Reached the 2800s. What’s Next!?

I say “mostly” because I did not get it right all the time, which is, of course, impossible when one is trying to forecast a non-linear, stochastic environment. And I will be first to admit “I am wrong till proven right,” as that allows for a humble, objective approach to improve my forecasting accuracy and reliability for my premium crypto members. But, as you may recall, $2775+/-100, $2700-2855 more specifically, was my next intermediate-term upside target for ETH for quite some time, and this week it has been reached.

So what is next?

Not shown here, but the daily chart for ETH strongly suggests it is wrapping up some tiny 4th and 5th EWP waves to complete the more significant (black) major-3 wave, as shown in Figure 1 below.

Figure 1. ETH monthly EWP count and technical indicators.

The rally to $2860 will soon complete

The monthly chart above tells what the big-picture, long-term trend, and EWP count is. ETH is in a solid Bull market as it is well above its ascending 10-month, 20-month, and 50-month Simple Moving Averages (SMA), with the 10>20>50. A 100% Bullish setup. In addition, the monthly Relative Strength Indicator (RSI5) is at almost 99, showing how strong the current uptrend is as the maximum possible reading is 100.

The summer of 2017 had similarly high monthly RSI5 readings (red box): 99.18 and 99.38, respectively. ETH peaked in June 2017 at $417.21, dropped to $132.64 in July 2017, followed by a rally to $1422.86 in January 2018. A 68% correction, followed by 970% gain. Quite impressive numbers. Back then, ETH completed blue Primary III, IV, and V of pink Cycle wave-1, respectively. Therefore, the instrument is in a similar wave setup now, albeit at different degrees: currently completing Major wave-3 of Primary-III. The current maxed out RSI5 reading supports this notion as 3rd of 3rd waves are the most substantial waves. Given the near-vertical ascend of ETH over the past six months, it is pretty obvious we are dealing with such a wave, and the 2017 analogy tells us we should expect a pretty decent correction soon: wave-4.

Typically 4th waves retrace between 23.60-38.20% of the initial 3rd wave but can extend to the 50% retrace. If anything, 2017 showed us it could even be more. The black box in Figure 1 shows the standard, textbook, target zone for this pending wave-4. Besides, horizontal support resides at $1900-2000 and $1300-1500. The latter area would “only” be a 55% decline for ETH and still fit well with the 2017 correction. An almost 1000% advance, even from those levels, would target the low- to mid-ten thousands. But for now, let’s focus on the pending decline, as extreme wave extensions cannot be forecasted and thus not guaranteed.

Bottom line: The anticipated rally to the ideal target zone of $2700-2855 has been accomplished. Although wave-extensions, i.e., even slightly higher prices, can not be excluded, I now expect a multi-week decline back to at least around $1900-2000, but ideally $1400+/-100. The latter would be an almost 50% haircut, which is not uncommon before ETH is ready to stage its next multi-month rally. A move and close below this week’s low at $2088 from current levels or slightly higher will signal this deep correction is underway.

 

S&P500 Still On Track For 4375

Then I expect a wave-4 down to around current levels (SPX4110+/-10) before a last 5th wave (green minor-5) rallies price to SPX4375. This [Elliott Wave Principle] EWP path forward is based on the assumption the index will follow a textbook EWP impulse pattern higher. There is nothing to tell me it will not, but it can, of course, always deviate. To be determined. But for now, this is all I can go by.

Now at the end of April, the index topped last week at SPX4191, went sideways for the remainder of the week, i.e., dropped in three waves (grey a, b, c highlighted in the grey insert in Figure 1 below) down to SPX4120+/-5p and is now making new all-time highs. Thus, so far, the SPX fell 19p (0.45%) short of the lower end of the ideal (green) minor wave-3 target but nailed the forecasted minor wave-4 target zone (4118, 4124 vs. SPX4110+/-10). All are well within the margins of error and show the accuracy of Fibonacci-based EWP forecasting.

Figure 1. S&P500 hourly chart, the focus in this update is on the green and grey inserts

The S&P500 can still reach SPX4375 assuming Fibonacci-based wave extensions continue to work.

The question now is if SPX4191 was all off (green) minor 3, SPX4124 all of minor-4 (in the form of a running flat: see here for examples of what are called “flat corrections” in EWP terms), and now minor wave-5 to ideally SPX4375 is underway, potentially subdividing in the grey “i? ii?, iii?, iv?, v?” waves. Since minor-1 and minor-3 are subdivided into five smaller (grey) minute waves, it is logical to assume minor-5 will do the same. Besides, ordinarily, 5th waves are equal length to the 1st wave, and since in this EWP count, wave-4 bottomed at the 100% extension, wave-5 should then target the 200% extension (100% of wave-1 + 100% of wave-1) at SPX4375. So far, so good.

The -even more Bullish alternative- is that last week’s high was only (grey) minute wave-iii of green minor-3 because the SPX “only” reached the 123.60% extension followed by “only” a 23.60% retrace (123.6100.0%). This option is labeled as “alt: iii, alt: iv.” Albeit wave-3 is now longer than wave-1 and has accomplished its minimum requirement (see here), it is slightly less than usual. Thus one needs to be aware of an alternative, which I am presenting here. It means minor-3 is still unfolding and can still try to reach SPX4214-4275 before minor-4 kicks in.

In Bull markets, I always prefer to have an alternate, more Bullish EWP option because they often present upside surprises and downside disappoints. The alternate option surely fits that bill. Besides, IMHO, this is simply a bit of a luxury problem, i.e., a matter of “how high can we go?”.

If the index can hold last week’s low and especially SPX4095, then I see no reason to become bearish, and I will let the market dictate me if the preferred or alternate, even more, Bullish path is unfolding. Ultimately both point to SPX4375, and as I continue to tell my Premium Major Markets Trading Members: “do not short, instead view pullbacks as buying opportunities as we keep our eyes on the SPX4375 price”.

Is Ethereum Still on Track for $2800?

In my article on Ethereum (ETH) from early last week, I found using the Elliott Wave Principle (EWP), “ETH should now be in red wave-v of black wave-3, which should ideally target $2340-2595, … once wave-3 completes -ideally- in the target zone, wave-4 should bring ETH back to around $2160+/-35. From there, wave-5 should target $2775+/-100 to finalize the larger blue wave-V. I then expect a retest of $1450+/-75, an almost 50% haircut, before the next significant, multi-month rally starts. See Figure 1 below.

ETH peaked at $2547 on April 16 for wave-3, declined to $1975 on April 18 for wave-4, and is now already making new all-time highs (ATHs), and wave-5 is gunning for $2700-2855. Thus, except for a lower wave-4 than anticipated ($2035-2190 was the target zone, see Figure 1, with $2160+/-35 ideally), ETH has so far followed the path I expected ten days ago -black dotted arrows- very well. It is simply impossible to be 100% accurate in a non-linear, stochastic environment, but this is the accuracy and reliability my premium crypto members take advantage of.

Figure 1. ETH daily EWP count and technical indicators.

The Rally to as High as $2860 is Now Underway

As you can see, once Fibonacci-based EWP target zones are reached, strong reactions occur, and ETH is no exception. Since the $1975 low did not overlap with the wave-1 high at $1941 on March 13, the standard impulse pattern is alive and well because, in a motive wave, the 1st and 4th waves are not allowed to overlap. Thus, as ETH is now on its way to the ideal $2700-2855 target zone, which it can overshoot, it is time to look at the technical indicators. As you can see in Figure 1, the red dotted arrows show ETH is moving higher on A) less strength: lower daily RSI5 readings, B) less momentum: lower daily MACD readings, and C) less liquidity: lower Money Flow readings. These divergences fit with a rally that should peak soon before a much larger correction is expected.

Bottom line: The rally to new ATHs is underway as anticipated, and ETH has adhered rather well to the Fibonacci-based EWP path I outlined early last week. Thus $2775+/-100 should still be doable, with an ideal target zone of $2700-2855. Once reached, I expect a sharp multi-week decline back to the critical support at around $1400+/-100, an almost 50% haircut before ETH is ready to stage its next multi-month rally, ideally to $4500+/-500. A move and close below this week’s low at $1975 from current levels or higher will signal this deep correction is underway.

For a look at all of today’s economic events, check out our economic calendar.

Bitcoin Should Rally in an Overlapping Fashion to Around $72K

Early last week, I showed, using the Elliott Waves (EWP), “I prefer the larger ending diagonal (ED). EDs are hard to forecast price structures as they consist of five waves, which [in turn] most often are comprised of three overlapping waves to the upside and downside. BTC is most likely in wave-iii, subdividing into three (a, b, c) waves … [with] wave-c to ideally $66050-72175. … A daily close back above last week’s high ($60062) will favor the upside diagonal. A daily close below $53900 is needed to shift the odds in favor of the Bearish option (a diagonal to the downside).

The above “if-then” scenario is the power and beauty of the EWP as it allows for straightforward elimination of options and increases one’s trading success’ odds. BTC has rallied over the last nine days since my last update. With the additional available price data, I know the ED pattern to the upside is operable: blue lines in Figure 1 below, as so far BTC has done nothing to invalidate it. Please compare to the ED example inserted in Figure 1.

Figure 1. Bitcoin daily chart with detailed EWP count and technical indicators.

The Contracting Diagonal pattern suggests a choppy rally to around $72K.

As said before, EDs are choppy, terminal patterns, and the recent price action supports this notion as BTC is barely above its March 13 wave-i top of $61749. Because in contracting diagonals the 3rd wave cannot be longer than the 1st wave I find BTC should ideally top at a maximum of $69K. This level corresponds with the (red) wave-iii=i relationship, the (green) 1.382x extension for minor-c of wave-iii, and the (grey) c=a extension of grey minute-c of minor wave-c, exemplifying the fractal and complex nature of the internal waves of a contracting ending diagonal. Once wave-iii completes, wave-iv should drop to around the lower blue trend line, which should be around $62K. (Red) wave-v of (black) wave-5 of an even larger (blue) wave-III will target about $72K. From there, BTC should then fall back to the beginning of the ED pattern to complete wave-IV: the low $50Ks to the low $40Ks. Only then is BTC, IMHO, ready to set up for a rally into the six digits: blue wave-V.

What does it take to invalidate my preferred POV? A first warning will be on a daily close below $59K, with a “lights out” on a daily close below $55355. Why? Because if BTC drops that low from current levels, the ED pattern as shown will not complete. Please remember that BTC is, IMHO, in a larger-degree terminal pattern, and the price action over the next few weeks will not be as easy to trade, track and forecast as it was before. Thus, one has to “anticipate, monitor, and adjust” to allow for safe trading now more than ever.

For a look at all of today’s economic events, check out our economic calendar.

Ethereum Gunning for $2800?

In my previous article on Ethereum (ETH) from four weeks ago, I looked for as low as $1200+/100 in ETH before the next rally to new all-time highs (ATHs). All ETH gave us was, however, $1549 on March 23. Although in Bull markets, “downside disappoints and upside surprises,” that shallower than expected pullback meant we’re dealing with another impulse move higher. See Figure 1 below.

Figure 1. ETH daily EWP count and technical indicators.

A rally to as high as $2860 should be expected

Using the Elliott Wave Principle (EWP), I now label the late February low as a 4th wave (blue IV), and blue wave-V is now underway. It is subdividing into five smaller waves, in black. Waves-1, 2 have already been completed, and wave-3 is now underway, which should ideally target $2340-2595. As you can see, wave-1 consisted of clean and clear five smaller waves (red waves-i, ii, iii, iv, and v), and so does the current wave-3. The target zone is based on standard Fibonacci-extensions for 3rd waves: 1.382 to 1.618 times the length of wave-1, measured from the wave-2 low.

ETH should now be in red wave-v of black wave-3. This wave can even move beyond the target zone, but for now, all I can go by is “the known unknown,” i.e., standard Fib-extensions, as U.S. Secretary of Defense and congressman Donald Rumsfeld once said.

But what I do know is in an impulse move, wave-4 always follows wave-3, and wave-5 always follows after wave-4. Thus, once wave-3 completes -ideally- in the target zone, wave-4 should bring ETH back to around $2160+/35. From there, wave-5 should target $2775+/-100 to finalize the larger blue wave-V. I then expect a retest of $1450+/-75, an almost 50% haircut, before the next significant, multi-month rally starts. The above-described path forward is exemplified by the black, red, and green arrows in Figure 1.

Bottom line: A month ago, when ETH was trading in the mid-1700s, I was looking for $1200+/-100 and then a run to $3000. Although the anticipated path of lower and then higher was correct, all ETH gave us was a drop to the mid-1500s and now the rally to new ATHs is underway. Besides, it means I am adjusting my upside projection based on the current price action slightly to $2775+/-100. But remember, in Bull markets, downside disappoints and upside surprises. So I will continue to monitor the price action to see if ETH decides to deviate from the anticipated path. Because all we can only do is “anticipate, monitor, and adjust.”

For a look at all of today’s economic events, check out our economic calendar.

S&P500 on Track for 4375?

Last week I foundThe S&P500 is still in a 100% Bullish uptrend … and a move below the early-March low (SPX3725) is needed to confirm a more pronounced correction down to SPX3250-3500. Until then, the index can still try to move higher to SPX4065-4185…”

Fast forward, and the S&P500 (SPX) is now trading at SPX4095. Target zone reached. So was that it? Using the (EWP) see figure 1 below, I think there’s still more upside in store first before the subsequent more significant multi-week correction unfolds.

Figure 1. S&P500 hourly chart

The S&P500 can reach SPX4375 assuming standard Fibonacci-based wave extensions.

In this update, I want to focus on what is shown inside the larger green square. I’ve drawn in the typical 3rd, 4th, and 5th wave targets for a standard, Fibonacci-based impulse pattern that started from the early-March low (red wave-iv). Green (minor) waves 1 and 2 have been completed, and now wave-3 is underway, which should ideally target between SPX4210-4275. Then I expect a wave-4 down to around current levels (SPX4110+/-10) before a last 5th wave (green minor-5) rallies price to SPX4375. This EWP path forward is based on the assumption the index will follow a textbook EWP impulse pattern higher. There is nothing to tell me it will not, but it can, of course, always deviate. To be determined. But for now, this is all I can go by.

Thus, as long as the index stays above the grey (minute) wave-i high at SPX3978 on any short-term pullback, while on its way to ideally SPX4210-4275, then the in Figure 1 shown EWP path (grey arrows) should unfold, and the index will reach higher than I initially anticipated March 11th.

Bitcoin Bears Are Likely Going To Get Paid Later.

Why is BTC not continuing its unabated rally? I even have had traders sign up for my Premium Crypto Trading Service, literally thinking BTC would only and always go up. Well, no. BTC, like any other financial asset, still must go through its Elliott Waves (EWP).

Two weeks ago, based on the available data, I concluded, “If BTC moves below $52625 without making a new ATH first, my preferred “flat wave-4” scenario continues to play out as initially anticipated, with the added “flavor” of an irregular flat. Therefore, the ideal downside target can be adjusted to $43K+/-1K for a classic C=A relationship. Once the downside region is reached, I then expect the rally to $75K+ to take hold. If there is no overlap with $52625 over the next several days, and BTC can instead reclaim its 10d and 20d SMAs, to be followed by a rally over $60K, then the impulse pattern with an ideal top at $63.4K is favored. Only then can the Bears have another shot at, with a potential downside target of $40+/-1K.

Figure 1. Bitcoin daily charts with detailed EWP count and technical indicators.

More downside was correct but limited. Can BTC, therefore, still reach $70K?!

Fast forward, and as I preferred, BTC moved lower. It dropped below $52625, bottomed at $50406 on March 25, but never reached $43K +/- 1K. Instead, it rallied back to $60K. Thus, my idea BTC would see the low $40Ks when below $52625 was wrong. But, as said at the beginning of my update, BTC has not moved much over the last two months (on February 21, it reached $58K, and today April 6 it is still at $58K). Unfortunately, sideways price action is the hardest to interpret, especially from an EWP perspective, as it leaves the door open to many options. But eventually, one option will be chosen by the market, the smoke will clear, and the subsequent path will then be much easier to forecast, track and trade. As usual, all we can do is “anticipate, monitor, and adjust.”

So, what is next? With the current and additional price data at hand, I now prefer the larger ending diagonal (ED), as shown in blue Figure 1A. EDs are hard to forecast price structures as they consist of five waves, which most often are comprised of three overlapping, waves to the upside and downside: the green a, b, c’s of the larger (red) waves i, ii, iii, (and iv and v). As you can see, the red wave-i rally of the black (major) 4 low made at the end of February was three waves (green a, b, c), with the c-wave made up of five smaller waves (grey waves i, ii, iii, iv and v). The subsequent decline, red wave-ii, was also three waves. BTC is most likely in red wave-iii, which is also subdividing in three green (a, b, c) waves. Wave-a completed, wave-b is likely still underway and soon to be followed by green wave-c to ideally $66050-72175 depending on the exact Fibonacci-extension it will have. From there, a wave-iv and v await but let’s focus for now on the potential wave-iii as the internal price structure is complicated enough. Right!? Well, such is the nature of EDs: hard to forecast, track and trade as there are few firm rules (see here for a summary)

The Bearish option is the diagonal to the downside to complete black major 4. See Figure 1B. The market has still left this major-4 option on the table but is close to invalidating it. A daily close back above last week’s high ($60062) will favor the upside diagonal. A daily close below $53900 is now needed to shift odds in favor of this Bearish option.

Thus, while BTC has not done much over the last two months, it will soon tip its hand and tell us which of the options it will prefer: breakout is Bullish and targets the low $70Ks ultimately, while a breakdown is Bearish and targets the low $40s once again before reaching the $70Ks.

Can The S&P500 Still Reach Over 4000?

In my article from a little over two weeks ago, see here, I had “three individual and independent tools/methods pointing first and foremost higher and towards the same target zone/region (SPX4065-4185) for a significant top.” Fast forward, and the index reached as high as SPX3984 on Mach 17 and made a secondary high of SPX3982 yesterday. Was that all she wrote, so to say, or can we still expect the target zone to be reached. Since markets are stochastic, dynamic, and probabilistic, nothing is ever set in stone. Therefore, one must continuously (re)assess the charts to see if once assertions based on prior price data are still correct with the new price data at hand: anticipate, monitor, and adjust if necessary.

Figure 1. S&P500 daily chart

The S&P500 is still in an uptrend, but technical indicators are diverging.

A strong uptrend has price above its 10-day SMA, which is above the 20-day SMA, above the 50-day SMA, and subsequently the 200-day SMA. Besides, all these SMAs should be rising. In short, price>10d>20d>50d>200d and all SMAs rising = a 100% Bullish price chart. It is then logical to expect a Bullish outcome. Conversely, when price<10d<20d<50d<200d and all SMAs are declining, then the chart/index is 100% Bearish, and one should expect Bearish outcomes.

Moving averages are, however, not predictive but trend following and therefore they are not the holy grail. Adding technical indicators, such as the MACD, RSI, a stochastic oscillator (FSTO), and Money Flow (MFI), can give another layer of evidence to assess the next likely move. So let’s put the current daily chart of the S&P500 to the test (see Figure 1 above)

We can observe that the index is above its rising 10d>20d>50d>200d SMA. Thus it is still 100% Bullish (green horizontal arrows). What about the technical indicators? The MACD is on a buy, the RSI is above 50, while my stochastics’ based Buy/Sell indicator is on a buy as well. However, the MFI is weak as it is below 50. Besides, the RSI, MACD, and MFI are all negatively diverging (red dotted arrows). What does that mean?

As the price is rising, it is doing so on less Strength, less Momentum, and less liquidity. Now divergence is only divergence until it is not, i.e., it only takes a few solid up days to erase it, but for now, it must be noted and suggests the uptrend is weakening. But, based on the SMA setup, the uptrend is still intact. The index is still above the lower black dotted trendline, connecting the March 2020 low with the October 2020 and March 2021 lows. However, the dotted purple trendlines suggest an ending diagonal pattern, i.e., wedge, is forming, which resolves bearishly when completed. See here.

Bottom line: The S&P500 is still in a 100% Bullish uptrend based on its SMA-setup and trendline support and the technical indicators. However, the latter are negatively diverging since at least mid-February telling us the uptrend is weakening and running on less liquidity. The Bears’ first order of action is to close the index back below its 50d SMA, which should bring it back below last Thursday’s low. A move below the early-March low (SPX3725) is needed to confirm a more pronounced correction down to SPX3250-3500. Until then, the index can still try to move higher to SPX4065-4185, albeit all the divergences.

Bitcoin Bears: Pay Me Now Or Pay Me Later?

I shared that the cryptocurrency was most likely in a more significant 4th wave, taking weeks to complete. Back then, I preferred for BTC to “top around $54.7K to $ 56.1K, for a b-wave, before the next leg lower (wave-c) should target about $39.2-40.6K.

But, I was conscious of the fact that “BTC can have one more trick up its sleeve as 4th waves of this magnitude are often more a sideways affair where recent gains are digested more in price than time, i.e., a trading range is made. This means the red b-wave/bounce can even target as high as $64.3 (ranging from $56.9 to $64.2) before that pesky C-wave takes hold … bringing the price back to $40+/-2K.

Figure 1. Bitcoin daily charts with detailed EWP count and technical indicators.

Bitcoin can still try to reach $63.4K, but odds favor more downside.

Fast forward, and indeed BTC had a trick up its sleeve, rallying to a new all-time high of $60.7K five days ago. That was precisely the 1.618x Fibonacci-extension of (green) minor-a, measured from the minor-b low (see Figure 1A above). Classic irregular flat in EWP terms: see here? Not so fast just yet, as this pattern also means the recent ATH could have been a 3rd wave (red wave-iii) because 3rd waves often extend that far as well. The Bullish thesis suggests BTC is now in red wave-iv, with the last wave-v to ideally $63.4K before topping (see Figure 1B above).

What would it take for BTC to invalidate my original thesis? As long as it does not move below $52625 (the minor-a or red intermediate-i high), it can still try to reach $63.4K because 4th and 1st waves are not allowed to overlap in a common impulse. Only in a diagonal (see insert in Figure 1B) do we see such overlap. But those are erratic patterns, and I would not try to bank on them.

What do the charts favor? Currently, BTC is below its 10- and 20-day simple moving average (SMAs), while all the technical indicators are pointing down, i.e., on a sell. Not a good sign for continued upside. Besides, the MACD-indicator made a lower high at the recent ATH compared to the late-February price high. Thus the recent rally was on much less momentum and strength.

Bottom line: the chart setup on the daily time-frame is short- to intermediate-term relatively weak. Suppose BTC can now move below $52625 without making a new ATH first. In that case, my preferred “flat wave-4” scenario continues to play out as initially anticipated, with the added “flavor” of an irregular flat. Therefore, the ideal downside target can be adjusted to $43K+/-1K for a classic C=A relationship (see Figure 1A). Once the downside region is reached, I then expect the rally to $75K+ to take hold. But, if there is no overlap with $52625 over the next several days, and BTC can instead reclaim its 10d and 20d SMAs, to be followed by a rally over $60K, then the impulse pattern as shown in Figure 1B, with an ideal top at $63.4K is favored. Only then can the Bears have another shot at, with a potential downside target of $40+/-1K.