Last week, I wrote about the looming bull trap. On Feb 27, the stock market topped and the SPX fell 142 points or about 5% in 3 days. My observation was based on time cycles and Elliott Wave. Most of the decline was blamed on the Trump announcement of tariffs on Aluminum and Steel, with fears igniting about a coming trade war.
A coming B Wave rally appears to be coming into early next week (followed by Wave C down). This suggests more selling ahead. The SPX chart below explains what I now expect given the new market information. My original expectation was to see new lows directly ahead. I now believe all we see would likely be a test of the 200 day moving average down near to 2565 by around March 8 or 9 and then a strong rally to new recovery highs above 2789 by March 15 or 16.
The current count looks like an ABC X ABC type A Wave (a double three) move down into late March, with X expected near March Option Expiration. The 10/20/40 week low is not due until sometime in middle/late May. The trend is still down and wild up moves may still be expected out of exhausted selling. The May low (expected to be near 2400) should launch a new rally to above 2900 by sometime this summer, which should form a Y Wave double top and more severe selling (Wave Z) as we go into the fall and early winter of 2019. My best guess is we see a 20-25% bear market by then. This should end Wave 4 since 2009, with Wave 5 of V of (V) expected by early 2020.
Gold is doing better than the miners and I expect that trend to continue. I do see a nice low developing soon that should launch the miners up into March expiration, but it should be nothing more than a trading opportunity, IMO. Right now the trend in the precious metals (and especially the miners) is at best a sideways one with expected selling later in the year along with the stock market.
I know that a lot of commentators are bullish the precious metals market, but I am not one of those, at least not yet.
I am shorting any stock market strength in the next day (2703?) or two expecting another leg down into either Thursday or Friday. The mining shares look good for a short term move up into the middle of month, and I am just waiting for some weakness to develop into week’s end to go long NUGT.
