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Is A Deleveraging Event About To Unfold In The Stock Market?

As 2018 draws to a close and the global equities markets continue to find pricing and valuation pressures driving prices lower, a few questions come to mind for all investors/traders – Is a deleveraging event about to unfold?  What will it look like if it does happen and how can I protect my investments from such an event?  This research article is going to help you answer those questions and should help to resolve any lingering questions you may have regarding the true nature of this market rotation and volatility.

Our research team at www.TheTechnicalTraders.com has been digging through the data and charts in an attempt to identify key elements of this recent price move.  We are starting with our Monthly Adaptive Dynamic Learning Cycles chart of the ES (E-mini S&P).  As you can see from this chart, our ADL Cycles modeling system is showing a deep downside price rotation is likely to unfold over the next 8~12 months.  One thing to remember about this chart is that these cycles and the width of the future cycle peaks and troughs are NOT indicative of price target levels.  Therefore, this downside move is NOT suspected of reaching price lows near 1000 or 1200.  These cycles are representative of a magnitude of cycle events.  In other words, this current cycle, downward, is expected to be a major cycle event that establishes a major price bottom somewhere near the end of 2019 or early 2020.

We urge traders to understand the scope of this cycle event.  Look at the previous cycle events on this chart.  Numerous downside cycle events have taken place over the past 10+ years that represent somewhat similar down-cycle price moves.  The most recent was in 2015~2016.  This event represented a moderately deep down-cycle even that equated to a 300~400 point price rotation in the ES.  If the current cycle event is relative in scope to the last, then this current down-cycle event will likely result in a 600~800 point price rotation, and we have already experienced a nearly 300 point rotation in the ES.  This would suggest a potential price bottom near 2100~2300 on the ES if the scale and scope of the current cycle event are relative to the previous down-cycle event.

 

This next chart highlights key time/price cycles on the SPY Monthly chart to help us keep the timing of these events in perspective.  As we have suggested, above, a major down-cycle even may be unfolding that results in a deleveraging even across the global markets.  If this does, in fact, take place, there are a number of elements that will likely play out.  First, currencies will fluctuate dramatically as deleveraging takes root.  Capital will seek out and identify the safest and most suitable returns by rushing away from risky markets and into safer markets.  Additionally, a prolonged deleveraging of global equities may take place where valuations are reduced as capital attempts to establish a balance between expectations and true market value.  Overall, this is a very healthy event for the markets as long as it does not result in a total collapse of price, as we saw in 2008-09.

This SPY chart highlights three key components of the markets current setup.  First, the RED LINE (a 2.618 Fibonacci extension from the 2015-2016 price rotation at $266.50) is acting like a strong support level in the markets.  This level, along with the 2018 lows near $254.78, are important levels that we are watching to determine if any further downside price activity is unfolding.  As long as these two levels are not breached to the downside, we can confidently say that the upside trend is still intact.  Second, the two BLUE price channels, which originate from the 2009 market bottom, establish a powerful upside price channel that will act as critical support should price reach near the lower level of this channel.  This means that any downside price rotation will likely find solid support near $232.00 or higher.  Lastly, the vertical time/price series cycles are suggesting that May and Oct of 2019 are likely to prompt significant price reversal patterns/setups.  This helps us to understand that any potential breakout moves (up or down) will likely reach some critical inflection point, or reversal points, near May and October of 2019.

 

Next, we fall back to our Custom US Market Index chart on a Monthly basis.  This chart, again, shows the support level originating from the lows of 2009 in a heavy BLUE line as well as two price channel levels that represent current price ranges.  The first thing we want you to focus on is the breadth of the current rotation within the regression channel on this chart (the red/blue shorter price channel).  Currently, the price is within this standard regression channel and has yet to break the longer-term, more aggressive, upward price channel.  Additionally, we can see from this chart that the recent price activity is still measurably above the 2018 price lows near 374.12.  Secondly, the Pitchfork channel, originating from the 2009 lows and spanning the range of the 2015~2016 price rotation, provides additional confirmation that we are still well above the middle and lower areas of this price channel.  Even if the current price did fall by another 4~8%, the price would still be within the normal channel levels of this extended upside price channel.

So, when we consider the scale and scope of this current downside price rotation, we have to be very aware of the real expectations of the market.  Yes, it looks frightening when we see it on a Daily or Weekly chart.  But when we consider the real reality of the long-term perspective, we can begin to understand how the price is reacting to the recent upside acceleration since 2017.

 

Lastly, this Daily ES chart is showing what we believe is the most important data of all and why all traders need to understand the risks involved in this rotating market.  First, this chart shows our Adaptive Dynamic Learning Fibonacci price modeling system and the results of this chart are clear to our team or researchers – although it might be a bit cluttered to you.  So we’ll try to explain the basic components of this chart for you.

The heavy RED and GREEN levels that are drawn above and below the price action are the Fibonacci Price Trigger levels.  These indicate where and when we would consider a new price trend to be “confirmed”  As you can see, the most recent “confirmed” trigger happened on Oct 10 with a huge breakdown of price confirming a bearish price trend.  Since then, these Fibonacci Price Trigger Levels have expanded outside price as volatility and price rotation has also expanded.  This indicates that price will have to make a bigger push, higher or lower, to establish any new confirmed price trend based on this modeling system.

There are two heavy YELLO lines bordering recent price rotation on this chart that help us to understand a rather wide flag/pennant formation appears to be forming within these rotation/channel levels.  For example, the absolute low of the current bar touched this lower YELLOW level and rebounded to the upside very sharply.  It is very likely that a washout-low price pattern executed today that may provide further price support near 2626 in the ES in the immediate future.  Either way, the price will have to exit this YELLOW price channel if it is going to attempt any new upside or downside price trends.  As long as it stays within this channel, we have a defined range that is currently between 2626 and 2800.

Lastly, the LIGHT BLUE oblique has been our estimated critical support level in the ES since our September 17 market call that a 5~8% downside price rotation was about to hit the markets.  This level was predicted by our ADL predictive price modeling system and has been confirmed, multiple times, by price over the past few months.  It is very likely that this level will continue to act as major support going forward and will be the last level of defense if price attempts a downside price move.  In other words, as we stated above, 2600~2680 is a very strong support range in the markets right now.  Any breakdown below this level could push the markets toward the 2018 price lows (or lower).  As long as this level holds, we could see continued deleveraging in the markets as US Dollar, Energy, Commodity, Currency or global market price weakness while the US markets attempt to hold above the 2018 lows.

 

Pay very close attention to our Fibonacci price modeling and US Custom Index charts, above, because we believe these charts paint a very clear picture.  Yes, a deleveraging event is likely already unfolding in the global markets.  It has been taking root in various forms over the past 12+ months in all reality.  The US markets are continuing to shake off the downside pricing pressures that we’ve seen in other global markets, and this is likely due to the “capital shift” event that is also unfolding throughout the globe.

Our advice for active traders would be to consider drastically reducing your trading sizes as well as pare back your open long positions if you are concerned about a market breakdown.  Our modeling systems are suggesting we have many months of rotation within the market to reposition and evaluate our plans for future success.  Unless the 2018 lows and the multiple critical support levels we’ve highlighted are threatened, we believe this rotation is nothing more than standard price rotation with acceptable ranges (see the charts above again if you have questions).  Yes, there is still concern that a price breakdown may unfold and we are certainly seeing a deleveraging event taking place.  We are not calling for a price collapse at the moment, and we have explained the reasons why we believe our research is accurate.

Use the best tools you can to assist you, just as we do for our members.  The only thing you can do in a situation like this is taking factual data, evaluate the true price data and make an educated and logical conclusion about the markets.  If you want to learn how we help our clients find and execute better trades and how we are preparing to make 2019 an incredibly successful year with our members, then visit www.TheTechnicalTraders.com and see what we offer our members.

Chris Vermeulen

Don’t Give Up – Gold Is headed For A Big Move Higher

Bill Murphy: Don’t Give Up – Gold Is headed For A Big Move Higher By Interviewed by Investing News 2 days ago 3454 Views No comments Nov 14, 2018 Bill Murphy of the Gold Anti-Trust Action Committee (GATA) interviewed by Investing News Bill Murphy, chairman of the Gold Anti-trust Action Committee (GATA), believes an explosive move in gold and silver prices is in the cards — but not before manipulation comes to an end. “This past year and years have been so frustrating because other assets have soared … the stock market, the cryptocurrencies, art, real estate. And gold and silver have just been in the weeds,” he said on the sidelines of the recent New Orleans Investment Conference. “From our standpoint … it’s all because of the gold cartel,” Murphy continued. “The government’s going to use all this quantitative easing, they’re going to budget deficits, debt’s going to go like crazy, interest rates are going to go to … Continue reading

New Era As Canada Enters Cannabis Legalization; Workplace Implications Outlined

By Jim Bentein Wednesday, October 17, 2018, 7:05 AM MDT     A senior manager of a company specializing in drug and alcohol testing at worksites says he’s concerned about impediments to implementing legislation and practices that will prevent workplace deaths. Provinces across Canada enter a new era today with the legalization of cannabis. It’s something industry has been preparing for, for some time. Dan Demers, who specializes in drug and alcohol testing for CannAmm Occupational Testing Services, which has offices in Edmonton and North Bay, Ont., said he doesn’t believe governments have taken enough steps to protect Canadians, at worksites and on roadways, as marijuana becomes legal countrywide today. And Demers thinks the sheer size of the marijuana sector, with companies such as Canopy Growth Corporation having stock market capitalizations in the billions, will prevent governments from moving ahead on needed legislation and marijuana research. “I worry that the cannabis producers will outspend energy … Continue reading

Keep A Proper Perspective About This Recent Move

October 14, 2018 There has been quite a bit of information and opinion in the news recently regarding the recent downside price action in the US Equities markets.  We’ve seen everything from “The sky is falling” to “The markets will rally into the end of the year”.  If you’ve been following our research and analysis, you already know what we believe will be the likely outcome and if not – keep reading. There are a number of key components of the global economy that are of interest currently; US Treasuries, Precious Metals, Emerging Markets, the European Union, Trade Issues and Capital Shifts. When one considers the scope of the entire global market environment in terms of these individual issues, a fairly clear picture of what is really happening begins to take shape.  Here is our summarized opinion of the current state of the global markets. Capital is shifting (again) as … Continue reading

US Transportation Index Suggests Bottom May Be Forming

October 11, 2018 Chris Vermeulen Our research team, at www.TheTechnicalTraders.com, is alerting our members that the Transportation Index has reached its first level of support near 10,500 and this level may be the start of an extended bottoming formation.  If you have been following our research posts, you already know that we predicted this recent downside price swing over 3 weeks ago with our Adaptive Learning Predictive Modeling systems.  You will also understand that our modeling systems suggest this move may not end till early November (somewhere between November 8~12).  Keeping this in mind, we are now alerting you to be prepared for the following. This Weekly US Transportation Index chart highlights what we believe will become support for the US stock markets.  The 10,500 level, highlighted by the GREEN horizontal line, is a key support level that goes all the way back to late 2017 and early 2018.  This level will … Continue reading

Ted Butler: New Hope For Higher Silver Prices

by Tyler Durden Mon, 07/23/2018 – 20:35 Authored by Adam Taggart via PeakProsperity.com, Precious metals analyst Ted Butler returns to the podcast this week to discuss the long-suffering silver price.Will the beatings continue? Or is there finally reason to believe that, after seven painful years of languishing, silver may finally see a brighter future?Butler predicts a turning point is nigh. And ironically, he thinks silver’s savior will be the same cultprit responsible for keeping the price suppressed for all these years: Every time we’ve had a rally in the last 10 years, ever since J.P. Morgan took over the investment bank Bear Stearns, J.P. Morgan has added aggressively to its paper short division on the COMEX as speculators, technical funds and what-have-you come in to chase rallies higher. J.P. Morgan has always been the seller of last resort, and they sell whatever is required to satisfy all buying. And, ultimately, after that buying is satisfied, the prices roll … Continue reading

David Morgan: Crash Day In Silver and Gold

David discusses the recent drop in silver and how it is another “spike low.” These massive down days are often very sudden quick drops. These “spikes” are a good entry and exit point if you’re looking to get into the market. People don’t act consistently and keep to a simple strategy. He discusses what works for him in these markets and what he uses as indicators. He has bought this dip and will buy more if it drops again and expects a gradual price increase once the precious metals market gets moving and later on a price surge. Mr. Morgan talks about the concept of overhead resistance and why its a psychological barrier to price increases. There is a lot of this resistance that has to be overcome before the price can move higher. However, these are small markets, and resistance could be quickly overpowered if there is a flight … Continue reading

Renaissance Oil Cleared For Development On Chiapas Blocks and Acquires Right Of First Refusal On Shale Lands

On behalf of the Board of Directors, RENAISSANCE CLEARED FOR DEVELOPMENT ON CHIAPAS BLOCKS AND ACQUIRES RIGHT OF FIRST REFUSAL ON SHALE LANDS July 9, 2018 – Vancouver, BC – Renaissance Oil Corp. (“Renaissance” or the “Company”) (TSX-V: ROE) (OTCQB: RNSFF) is pleased to announce it has now received final authorizations from the relevant Mexican authorities to proceed with the development program on the Company’s three 100% held producing properties in the state of Chiapas (the “Chiapas Blocks”).  This development program, designed to significantly enhance production along with the exploration of new formations, comprises: 1) Major work-overs on three existing wells, one at Malva and two at Topén; 2) Drilling up to four Cretaceous wells, two at Malva, one Mundo Nuevo and one at Topén; and 3) Extensive coring in new zones of interest across the Chiapas Blocks. Major work-overs are scheduled to commence in August 2018.  The wells are tied into the existing … Continue reading

Micron/China Holding Markets Back

July 5, 2018 Just before the July 4th holiday, the US equity markets were about to rally above a defined wedge formation that has been defining price range for the past 7+ days.  As the markets opened on July 3rd, prices had already started to rally and appeared to be ready to rocket higher by a decent amount.  Yet, by early morning, news that China had banned Micron chip sales in a patent case caused the markets to reverse quite steadily.  This news, as it relates to US chip manufacturers and a major part of the NASDAQ, creates a temporary speed bump in the perceived rally that we have been expecting for weeks. The Technology sector makes up a very large component of the US major indexes.  Other than the DOW, technology firms are spread across nearly every sector of the US major indexes and this case may have some reach to it.  … Continue reading

Gold & Miners To Rally s US Equities Fall On FEA

June 25, 2018 The US Equities markets rotated over 1.35% lower on Monday, June 25, after a very eventful weekend full of news and global political concerns.  Much of this fear results from unknowns resulting from Europe, Asia, China, Mexico and the US.  Currently, there are so many “contagion factors” at play, we don’t know how all of it will eventually play out in the long run. Europe is in the midst of a moderate political revolt regarding refugee/immigration issues/costs and political turmoil originating from the European Union leadership.  How they resolve these issues will likely be counter to the populist demands from the people of Europe. Asia is in the midst of a political and economic cycle rotation.  Malaysia has recently elected Prime Minister Dr. Mahathir Mohamad, the 92-year-old previous prime minister (1981~2003) as a populist revolt against the Najib Razak administration.  In the process, Mahathir has opened new … Continue reading