September 26, 2018

Nikkei and Bitcoin two to Watch

Volatility Report September 27, 2018

Nikkei 225

I wanted to focus on the NK for one simple reason; it is making a major pivot high in the current time frame. As such it has spilled over implications for the reaming stock market that are making new all-time highs in the same period.

The weight of the evidence is clear, but I did not hear anyone pointing to the recent spike up by the index before it occurred, and I am not hearing anyone now calling for a major peak. The chart pattern is a classic horizontal triangle, which based on EWT only occur in 4th of B waves. Here it is taking place after nine years of advance in a 4th wave position.  Based on 100 years of observation, the thrust out of the pattern is always a high rate of change affair that equals the widest high to low points in the pattern.

Math would be from “a” top “b” added to “e” for a target of 24.762. Or a more ambitious calculation is from “Three” to “a” added to “e,” which puts the NK near the high side of its long-term resistance zone at 25,328.00

Furthermore, based on the same historical observations, the “post triangle thrust” is the end of the trend not the beginning of a new one.

What supports these Amercian facts is the fact that our volatility model – the Technical Event Matrix – is registering panic buying, which is nearly always (99% likely) at a change of trend. In this case, the best case for the bulls is from up to sideways before the market flips on the trend followers. This FOMO is on a short and intermediate basis.

Given our MarketMap COT dates for the Dow coming in here at the end of September, the first phase of a cyclical bear market is expected.

Bitcoin

Triangles imply thrust, high ROC moves.  From a trading opportunity point of view, Bitcoin sets up for a straight-line trend after it breaks out of the wedge formation seen here.

For swing traders, the use of a band breakout, or a moving average crossover should get you into the trade. Use the largest width of the triangle measured from the last pivot inside the formation for a target.

This chart is the NYSE Bitcoin index, but the coin itself and the futures have the same pattern calling for a $4,500 to a $5,000 swing.

For Long Term investors: given that Bitcoin is a leading example of speculative exuberance and was a foreshadowing of the Dow peak in January, I suspect it will be a leading index of the Dow today.

If I reverse engineers this from the bearish outlook for US Stocks, expect a 4,500 dollar move to be a spill for this market going into the end of the year.

Furthermore, given the patterns are repeating here, if we use the Chinese markets as a similar pattern the expectation would be for a crash in Bitcoin prices.

A move to new lows, a move below 5,883 on the NYSE bitcoin index, should lead to lower prices; and this could lead the US equity markets into their bear markets.

Commodities with Related ETFs

Crude Oil

Tradition cycles have always phased the bull/bear directions of the markets from bonds to stocks to commodities to descending bonds followed by stocks followed by the commodities.

The turning point map for Crude Oil seen here syncs with additional independent modeling forecasting further uptrend by the commodities in general and oil imparticular.

 

The bar chart of the Crude Oil futures has traced out a 10-point wide triangle where prices have broken out. A measured move targets 80.00.

The post triangle thrust fits the Maps change of trend dates with a peak in the next two or three weeks.

S&P Sectors with related ETFs

Transports
  1. The transportation index has failed to hold the break to new highs.
  2. A head-and-shoulders top has formed with a breakdown confirming the top.
  3. Volatility measures allow for the trend to follow through.
  4. I-T target 10,000.

Oil sector (USO)
  1. The shares are following similar patterns to the underlying crude oil futures, which remains bullish and trending.
  2. The monthly sequence of Technical Events is textbook. Moving from a panic low extremely high volatility, a TE#1 (red vertical dashed line) to the end of base building marked by extremely low volatility, a TE#2 (green vertical dashed line) into the current time period with a TE#3 (the cyan blue dashed line) making the low volatility laboring trend.
  3. While the longer-term uptrend is maturing, the shorter-term backdrop is an extremely low reading of volatility. A set up for a short-term run at new recovery
  4. The middle daily chart shows a horizontal triangle breakout. Like the crude oil that targets $80.00, USO targets 50 – 17.00

Offshore Stock Averages with related ETFs

FTSE (PRF)
  1. Like the Dow, the major UK average made new highs at the same time. Unlike the Dow, however, it was not able to hold its breakout. Unless there is a quick recovery, the I-T has turned lower.
  2. The failure to breakout highlights here is an I-T sell signal with targets that are 5% to 6% lower
  3. The new high was emotional on panic buying signaled by our volatility model’s technical event #1. On the I-T model, the uptrend is low energy and laboring.

Great and Many Thanks,

Jack F. Cahn, CMT
A Thinking Man’s Trader Since 1989,
Copyright 1989-2018
http://www.thinkingmanstrader.com
www.ContraryThinker.com coming soon

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