Bond Market Highlight #7
Rally to new all-time bond market highs anticipated by seasonals and "Cyclic Trends".
(COMMENT #s 358, 359, 365, 406)
UPDATED 19980505
COMMENT 1998-358
1. Turn to page 298 in "The 1998 $upertrader's Almanac - 1st Half Edition".
2. Note how quickly we can tell the expected direction of this market over the next month or so.
3. Do you see the "hollow arrow"?
4. Now look to the left margin.
5. Do you see the "GN"?
6. This is a "Golden Nugget" seasonal tendency.
7. Golden Nuggets have worked EVERY YEAR for the past 10.
8. This is a strong tendency in any market.
9. When the arrow is above the price chart, the tendency is up.
10. When the arrow is below the price chart, the tendency is down.
11. Wasn't that easy?
12. Now, if we want to see the individual tendencies responsible for the arrows, we can look at the seasonal listing in the "Seasonals" table in the opposite right page (p 299).
13. As an example, go to the first tendency from the bottom of the right column.
14. Can you see that this tendency is identified as a "G" trade (Golden Nugget)?
15. Can you see that this is Golden Nugget seasonal tendency # 31?
16. The next two column report the opening and closing dates of this tendency (507 to 831, or May 7 to August 31).
17. The final column, "WK 19", means that we can turn to the 19th week of the year and look deeper into this tendency.
18. Week 19 begins on page 192.
19. Turn the page, and we can see this trade listed at the top.
20. Can you see that this seasonal tendency has averaged $ 3,984 per year for each of the last 10?
21. We've just identified a strong $ 3,984 per year seasonal tendency (PROFITABILITY) and combined the tendency with the RELIABILITY of the trade.
22. Since this is a Golden Nugget seasonal tendency, we know that the tendency is not just strong, but that it has been PERFECT for each of the last 10 years.
23. To determine the CONSISTENCY of the tendency, one must inspect the individual seasonal trade sheets for this trade.
24. Such sheets are shown on pages 53 and 54 where the sheets can be ordered.
25. With this information, PROFITABILITY, RELIABILITY, and CONSISTENCY, one can learn all one wants about the use of seasonal tendencies.
26. Wasn't that easy?
UPDATED 19980505
COMMENT 1998-359
1. Turn to page 303 in "The 1998 $upertrader's Book of Linear Time Cycles".
2. Do you see the "Inversion Cycle" peak (the dotted line)?
3. Do you see the cyclic tendency of this market over the next few months (the solid line)?
4. Haven't we followed the basic down projection so far this year with the early January peak and recent lows?
5. For you Elliotticians, this market appears to have been in an "4th wave triangle" since the beginning of the year.
6. Although it is POSSIBLE that the triangle ended at the late April lows, it is LIKELY that the triangle still has two more waves (a "D" wave high and an "E" wave low) to go.
7. Each of the waves "A" through "E" should break down into 3 legs each.
8. To date, such appears to be the case.
9. Hence, although short term traders can assume long positions for a short term continuation of the rise of the last few days, the more PROBABLE trade is the one obtained when the triangle ends (i.e., at point "E").
10. The expectation is that rapid uptrend acceleration will resume from that point.
11. The STRUCTURE of the market suggests that this acceleration will begin from a higher point than the late April lows.
12. When sufficient TIME has passed and the appropriate PATTERN formed, the market will then be in maximum reward/minimum risk position.
13. Note that page 303 suggests that the "D" wave high and "E" wave low will form rather quickly, this month.
14. In other words, we are looking for ALIGNMENT of the monthly linear time cycle low with an "Inversion Cycle Index" turn coupled with the end of an extended triangle chart PATTERN this month.
15. Wasn't that easy?
UPDATED 19980506
COMMENT 1998-365
Unless you're deep into the Elliott Wave, this discussion will likely bore you to death.
1. We're going to expand on COMMENT #359.
2. When we're attempting to use the EW, we want to also attempt to determine the next best, or alternative, interpretation.
3. In this market, the assumed "A" down wave lasted 37 trading days.
4. The next upmove was assumed to be a "B" up wave of 20 trading days followed by a "C" down wave of 17 trading days.
5. Note that the total of the "B" and "C" waves again equalled 37 trading days or the length of the "A" wave (MASTER # = 37, LUCAS # 18 X 37 = 666, FIBONACCI # 21 X 37 = 777, 24 X 37 = 888 [# of JC], and so on - see page 21 of "The 1994-95 $upertrader's Book of Numbers").
6. Because the assumed "B" wave was so abbreviated relative to the "A" wave, it is also possible that, instead of a "B" and "C" having been completed, the waves were actually an "a" and "b" wave of a larger "B" wave.
7. If this alternative interpretation is correct, we are now in the process of completing the "c" of a "B" wave.
8. So what does this mean, and how can we tell which interpretation is occurring, or, even, if either is correct?
9. If it's the "D" / "E" scenario (favored), the "D" and "E" waves will each break down into 3 legs each.
10. We should be in the process of completing, or have just completed, the 2nd leg of the "D" wave.
11. We are expecting that the 3rd leg UP of the "D" wave is about to follow.
12. If it's the "c" of "B" scenario, the "c of B" wave to the upside will break down into 5 legs (3 up, 2 down).
13. In this scenario, we are in the process of completing, or have just completed, the 2nd wave of the "c of B" wave.
14. We are expecting that the 3rd leg UP of the "c of B" wave is about to follow.
15. Hence, under either scenario, the expectation is that we are about to experience, or have already begun, an immediate and sharp up move.
16. Further, there are two very important trendlines which come into play.
17. First is the down trendline drawn off the January and April highs.
18. Second is the horizontal trendline drawn off the early April high.
19. In the first scenario, price should move up to the down trendline, complete the "D" wave, and then move down to complete the "E" wave.
20. At this point, the entire correction from the January high should be complete.
21. The "E" down move should not break the March low.
22. The 3rd leg of the "D" wave should be of approximate equal magnitude, in price, to the 1st leg.
23. In the second scenario, the "3rd wave" of the expected 5 wave "c of B" wave should be of approximate equal length to the "1 of c of B" wave.
24. This "1 of c of B" wave is assumed to have begun at the 980429 low and ended at the 980501 high.
25. In the first scenario, this "1 of c of B" wave is the 1st leg.
26. In either case, such equality would place the high of this move at, roughly, the down trendline mentioned in Point # 12. of this COMMENT.
27. After a bit of a pullback (wave "4 of c of B"), price would be expected to again break both the down trendline AND the April highs.
28. It is even possible, under this alternative scenario, for price to move to and through the January highs.
29. When the "c of B" wave is complete, a large "C" down move would be in order which would likely break the March lows.
30. This "C" wave, when complete, would complete the entire "A-B-C" correction which began in January.
31. A final large leg up would then be in order and should follow.
32. Note that, in both interpretations, the anticipated 3rd leg of the "D" wave of the first scenario or anticipated 3rd wave of the "c of B" wave of the second scenario both suggest that price should move up to the down trendline.
33. Note how both interpretations CONFIRM, at this point in time, the information cited in COMMENT #s 358 and 359.
34. Remember, the EW is a VERY dynamic process.
35. So long as price CONFIRMS the expectation and does not deviate, the assumption is that the interpretation is correct.
36. The key is to determine, for each interpretation relied upon, the point which would INVALIDATE the interpretation.
37. This interpretation also suggests that trend followers / break out traders, who have gotten absolutely taken to the cleaners this year, are going to continue to get fleeced for a little while longer (the majority just went short again last week or so after another $ 3,000 or so contract loss).
38. Must be more of the "smart money" at work!
UPDATED 19980518
COMMENT 1998-406
Back to the market highlighted in COMMENT #s 358, 359, 365, 366, 373, 385, and 392.
1. The scenario is beginning to favor the "c of B" interpretation of COMMENT # 392 and others instead of the "D - E" interpretation.
2. This outlook is more bullish over the near term.
3. The market is experiencing a "Thrust" entry buy signal today (see pages 115-116 of "The $upertrader's Reference Manual").
4. Seasonally, we can turn to page 202 in "The 1998 $upertrader's Almanac - 1st Half Edition" and look at "GOLDEN NUGGET" seasonal tendency # 36 which shows an average gain of $ 3,441.
5. "GOLDEN NUGGET" tendencies have worked every year of the last 10.
6. Note that this market made its retest bottom on 980511, 1 day before the 980512 "A" point (see page 398 of "The 1998 $upertrader's Almanac - 1st Half Edition").
7. Now turn to pages 303 and 305 of "The 1998-99 $upertrader's Book of Linear Time Cycles".
8. Note the "Cyclic Trends" in the middle of page 305.
9. Note the "Linear Time Cycle" indexes on pages 303 and 305 (the solid lines).
10. Wasn't that easy?
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