As you know a picture is worth 1000 words so consider this short yet
detailed post a juicy 2000+ word report on the current state of the stock
market and economic cycle.
The charts below I think will help you see where the US stock market and
economic cycles appear to be.
The first image shows two cycles, the blue one is the stock market cycle
and which sectors typically outperform during specific times within the
cycle. Here you will see that during the late stages of a bull market the
safe haven plays become the preferred choice for investors - Energy and
Precious Metals.
Typically, the stock market tops before the economic (business) cycle
does. Why? Because investors can see sales starting to slow and that earnings
will start to weaken and share prices will fall, so the market participants
start selling shares before the masses see and hear about a weakening
economy. The stock market usually moves 3-9 months before the economic cycle
change I known by the masses.
Stock Market Topping According to Sector Analysis
Elliott Wave Count - My Educated Guess
Elliott wave theory is a tough strategy to follow. Meaning, if you gave
the same chart to 5 different people you would likely have 3 or 5 very
different wave counts.
Recently I have seen a flurry of EW charts on the SP500 wave count which I
do not think are correct. When I do Elliott Wave counts I like to use more
than just price. I look into things deeper and use the market internals,
volume flows, and overall market sentiment during those times. They must all
be screaming extreme FEAR in the market in order for me to count it as a wave
low.
Fear is much easier to read and time than greed. So based on waves of fear
and I can plot the rest of the waves. By doing this, I feel it gives a truer
reading of significant highs and lows we should use in our analysis.
See my analysis below for a visual...
Stock Market & Economic Cycle Conclusion:
In short, the current market analysis, in my opinion, is still very
bearish and this could actually be the ultimate last opportunity to get short
the market near the highs before we dive into a full blown bear market in the
next 3-5 months.
I will admit, the market is trying VERY hard to convince us it wants to go
higher as it flirts with the recent highs for its second time in the past 8
months. I know it is doing its job because so many traders and investors are
changing their tune from bearish to SUPER BULLISH.
I don't see it that way JUST yet, but it could happen as the market can do
and will do whatever it wants. But all my analysis (much more than what you
see here) points to substantially lower prices over the next year.
