ELLIOTT WAVE ANALYSIS - Latest Market Commentary
Stock Indices
23rd September 2023 - The outlook for major stock indices remains bearish having completed mid-August, 2nd wave counter-trend rallies last week with this week’s declines adding further confirmation. The US$ dollar index has been running higher since July, the exact inverse ###time when stocks formed peaks – meanwhile, treasury yields are contrarianly set to form important highs next week, then turning lower as bond traders switch to safe-haven buying – commodities like Copper and Crude oil are approaching secondary highs and are soon to resume lower. The backdrop to these declines seems obvious – the Fed’s higher-rates-for-longer is the bearish driver and yet large asset managers are still largely unaware of the downside risks that are accumulating. In the latest Bank of America Fund Manager Survey, 74% per cent of respondents say either a soft landing or no landing at all. That’s a 180 degree switch from major bearishness that existed a year ago, contrarianly, a fine time for a top in stocks. Shorter-term, the benchmark S&P 500 is engaged in a 4th wave expanding flat correction that began earlier this morning (Friday), continuing into the close – an upside rally towards 4412.00+/- to max. 4419.00+/- is expected to complete…Read full summary in our latest report!
Currencies (FX)
23rd September 2023 - The aftermath of Wednesday’s hawkish Federal Reserve statement has seen stock markets lower and the US$ dollar index (slightly) higher. The negative correlation with stocks and the dollar is expected to remain constant – an examination of short-term### stock indices suggests today’s rally will end Monday, followed by a 5th wave decline ending later into the session but then a more durational counter-trend upswing developing across the remainder of the week. If correct, the US$ dollar index would inversely mirror these price-swings by initially holding firm around current levels of 105.78+/- or perhaps slightly higher through Monday’s early-session but as stocks reverse higher once 5th waves down have completed, so the dollar index begins a counter-trend downswing as minor wave iv. four. For the Euro/US$, this means forming a near-term low towards 1.0565+/- max. 1.0470+/- but then beginning a 4th wave corrective upswing targeting min. 1.0788+/-. Stlg/US$ is approaching similar interim support around 1.2192+/- but should this be exceeded, it could stretch as low as 1.1803+/-. US$/Yen is testing overhead resistance at 148.40+/- with a hint the Bank of Japan could be ready to intervene. This correlates to a top in treasury yields. US$/CAD is engaged…Read full summary in our latest report!
Bonds (Interest Rates)
23rd September 2023 - Markets are still contemplating the consequences of Wednesday’s hawkish Federal Reserve commentary especially since major fund managers are now expecting sticky inflation/hawkish central banks policies as the biggest ‘tail risk’ (40%) according to the### latest fund manager survey from Bank of America. About 60% per cent of the survey said the Fed was about to announce a terminal rate peak, but that’s not the case whilst 74% say the 1st Fed cut would occur in Q2 '24 or H2 '24 which again is not the case as indicated by the Fed last Wednesday. It tells us a little about what sentiment looks like – it may suggest the US10yr yield gains since Wednesday has been caused by long-bond liquidation – if so, the yield is about to end April’s zig zag run higher from 3.257 towards max. 4.575+/- and now turn lower. The latest Eurozone…Read full summary in our latest report!
Commodities
23rd September 2023 - Gold’s relationship to the US$ dollar remains constant with negative-correlation as the main driver. The US$ dollar index is still in a five wave impulse uptrend from July’s low with incomplete targets over the next few months. This inversely correlates### to gold’s corrective downswing that began intermediate wave (2) from May’s high of 2061.00. The dollar is approaching a 3rd wave high this week with a temporary pullback lower as a 4th wave that will allow gold to dig a little deeper into its counter-trend 2nd wave rally that began from either August’s or the previous week’s lows. Silver’s corresponding 2nd wave rally from the previous week’s low of 22.30 is expected to rally towards 23.90+/- but could extend next week towards 24.44+/- before resuming lower. Crude oil is approaching the upside completion of primary wave B’s expanding flat rally from December’s low of 70.08 although a top…Read full summary in our latest report!
