1 P a g e. Summary. However, a move over SPX2817 from current levels will mean we re still dealing with a larger, more complex bounce to SPX

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1 Summary Last week I provided some additional information from John Murphy and about typical end-of-bull sector rotation as added weight of evidence for a larger correction being underway. This week the S&P500, NASDAQ and RUSSELL2000 closed the week below their 200-day Simple Moving Averages, showing clearly weakness. In this update I ll go over three alternative Elliott Wave counts that are being presented, and using logical deduction based on a weight of evidence approach determine the likelihood of each of these three options. This is necessary because with EWT we can always come up with a myriad of (exotic) counts/possibilities, but it is up to us market forecasters to determine their probability. Meanwhile the short- and long-term simple moving averages charts continue to deteriorate, and market breadth remains negative and on a sell. With the close below the 200d SMAs for several indices, odds increase of further downside. A panic-flush over the next one to three days into the Fibonacci-based October 24 turn date would be the ideal scenario and created many bigger-bounce-coming setups for many charts (from daily to weekly to market breadth). Ideal lows are in the S&P , NASDAQ $ and RUT $ zones. However, a move over SPX2817 from current levels will mean we re still dealing with a larger, more complex bounce to SPX Aloha, Dr. Arnout, aka Soul, ter Schure 1 P a g e

2 Elliot Wave Updates Short term the market has most likley completed minor wave-a and -b of intermediate-a, or alternatively is working on a bigger, more complex and longer lasting bounce: intermediate wave-b. (Fig 1A, B). So far the retrace has reached the ideal SPX target zone as mentioned earlier this week and price reverserd down from there. It is a perfect 50% retrace and typical / good enough for a b-wave/bounce. A move below SPX2750 will be a first serious sign of lower prices below SPX2710 to come targeting SPX depending on the c-wave s Fib-extension. We will be able to narrow it down once this move down is underway. A move over SPX2800 is the first serious sign of the possible larger (b-wave) bounce developing. A move over SPX2817 will confirm, and I would be looking for SPX for wave-b. Figure 1. A) SPX daily chart. Two short term options: a, b, c with wave-c now underway vs a, b, c with larger, more complex b-wave bounce underway. B) SPX 1-min chart. a, b, a, b count preferred. Labeling with? alternate A B Copyright Intelligent Investing, LLC. May not be copied and/or distributed without permission. 2 P a g e

3 There are a few alternate counts floating around in the Elliot Wave sphere, which I ve summarized below with the annotations in the charts explaining my thoughts about each possibility. Remember the market is non-linear and thus all about probabilities of possibilities. With EWT we can always come up with a myriad of possibilities but using logical deduction we can then assess each option s probability. I find all three alternatives off low probability: A) The SPX2941 high was a b-wave high of a very large complex major-4 and now wave-c of 4 is underway. B) The S&P500 is working on an even larger ending diagonal with wave-iv complete or close to completion. C) The entire advance off the late- March lows was only wave-i of 5 and wave-ii is complete or almost complete. Figure 2. SPX daily charts. Three possible Elliot Wave Options, but IMHO all three are low-odds alternatives. A B B 3 P a g e

4 The main reason why I find the count shown in Figure 1A and B most unlikely is because tech (NAS, NDX and especially the RUT) made a nice picture-perfect Fib-based five waves up; not three. Hard to force the S&P into a three-wave count. Also, the RUT s current decline is much more severe (in depth) and prolonged compare to the February decline, which never even went below the 200-day Simple Moving Average (SMA), whereas currently the RUT has been below it for nine (9) trading days already and become much more oversold than at any time since the Bull started in This also does not argue in favor of the i, ii count. Small caps were leading the markets higher and now lower. Not a good sign. A move below $1480 and especially $1450 from current levels or even after a larger bounce will take any speculation about the three EWT counts shown in Figure 2 off the table. Figure 3. RUT daily chart. Current decline clearly much more severe and prolonged than February decline, and in fact currently already more severe -per weekly RSI5- than any other decline since the 2009 low (see insert). Nice support overlap 4 P a g e

5 Chart Patterns Updates This past week the S&P500 closed below its 200d SMA on Friday. That s not a sign of strength, but of weakness. The A.I. turned from buy back down to sell and the MACD is not looking very Bullish either. Price stalled this week right at the first resistance level and lower edge of the Ichimoku cloud; also a sign of weakness. The c=a (blue arrow) target on a closing bases was reached on Wednesday and a further move below the 200d SMA targets SPX2640 based on simple symmetry (purple arrow). A quick 2 to 3-day flush with a strong reversal on the last day will likely set up strong positive divergence on the daily RSI5 to foretell of a more sustained (2-3 week long) bounce back to SPX before the next leg down gets underway. I have a turn date on October 24 (see Page 11) and could match this aforementioned flush aka panic low. Figure 4. S&P500 daily chart. Nothing Bullish to see here yet: Wait for + div on daily RSI5 to foretell of a larger bounce 5 P a g e

6 Last week price fell outside the red uptrend, below its 20w SMA, below the long-term uptrend line in place since April 2010, and closed below SPX2800. This last week, price was unable to move above any of these three important parameters and all technical indicators remain on a sell and are pointing down. That s Bearish. Period. The only thing the Bulls have going for it is that the 50w SMA is holding as support. A break below it (SPX2747) targets the lower horizontal support regions: SPX2675, SPX2600, SPX2650 (all +/- 10p). Figure 5. S&P500 weekly chart. Price unable to move back inside the long-term uptrend channel, and below its 20w SMA as well as long-term uptrend line since April Not a Bullish sign. 6 P a g e

7 The NASDAQ s weekly chart doesn t look any better either with price also here below trendline support in place since the June 2016 low, and only being held up by the 50w SMA. A close below it targets $6800. Note that the RSI5 is oversold, but remember crashes happen when markets are oversold, not when overbought. All technical indicators are also here, like for the S&P500, on a sell and/or pointing down, wanting to see lower prices. To add insult to injury: price is at the lower Bollinger Band, which are now expanding and telling us price is weak (or has downside strength). Thus, with the data at hand we can determine there s not a single sign of a reversal being in place, and this week s chart tells us to expect lower prices going forward. Figure 6. NASDAQ weekly chart. Weak looking chart, all TIs are on sell, price lost uptrend support. 7 P a g e

8 Market breadth The SPXMO (McClellan Oscillator -MO- for the S&P500) ended the week at -50, up 8p compared to last week, and most indices MO s stochastic oscillator gave a sell signal, as each index MO ended the week once again negative. See table 1 page 12. Therefore, all indices Summation Indices (SIs, cumulative MOs) ended the week on sell, but are getting close to very oversold (Fig 7A). If the aforementioned two-three panic flush happens next week, we ll likely and finally get that awaited positive divergence on the indices MOs to add weight to the evidence of a pending larger bounce. Thus, currently market breadth is still not painting a Bullish picture, but we things are setting up from which a more sustainable and trade-able bounce/rally will most likely happen. Figure 7. A) SPXSI: still on a sell, as are all other SIs, but extremely oversold. B) SPXMO: still negative, awaiting positive divergence to tell off a pending bounce A Copyright Intelligent Investing, LLC. May not be copied and/or distributed without permission. B 8 P a g e

9 Simple Moving Averages Charts The Simple Moving Averages (SMAs) can be used for trend-following, and both the short-term chart and the long-term chart continued their deteriorating from last week into this week. The ST chart is now 22% Bullish, while the LT chart dropped to 35%. I ve also shown the LT-SMAs chart for the S&P during 2015 (Fig 8C) and as you can see now and then are rather similar. A bearish LT chart means the LT trend is Bearish: down. Simple. This supports my preferred view of at least a 30% market correction. Figure 8. A) Short term Simple Moving Averages: 22% Bullish. B) Long Term Simple Moving Averages: 35% Bullish. A Copyright Intelligent Investing, LLC. May not be copied and/or distributed without permission. B Copyright Intelligent Investing, LLC. May not be copied and/or distributed without permission. C Copyright Intelligent Investing, LLC. May not be copied and/or distributed without permission. 9 P a g e

10 Short term Cycles My Fibonacci-based short-term cycles chart has a turn date for October 24. As you can see, it has nailed many important and lesser important market highs and lows, and I see therefore no reason to suggest another important turn is going to happen around the 24 th. Figure 9. Fib-based short-term cycle chart: Turn date for October P a g e

11 How to trade this: It was suggested on Thursday that One could try inverse ETFs/shorts on a bounce to SPX2790/2800 with a stop loss just above SPX2817. Target: SPX2680ish. So far so good, as that trade is already green. Let s see how low it can go, but one should place stops above entry to lock in any profits. Longer-term investors should IMHO still stay out of the market until a Bull market has been re-established. Yes after 9-10 years of being mostly in the markets, now its time to be out. Table 1. Buy/Sell Signals based on Summation Indices Table 2. Buy/Sell Signals based on my Mechanical System for SPY/SH only. 11 P a g e

12 Trading Performance Update with Hedge Fund North Post Partners, LP NPP provides neither a boom, nor a bust. Just consistency. Last week I mentioned In Bear markets the winner is often he/she who loses the least. Preservation of capital is of utmost importance as to have enough ammunition left for when the next Bull market comes along. Thus, while most indices were down, NPP added 1.5% to its clients accounts, beating the indices massively, ending the week at a new ATH performance of 16.5%! NPP s performance since going public/live 2017 compared to several major indices. Insert shows YTD performance. If you want to join our winning team, please contact me or NPP s President, Rus Chao, directly (rustinchao@gmail.com) for more information. We do the hard work, i.e. trading for you, and you get to reap the rewards! *It should not be assumed that future performance will always be guaranteed and/or profitable. Nor will future performance necessarily equal past performance or past performance trends. All trading and investment decisions are the sole responsibility of NPP. Joining NPP is free, but does not exclude commission costs, and other possible charges. 12 P a g e

13 Trading Performance Private Twitter Feed: Please Join Me & Sign Up Here. The past two weeks were hard, but this week Rule #1 of trading was applied: minimize losses. 10% Loss were reduced to 5%, 5% losses reduced to (close to) break even, and <5% losses were in few cases turned into small wins. All in all, our performance took a hit over the last two weeks, but every trader experience draw-downs. No exceptions. Nobody wins all trades. As you can see we are still at a solid 30+% since June 1, while the S&P500 (SPY) is down 0.3% since*. Just shows that smart, active money management out performance buy-hold-and-hope. So how does it work!? How can you get this great super performance?! I tweet in real-time when I buy or sell any position. From AAPL to Oil and all ETFs (e.g. SPY/SH, SSO/SDS, SPXL/SPXU, SQQQ/TQQQ, etc) and you can simply follow my lead*. It doesn t get simpler than that! Of course, you don t have to, but Private Twitter Feed Trading Results Update* *Results (% gains and losses) are calculated assuming each trade is of equal sized position. However, position sizes may differ in reality. Results are for Intelligent Investing, LCC s -the provider- trades only. Subscriber results may vary due to different time of entry and exit as provider s trades are tweeted shortly (up to two minutes) after they ve been made. Subscriber takes full responsibility for his/her own trades and assumes no liability towards the provider regarding possible losses as provider s system is not perfect and no system can guarantee only winning trades. 2018, Intelligent Investing, LLC. This copyrighted weekly periodical is published on non-stock market trading weekend days by Intelligent Investing, LLC, and is intended solely for use by designated recipients. No reproduction, retransmission, or other use of the information or images is authorized. Legitimate news media may quote representative passages, in context and with full attribution, for the purpose of reporting on my opinions. Analysis is derived from data believed to be accurate, but such accuracy or completeness cannot be guaranteed. It should not be assumed that such analysis, past or future, will be profitable or will equal past performance or guarantee future performance or trends. All trading and investment decisions are the sole responsibility of the reader. Inclusion of information about managed accounts, program positions and other information is not intended as any type of recommendation, nor solicitation. For more information, contact intelligent investing at intelligent_investing@yahoo.com. I reserve the right to refuse service to anyone for any reason. 13 P a g e