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Apr 202015
 

Elliott Wave Analysis of 30-Year Treasury Bonds (ZB futures contract) by Sid from ElliottWavePredictions.com.  Click on the charts to enlarge.

Taking a short break from the stock market, here’s my current technical analysis of the ZB futures contract (30-year bonds).

30-yr bonds monthly 4-19-15 bonus chart

As shown in the lower left corner of the monthly chart above, the last large-degree bottom in 30-year bonds (and top in yields) was in October 1981.  Bonds have a long history of moving in 30-year cycles, so the 30-year top was roughly due in late 2011.  However, cycles are elastic, as the top in this one appears to be running 4 to 5 years late.  The end of the cycle is likely nearing fairly quickly though, because the MACD indicator appears to be forming a very large divergence on the monthly chart.

30-yr T-Bonds weekly 4-20-15

On the weekly chart (above), the ZB contract simply needs 5 complete (black/intermediate) waves to the upside from the June 2007 low to end the cycle.  Wave 1 (black) was a leading expanding diagonal, topping in December 2008.  Black wave 2 deeply retraced black wave 1 in the form of a zigzag, ending just slightly beyond a very common .618 retracement of black wave 1.  Black wave 3 ended in July 2012,  and was rather short as wave 3’s go, at only 1.327 times the length that wave 1 was.  Wave 3’s that are shorter than 1.618 times wave 1’s are typically followed by rather long wave 5’s.

That was followed by wave 4 (black), which concluded in September 2013, having retraced a perfect and highly common Fibonacci .382 of wave 3 (black).  Black wave 5 has been underway ever since.  As I mentioned before, with a shorter-than-normal wave 3 (black) in the books, we should be looking for a fairly long wave 5.  I believe the most likely target for the end of wave 5 black is where it will equal the net traveled by black waves 1 though 3 times .618.  That target is shown on the chart at 179^15.  That target is very close to another common Fibonacci target based on prior waves at one larger degree.  Burgundy (Primary) wave 5 will equal the net traveled  by burgundy waves 1 through 3 times .618 at 181^09.  The close proximity of these two targets supports the prediction that 30-year bonds will eventually top in the 179-181 area.

30-yr T-bonds daily 4-20-15

Finally, as shown on the daily chart above, there are several clues that indicate that 30-yr bonds haven’t topped yet.  Ultimately, up from the end of black wave 4 in September 2013, we need to see 5 blue (minor) waves up.  So far, we’ve seen blue wave 1 (October 2013), blue wave 2 (December 2013).  That much is easy.  But then I’m labeling the February 2 2015 top as blue wave 3, with blue wave 4 underway now, and blue wave 5 yet to come.  Some might think that blue wave 3 ended on October 15, 2014, and therefore blue wave 5 (and the end of the 30-year cycle) ending on February 2, 2015.  I don’t think so.  Here’s a few reasons why:

  • The internal subdivisions between December 2013 and February 2015 make more sense as 5 pink (minute) waves.  I especially like the spike into October 15 2014 as wave 5 of a small-degree (green/minuette) expanding ending diagonal.
  • Every blue (minor) wave going back over 30 years is easily visible on a monthly chart.  If blue 3 ended in October 2014 and blue 4 in November 2014, they would not be discernible on a monthly chart.
  • The drop from February 2 2015 through March 6 2015 counts best as a simple green abc zigzag.  It is therefore unlikely that it was wave 1 within a new trend to the downside.
  • Blue wave 2 (Dec 2013) appears to count best as a deep, fairly brief double zigzag, so based on the guideline of alternation, wave 4 is likely to be a longer lasting, fairly shallow “flat” or “triangle” with a new price extreme inside of it.  Based on price action so far, an expanded flat seems most likely.
  • Hurst Cycle analysis is expecting an 18-month cycle trough in August 2015.  Based on the early scope and dimension of the incomplete blue wave 4, an August low would fit well as the projected end for blue wave 4.

Please join me for my next weekly “Counts” webinar, where I go over all of my Elliott wave counts and associated Fibonacci price targets for many of the world’s major stock markets, commodities, currencies, and bonds. Hurst cycle analysis is considered on virtually all items. A recording of the webinar is provided to all subscribers, whether in attendance “live” or not. In addition, all “Counts” webinar subscribers receive my Sunday and Wednesday EWP ScreenShots as a free bonus!

Many traders find my work extremely helpful in their trading! Here are just a few of the testimonials from those traders/investors.

Sid

Apr 142015
 

Elliott Wave Analysis of General Electric (GE) by Sid from ElliottWavePredictions.com.  Click on the charts to enlarge.

This continues my series covering Dow 30 components.  As a refresher, so far in the series this year, I’ve posted technical analysis of American Express AXP)Boeing (BA), Caterpillar (CAT), Cicso Systems (CSCO), and Chevron (CVX).

GE monthly 4-14-15

As the GE monthly chart above shows, I believe that General Electric stock, just like the Dow Jones Industrial Average, carved out a cycle (teal) degree wave 4 during the late 60’s and early 70’s, ending in 1974.  This was followed by an extended 5th wave to the upside, concluding in the year 2000.  Note that after extended 5th waves, the following corrective period quite often corrects back to the extreme of wave 2 within that preceding extended 5th wave.  In GE, that target is an amazingly low $0.91 per share.  Is it actually possible for GE to drop over the next few years down to a buck?  It doesn’t seem likely.  And based on Elliott’s guideline of alternation, it won’t.  If my labeling of the deep (90%) correction ending in 1932 in the DJIA as the end of Supercycle wave 2 is correct, Supercycle wave 4 is likely to be a more shallow, sideways affair.  It therefore seems more likely that GE will not drop substantially below the 2009 low of $5.73 before Supercycle wave 5 to the upside gets underway.

As similar as the upward movement in GE is to the DJIA from 1974 though 2000, the two have definitely parted ways since.  Unlike the Dow, the Y2K top remains the all-time high in General Electric to this day.  Down from that August 2000 all-time high, you can see the obvious ABC zigzag through March 2009.  I’ve labeled the 2000-2009 period as Cycle (teal) wave W within an unfinished Supercycle (olive) wave 4.  Why?  Why not call 2009 the end of Supercycle wave 4?  The answer is due to the “character” of the price action since the 2009 low.

GE weekly 4-14-15

As the weekly chart above shows, if the upward movement from March 2009 was to be labeled a 5-wave impulse to the upside, with wave 1 ending in April 2010, and wave 2 ending in October 2011, the supposed wave 3 (from October 2011 though January 2014) should have been much stronger than it was.  Not only did it not break out of the top of the “base” channel (shown in burgundy), it really never moved substantially into the upper half of that base channel. Additionally, within that “theoretical” burgundy wave 3 (from Oct 2011 thru Jan 2014), black waves 1, 2, 3, and 4 are already finished, and wave 3 was shorter than wave 1 was.  This is NOT wave 3 stuff!  Lastly, the monthly RSI has been diverging for over 5 full calendar quarters.  For those reasons, I am labeling the upward movement in GE stock since March 2009 as Primary (burgundy) waves ABC, with the C-wave not quite complete yet.  If I’m correct, once Wave C (burgundy) completes, Cycle (teal) wave X will also be complete, and will be followed by (multi-year) downward movement in the form of a Cycle (teal) wave Y.

It is also worth noting that Sentient Trader software is considering the October/November 2011 lows as the last 4.5-year Hurst cycle trough in GE, identical to its analysis of the DJIA, when starting the analysis at the Y2K top.  This means that the next 4.5-year cycle trough is due in GE in early-to-mid 2016, and the next 4.5-yr cycle trough after that in late 2020.  These dates for projected cycle  lows keep popping up in independent Hurst Cycle analysis of stock after stock, and index after index.

GE daily 4-14-15

Finally, on the daily chart above, black wave 4 (within primary/burgundy wave C) appears have completed a one-year-long blue ABC zigzag on January 14 of this year.  Wave B (blue) of that zigzag was a pink a-b-c-d-e triangle, so the last wave down into the Jan 14 low was a terminal thrust.  Upward movement since January 14 is therefore very likely black wave 5, to complete burgundy wave C.  Black wave 5 should subdivide into 5 blue waves.  It appears that blue wave 3 is still underway, with a target of $29.20.  That should be followed by a blue waves 4 and 5, with the 5th wave topping at about the top of the (black) channel, around $30.50.  Importantly, because black wave 3 was shorter than black wave 1, black wave 5 must be shorter that black wave 3 was.  This is due to one of the three rules of Elliott:  “Wave 3 cannot be the shortest of waves 1, 3, and 5″.   So, black wave 5 cannot reach $31.24, if my placement of the black 1, 2, and 3 labels on the weekly chart is correct.

Please join me for my next weekly “Counts” webinar, where I go over all of my Elliott wave counts and associated Fibonacci price targets for many of the world’s major stock markets, commodities, currencies, and bonds.  Hurst cycle analysis is considered on virtually all items.  A recording of the webinar is provided to all subscribers, whether in attendance  “live” or not.  In addition, all “Counts” webinar subscribers receive my Sunday and Wednesday EWP ScreenShots as a free bonus!

Many traders find my work extremely helpful in their trading!  Here are just a few of the testimonials from those traders/investors.

Sid

Mar 312015
 

Elliott Wave Analysis of Cisco Systems, Inc. (CSCO) by Sid from ElliottWavePredictions.com.  Click on the charts to enlarge.

This continues my series on Dow 30 components.

CSCO monthly linear 3-31-15

As you can see on the monthly chart above, after crashing over 90% in a 5-wave impulse from March 2000 through October 2002, CSCO has been stuck in a long, sideways consolidation.  Probably the most important aspect of Cisco’s “recovery” starting in October 2002 is that the initial rise into November 2007 was a clear 3-wave zigzag, shown outlined in green on the chart.  That corrective initial rise cannot be wave 1 of a bold new 5-wave impulse rally to new all-time highs.  Rather, it suggests that after a corrective period, Cisco stock is likely to make new lows below the 2002 low before the next, large-degree rally phase can begin.

That initial zigzag from 2002 through 2007 was followed by downward ABC zigzag into August 2011, which I’ve outlined in red on the chart.  While it is possible that the November 2007 high can be labeled as Primary (burgundy) W, and the August 2011 low as burgundy X, it seems more likely that CSCO is carving out a Cycle (teal) Degree Wave B triangle.  That expectation is supported by the character of the upward price movement since August 2011, which is more jagged and complex that any of the other waves since 2002.  Typically, within a contracting triangle, “wave C subdivides into a zigzag combination that is longer lasting and contains deeper percentage retracements that the other subwaves.” (Elliott Wave Principle, Frost & Prechter, 10th edition, 2005, page 90).

CSCO weekly 3-31-15

The weekly chart above shows more closely the complex, choppy, overlapping nature of the rise since August 2011.  The upward movement since December 2013 is especially volatile, and appears to have started with a leading expanding diagonal for Minor (blue) wave A.  The subsequent blue wave B was quite brief, if I have it labeled correctly, as was the following blue wave C.  Despite the brevity of those most recent waves, it seems most likely that the Primary (burgundy) wave C top is “in” on Cisco for several reasons (shown on the weekly chart above):

  • Wave C burgundy has already retraced burgundy B by a deep 78.6%.
  • Wave D (burgundy) of the 13-year-long (so far) triangle is likely to coincide with the next Hurst 4.5-year cycle trough, which, according to Sentient Trader software analysis is due in early 2016.  If a triangle is truly underway, further new highs would not fit well with an expectation of triangle-like proportionality.
  • Weekly MACD histogram divergence appeared at the early March 2015 high.

CSCO daily 3-31-15

Additional evidence that CSCO recently made a large-degree trend change also appears on the daily chart (above):

  •  The very recent downward movement from March 2 though March 26 has occurred in 5-waves.
  • A potential head and shoulders top is currently under formation.

QQQ monthly 4-26-15

One last bit of food for thought:  Why has Cisco stock been so weak since its November 2007 “recovery” high, while the tech-heavy Nasdaq index has jettisoned to the upside starting November 2008, almost reaching new all-time highs recently?   A comparison of the monthly chart of the Q’s (above) to the monthly chart of CSCO (shown earlier in this post) is truly shocking.  Is it a coincidence that November 2008, (the bottom in QQQ), was the exact month that QE1 was announced?  And if QE caused the divergence, what do mortgage backed securities have to do with tech?  And why would QE affect the larger tech-heavy index so dramatically, but not the traditionally highly correlated Cisco shares?

Closer scrutiny of the charts of the two items indicates that the pair remained highly correlated until exactly July 2010, after which the Nasdaq index took off to the upside while Cisco stock languished.  Maybe the more meaningful coincidence is therefore that the price of Cisco stock diverged from the larger indices just following the May 2010 flash crash.  The timing of of the divergence suggests that at least some of the “distortions” showing in the markets in recent years may have resulted from market “protections” enacted due to the flash crash, and not necessarily from the gradual effects of, or market reactions to QE.

Sid

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