This week we got the news that the fed has finally reached its 2% inflation goal!
This is after 9 years of interest rates pinned on the floor,
And,
About 4.5 trillion in cheap credit flooded into government and wall st.
That is all it takes!

Now the central bank can rest easy as the target has been met and all is well with the world.
Right?

Let me summarize where we stand in this current bubble.

1- 40% of the stocks traded on the NTSE are below their 200 day MA.
2- market uniformity has been broken, new 52 week lows outnumbered new 52 week highs,
3- credit spreads are worsening as junk bond yields have soared over the last week.
4- a possible series of 1,2 waves off the recent high at 23600.
5- extremes in bullishness displayed by market actors across the board, from governments to corporations to individuals,
45.1% bullish, 23.1% bearish in the latest AAII investor survey.
6- Bearish momentum signals registered today on the 4hr chart, and the price is approaching the 200MA.

These facts alone do mean that the final high in stocks is in,
BUT,
Every major market top in history,
is characterized by conditions exactly like I just described.

As I have maintained for the last few months,
Now is not the time to be foolishly bullish,
Be vigilant, start saving.
Because,
This market is ready to rip the rug out from under us.

My Bias: market topping process ongoing
Wave Structure: Impulsive 5 wave structure, possibly topping in an all time high.
Long term wave count: Possibly topping in wave (5)

The DOW gaped higher right out of the gate this morning.
investors are not willing to submit to reality just yet!

I have labelled the rally of the recent wave (i) low as a possible expanded flat correction wave (ii).
The price is now sitting at the 61.8% retracement level of the previous decline.

On the 4hr chart,
You can see that the price has rebounded off the 200MA,
A further decline below the MA will add significant weight to the fully bearish wave count.

On the daily char the momentum indicators have diverged in a very bearish fashion from the price pattern.
After reaching bullish extremes not seen for years!
The scene is set in the longer term chart.

For tomorrow;
lets see how the price reacts to the Fibonacci retracement level.
The price may be building a larger degree top
which could longer to trace out if we see a series of 1,2 waves occur.

My Bias: Long to a new all time high above 1827.
Wave Structure: Impulse structure to a new high.
Long term wave count: wave (3) above 1666.

GOLD has corrected higher today in a possible wave '2' pink.
I have switched the expected wave structure in wave 'c' brown to a flat correction.
This should follow a 3,3,5 wave form,
And as such wave 'c' is now expected to trace out five waves down to the target at 1250.

Wave '1' and '2' are complete,
Wave '3' should carry the price below support.

Every indicator I know of is pointing to a major bottom forming in the GOLD market, This Low could be a significant as 'Browns bottom' in the late 90's, and the coming rally could be just as big.

Once this corrective pattern is complete, I will be looking for the formation of a bullish Elliott wave signal off the low.
For tomorrow;

A break of todays low at 1275.74 will signal that wave '3' down has begun.

If you want to be ready for the next opportunity in Crude, Gold, The DOW and the USD FX markets,

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Enda Glynn
http://bullwaves.org
I am an Elliott wave trader,
I have studied and traded using Elliott wave analysis as the backbone of my approach to markets for the last 10 years.
I take a top down approach to market analysis
starting at the daily time frame all the way down to the 30 minute time frame.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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