We were lucky not to have bought this stock back yet, so we missed the 21% drop. This could, however, still be that b-wave in a more complex upward bounce, but we are leaning towards the possibility of this being a large A-B-C down correction which would normally call for a drop to where C=A around $25. This corresponds roughly with where the lower channel line is running . In this scenario we are presently in wave 3 of 5 of C.
Not too long ago this ETF looked like it was going vertical already at about $320. We thought it was a sell then, Dec. of last year and even earlier. Wrong. We are up another $30/$40 and are going more vertical. Of course you cannot possible go pure vertical as that would imply that time stands still , yes that takes a minute to digest but think about it.
Looking at this chart again I was reminded of the Brenner cycle. It is a little known cycle that uses, alternatively, 7,8 and 9 year cycles for highs and lows in the market. More interestingly there is also the Joseph cycle which has biblical proportions and turns precisely on seven years. If you are so inclined you will notice that for the first seven years this ETF acted rather miserably (relative to the market overall which essentially doubled over the same time). Then we get seven years of plenty which period should end in about 5 months or so. If you buy into the message then you should save now for a rainy day, or more correctly in Egyptian terms, seven years without rain. In short a sell.
The index goes up and the technical picture deteriorates. In any event, it is possible that this , almost 6 month long, pattern is a 5th wave diagonal a.k.a a wedge. They are supposed to retrace right back to the base and do so rather fast. Perhaps Yellen’s sophistry, hairsplitting gobbledygook can push the date of recognition even further in the future, but this chart is clear as a bell. Coming after a 25% rise it all seems to fit. Just for some perspective, below is the Bigchart of the Russell 2000. Clearly there is no bubble!
For at least the length of this chart Toyota has performed exceptionally well. The Corolla is one of the most durable and uncomplicated vehicles that you can find. In the last 10+ years they have received an enormous boost from China which is now the World’s largest car market. As always for 1000 years nothing happens and then in a very short time period 1/4 of the population makes the transition from bicycle to Lexus and there is no end in sight (except if and when congestion rekindles the popularity of the bike).
Looking at this chart what strikes me most is the consistency or persistency of this stock which has adhered to the channel , between the black arrows, for almost the entire time. Only seven years out of 36 does the stock venture above the channel and, equally interestingly, never below it! The count that we show here has the top in 06/07, followed by an A down and B up. However the B is not very clearly a three wave affaire , in fact one could argue that there are 5-waves. That really doesn’t matter as all it does is put the top right at the end. Double-topping – where we are now – is then probable going to give way to a new high at around $150+. After that it should go to the lower channel line at about $70 by that time or even below that. A sell now and a short at $150+.