What goes up, must go down and vica versa.

After a month of gyrating in a fairly narrow range, we may just be on the cusp of a breakdown. The triangle pattern which I never believed was valid will die if we cross the thin blue line, the low of wave wave c. There would still be a possibility of a larger, more protracted triangle but that is getting very thin. It is far more likely that we are in a third wave of something; this would be the case if we get a solid down day, that is 700 points or more. We will see.

Again there are a lot of triggers that could start this downdraft. We now have not one but two “Stormies” , a looming government shutdown, Cambrige Analytica and a whole slew of other things but the most fundamental factor is shown in the second chart, the yield on the 10 year Treasury bond/note. It is generally accepted as a proxy for interest rates, a sort of base-line.  It has broken out of a 30/35 year channel and has already doubled! Theoretically the present value of just about everything has been cut almost by half, but not stocks. It takes time to adjust but we should expect at least another 50 basis points before the year is out so this would just accelerate.

I suspect that Boeing, BA, will be an excellent indicator of how fast things can go south.

Then and now;

We recommended buying this stock more than 2 years ago at about $9.25 on the understanding that you use a stop loss order at $7.25. It never did hit the stop-loss. We did suggest you sell at $15 if you did not like the overbought situation but we also reiterated our estimate for a target at $18. We reached that while we were asleep at the wheel but should you still own it and sell now you would make a gain of 80% over roughly 2 years.

The stock may be tracing out a “diagonal” for the C part of this A-B-C in which case it could go as high as $19. Your call!

Here is where we are today, something for everyone it would seem. If you are a bull you see a nice triangle in which the e-leg must stay above the low of the c-leg. Then you would expect a thrust up which could be good for another three or four thousand points. The only fly in this ointment is the a-leg. It is best counted as 5-waves, that is an impuls wave 1 down and definitely not as a wave a of a triangle (not possible, not allowed).

The proper count would be a 1-2, 1-2 and now we are in a wave 3 of the first major downleg. This is where things should start to accelerate.

As to the question why now, there are quite a few possibilities. We have Stormy Daniels about to talk, we have Kudlow taking the place of Cohn, we have the Russian situation heating up, we had a Democrat win in Pensylvania, we have the NRA running the country – in short reasons galore but above all we have an overvalued market by just about every measure.

The bulls may still be right but break 24,000 and there could be another 20,000 to go.

The then, 17 April 2017, and now charts;

It is worth reading the whole blog, particularly the longer term chart. Had you followed this advice you would have doubled your money over the past 2 years. We are not yet at the wave e level as suggested at that time, about $5, but nevertheless we would exit the trade on the next uptick given our overall negative outlook.