Archive for year: 2018

Over the past 4+ months, we’ve been working away trying to keep our readers aware of the risks and concerns that were originating out of some foreign markets and how that might relate to the US markets.  We remember a point in time back in June or July 2017 when we, suddenly, started receiving emails and calls from moderately large Indian, Indonesian and other foreign development companies asking to schedule time for an “introduction call”.  It is not unusual for us to receive cold calls from development firms looking for new projects, but at one point we were getting 2 to 3 calls a week.

The point behind what we are sharing is that sometimes the signs are right in front of you if you are paying attention to the messages.  In this case, a number of things had recently transpired – the biggest of which was the recent US Presidential elections as well as a renewed US equities market and increased volatility in certain currency markets.  We also believe the currency controls in India (near November 2016), as well as the Chinese cash restrictions imposed shortly before this, were also factors that played into the current outcome. Our opinion is that these dynamic factors in the global economy, as well as the fact that many government reporting/news agencies are slow to catch onto a dramatic shift in market sentiment, resulting in a latent and somewhat aggressive price rotation in the global markets.

Which brings us to January/February 2018 – when the US and Global markets tanked, unexpectedly, by nearly -13.5%.  While many analysts throughout the globe were concerned this rotation could be the start of a much deeper and potentially catastrophic global market collapse, our proprietary predictive price modeling systems and analysis systems kept telling us the US markets climb out of this rut and attempt to rally to new highs.  In some ways, we took a lot of flack from others calling for this type of market rally when everyone else was calling for a breakdown in price.  Still, look at where the US markets are now in comparison to all of those short-sellers that were convinced the markets were going to tank?

Right now, there is a very interesting dynamic at play that may not last forever – and most of the industry analysts are starting to catch onto what we’ve been talking about for months.  That fact is that capital is very fluid and will migrate to the healthiest and most suitable investment environment possible when the environment where this capital currently resides is unfavorable or deteriorating.  As we learned in the movie “Wall Street” – “Greed, for lack of a better word, is good” (Gordon Gekko: 1987 “Wall Street”).  In our interpretation, Greed is the essence of the survival of capital in different market environments.  Greed and Fear are two very similar emotions and they both, at times, are very good to have in measured levels.  Both of these emotions drive capital into and out of markets as a natural occurrence of the global markets.

This dynamic, the capital migration that has been taking place for approximately 12+ months, may come to an end at some point in the near future and we have to be prepared for it.  If we think about this scenario, what would cause this capital migration to subside or end and change dynamics?  We can think of two scenarios that would be likely to play out to result in this transition :

1. Emerging markets stabilize, forming near-term bottoms and establishing some optimism regarding opportunities for upside price advances. This, in our opinion, may be enough of a catalyst for capital to move back into these markets in an attempt to capture returns with diminished risk factors – resulting in GREED outweighing FEAR.
2. Something decreases the US and major global market standing in terms of currency strengths and global market dominance. In this case, we believe some massive credit or debt risk factor would have to occur that greatly decreases the capabilities of the mature global markets (US, UK, Canada, Japan & Europe).  Should something like this happen, where the biggest and most stable markets on the planet are diminished, then capital may aggressively move away from these markets and into any other market that may appear to benefit from these diminished expectations.

Until either of these things happen, we believe continued pricing pressure will exist in China/Asia, the BRICs markets and, to some degrees, in the European Union markets.

 

Take a Look at Our Previous Forecast on March 28^th

This chart clearly shows where prices were expected to move, which was sharply lower through spring and this summer. See complete 5 part series on global indexes

 

Now, let’s start off by checking this Weekly chart of our China/Asia custom index and where it is today.  One can clearly see the pennant/flag formation (the Green lines) that originated in early 2018.  This pennant formation recently broke out to the downside and has already fallen nearly half way to our downside target which is incredible.

The current downside move aligns with a 38.2% retracement from the highs and we believe this move could be just starting.  In other words, we believe a full 50%, or more, a pullback from these highs could be in the works if the data originating from China/Asia recently is correct.  The entire region of China and SE Asia is open to interpretation and legal issues with little certainty about anything.

 

This next Weekly BRICs chart shows a similar pattern.  A sideways pennant formation originating in early 2018 that broke out to the downside.  A clear breach of price support and a more than -38.2% price drop so far.  Our Blue price support line, originating from 2016/2017 lows, shows us that critical support is currently about -11% lower than the current price.  You can see from our drawn arrows that we believe this level will create price support and price will rotate well into the end of 2018 before breakout out of this new pennant formation and moving dramatically lower.  Right now, time will tell how this plays out 5+ months into the future, but at this time, unless the global market dynamics change dramatically, this is what we believe is the most likely future outcome.

Lastly, this is the Weekly European Custom Index that shows, yet again, a somewhat similar pattern without the recent price breakdown.  Originating in early 2018, a deep price rotation has created a very clear price rotational cycle.  This rotation is forming a very clear pennant formation, again, and we believe the final outcome, at this point, will be a breakdown of price in the European markets as the Brexit and other regional economic and political issues continue to play out.  As a word of warning, our last Red arrow (drawn on this chart) does not point to a target price level – it is just indicating that we believe a breakdown in price is the likely outcome.

If we were to add a simple Elliot Wave count to this in an attempt to isolate potential future moves, our estimate (with limited data) would be that we are in the midst of a Wave D correction.  In other words, this is a corrective price trend “in an uptrend”.  The move lower, as we are predicting, may not drop below the 50% retracement levels shown on this chart before finding support and attempting to start a new upside price move.

 

Pay attention to the global market news and the news of certainty or uncertainty originating from the global economies.  Capital is “Greed and Fear and work every day”.  Capital will always attempt to exit hostile or dangerous economic environments and find a more suitable environment for growth and stability.  As the continued global market turmoil continues to unfold, understand that Trillions of dollars will be sourcing the safest and best returns on the planet.  As these dynamics play out, there are tremendous opportunities for traders and investors to follow the cash and ride the waves.  There may, certainly, be some wild rotations and waves as this capital moves around, but the longer term trends that should establish as this capital moves around should be substantial.  Get ready for some excellent trading opportunities over the next 12 to 24 months.

Our exclusive member service provides detailed market research, daily market video analysis, detailed trading signals and much more to assist you in developing better skills and greater success in your trading.  One of our most recent trades is already up over 12%, we already took some partial profits, and we believe much higher share prices is just around the corner. We urge you to visit www.TheTechnicalTraders.com to learn how we can assist you in finding new success.

53 years experience in researching and trading makes analyzing the complex and ever-changing financial markets a natural process. We have a simple and highly effective way to provide our customers with the most convenient, accurate, and timely market forecasts available today. Our stock and ETF trading alerts are readily available through our exclusive membership service via email and SMS text. Our newsletter, Technical Trading Mastery book, and 3 Hour Trading Video Course are designed for both traders and investors. Also, some of our strategies have been fully automated for the ultimate trading experience.

Get our advanced research and market reporting, Daily market videos, detailed trading signals and join the hundreds of other traders that follow our research every day and profit.

Chris Vermeulen
Technical Traders Ltd.

Our weekend analysis of the markets continues to amaze our research team simply because we see so many other researchers continue to miss the signals.  We’ve been calling this market bottom since the middle of February 2018 and we have stuck to our analysis even though we’ve taken some flack from others about it.  Now, with earnings nearly upon us and the markets poised to either breakout higher or rotate lower, our longer-term analysis shows the markets are in pretty good shape for a continued upside rally.

This week, there are 214 companies reporting earnings data.  Next week, there are 781 companies reporting earnings data.  The following week, another 1003 companies release earnings data.  Combined, we are going to have 1998 companies releasing Q2 earnings data and each of these, to some extent, could drive the markets higher or lower as this data is digested.

US Real Disposable Income has increased from $12,570 (December 2016) to $13,009 (May 2018) (source : https://fred.stlouisfed.org).  Gross Private Domestic Investment has risen from $3,126.18 (Q4 2016) to $3,379.11 (Q1 2018) (source : https://fred.stlouisfed.org).  Personal Income has risen from $16,027.03 (December 2016) to $17,005.4 (May 2018) (source : https://fred.stlouisfed.org).

Think about those core factors of the US economy as well as the facts that US companies have been able to rebuild and restructure – often running leaner and meaner than years ago.  Of course, US corporate debt levels have risen in tandem with these personal income levels.  US corporate debt levels have risen nearly 20% in 2017 alone.  Yet, we continue to believe the overall health of the US economic is much stronger than many people believe, and we continue to believe a huge influx of foreign capital is driving the US equities markets to higher values in the face of any isolated economic concerns.  The fact is that the US equity markets are really the only location on the planet where protection from currency devaluation and localized economic/equity deflation concerns can be thwarted (at the moment).

Onto the charts…

 

Monthly SP500 chart

This Monthly ES chart may be a little complicated to understand when you first look at it but pay attention to our analysis of this data and it will become easier to understand.

The two support channels (Yellow and Blue) are critical to understand price support.  These longer-term price support levels are key to understanding how and when this current upswing in price may end (if it ends).  Right now, these support levels are telling us that price has established a low rotation point and advanced higher setting up these support channels as key price levels should it break lower.  As long as these support channels hold, price should continue to push higher.

Additionally, pay attention to out proprietary Tesla Vibrational Arc (circles) on this chart.  They are showing us that price has recently exited the inner (25%) arc and is currently rallying outside of this price level.  In theory, as long as the support channels hold and price attempts to move towards the next Tesla Arc, we can expect price to advance towards $2950 or $3080 throughout the end of this year.  The current level, near $2800, can be seen as an “inflection point” where the outer RED arc crossed our Pitch Fan level.  This would indicate that any move above $2800 would likely prompt a bigger upside move towards $2950 or higher.

Lastly, the Pitch Fans are drawn from 2016 low points and are used to attempt to identify and highlight price support and resistance levels.  In this case, we are using them to identify “crossing points” where these fan levels cross our Tesla Arcs and other drawn lines to see where price may be targeting in the future.  Just above the current price, we see a Red and Grey Pitch Fan level that is acting like resistance near $2850.  Understand that these levels, once breached, will likely propel the ES price much higher.

 

Monthly Nasdaq chart

The Monthly NQ chart below shows similar price action to the ES chart – yet we see a more defined uptrend in place.  As we’ve been warning, we believe the NQ will stall/rotate near the $7400 level for at least the next few weeks (3~5+ weeks) before attempting a further upside move into the end of 2018 and possibly longer.  Right now, the NQ has rallied to all-time highs this month and is sitting very close to our $7400 target level.  We can see from this chart we have two upward sloping price support channels (Yellow and Light Blue) that provide us with a very clear understanding of where price support is located.  The current, Yellow, level is more recent and will likely be broken if the NQ stalls as we expect.

The Std. Deviation channel (the Dashed lines) on this chart shows that price has been rotating near the upper levels of this price channel and that price is attempting a breakout upside move currently.  Notice the Tesla Vibrational Arc that is sitting very near to the $7375 level?  This arc will likely result in some lower price rotation in the NQ over the next 3+ weeks with the potential that we could see a rotation to near $7100 or lower before another upside move sets up.  Generally, when the price exits the upper Std Deviation channel and coincides with one of our Tesla Arcs, one of two things will likely happen; a. price will stall and rotate lower a bit before breaking out of this congestion or, b. price will blow right past this arc level in a massive price breach.

Right now, we believe our earlier estimate that price will consolidate and stall near $7400 is the correct interpretation.

 

Monthly TRAN (Transportation Index) chart

This Monthly TRAN (Transportation Index) chart below provides one of the clearest pictures yet of the true underlying market dynamics (in our opinion).  Feb 2018 highs are still in place – they are still the critical component from a technical basis for any further upside price moves.  Support channels, both the Green and Blue solid lines) are indicating that price is currently within these support channels and has not broken lower (yet).  The Std. Deviation channels (the Dashed lines) are showing us that price is currently sitting near the lower Std. Dev levels (near dual support).

Additionally, the Tesla Vibrational Arc (the Purple arc near the current bars) is showing us that price has recently broken through the previous arc (the Light Blue arc near the Jan/Feb 2018 highs : 1.382%) and is struggling to break out of this new Purple Arc (1.50%).  What this means to us is that price is “coiling near support and will likely make an explosive move – one way or the other”.

Now, take into consideration the Red Resistance Channel Line that created a Pennant/Flag formation recently.  We’ve seen price, over the most recent 3+ bars, rotate above this Red Resistance level and rotate back into it.  Now, with the Month of July, we see price struggling near these lows, yet very near to the support channels and Std. Deviation channels, as well as very near to the Purple Tesla Arc.  Knowing that we have nearly 2000 earnings data points hitting the markets over the next 3 weeks and the correlation of support/upside breakout analysis that we’ve identified in the ES and NQ markets, only one analysis can be made for the Transportation Index….

As long as the $10,100 support level holds and the ES/NQ do not break their immediate (YELLOW) support channels, the Transportation Index is setting up to be one of the best buy opportunities (with low risk) that we’ve seen in a very long time.  Yes, there is downside risk should the markets break lower – we understand that.  The fact that all of these longer-term charts are aligning with the potential that earning could drive the market to fresh highs, the Transportation Index appears to be one of the most opportunistic setups we’ve seen so far.

 

Now, are you ready for these next few weeks with earnings about to hit the markets?  Are you prepared to take advantage of these setup and potential moves?  Do you understand what we are attempting to illustrate to you and how these types of setups can dramatically improve your trading success?

Want to know how we can help you even more than just showing you these nice charts?  Then visit www.TheTechnicalTraders.com to learn how we can help you stay aware and ahead of these markets moves and how our team of researchers can help you find greater success.

The markets are going to move over the next 2~5+ months and our analysis has already shown us that the markets want to continue to “melt higher”.  The only concern we have, at this point, is if some external news/crisis event disrupts the price advance and breaks support.  If not, then this market should rally from these support levels and attempt new/fresh highs within the next 20~45+ days.  Don’t miss it.

53 years experience in researching and trading makes analyzing the complex and ever-changing financial markets a natural process. We have a simple and highly effective way to provide our customers with the most convenient, accurate, and timely market forecasts available today. Our stock and ETF trading alerts are readily available through our exclusive membership service via email and SMS text. Our newsletter, Technical Trading Mastery book, and 3 Hour Trading Video Course are designed for both traders and investors. Also, some of our strategies have been fully automated for the ultimate trading experience.

Get our advanced research and market reporting, Daily market videos, detailed trading signals and join the hundreds of other traders that follow our research every day and profit.

Chris Vermeulen
Technical Traders Ltd.

Over the past 4+ months, many emerging markets have come under pressure as the global markets were roiled by the sudden and relatively deep market retracement in early February.  For many, this downward price trend has been frightening and somewhat disastrous.  Recently, though, something new appears to be on the horizon that may be the early signs of renewed life for many Latin American, South American and Indian markets – early signs of support and a potential bottom formation in the works.

Our researchers have been following the recent moves in these emerging market ETF for Brazil, Latin America, and India with great interest because we believe in finding opportunities when many others may not be looking for them.  We believe these early warning stages of a market bottom could be an excellent time to “forward think” any possible price recovery that may occur in the near future and to prepare for any success opportunities that may arise.  Heck, we are traders and if the opportunity exists for a decent profit with little risk, we’ll investigate it.

Let’s get started with this Daily chart of the BRZU (Brazil Bull 3x ETF).  We can see from this chart the extended downtrend channel that has existed for nearly 4 months.  Near the bottom right side, pay close attention to the horizontal price channel that is setting up – this could be an excellent bottom rotation channel resulting in an upside breakout eventually.  With only 3 to 7 days to go before the upper price channel may be challenged and a clear double bottom formation near $16, any downside rotation below $17.50~18 would be an excellent buying opportunity range with $16 being our protective stop level.  Assuming this channel continues as price reaches this apex, at some point price will either rotate higher or continue to channel lower (below the $16 level).  So, buying near the lower range of this horizontal price channel may be a great opportunity for an upside move.

Additionally, the GAP between $26 and $28 is a clear upside target.  We would hope this move would be quick and simple, buy below $18 with a target above $26.  A quick $9 profit per share (50%+) and we could manage the remainder of our trade by moving our stop to $23 or $24 to protect against any unwanted losses.

Yet, in order for this trade to really have any teeth, we would need to see some correlation across multiple emerging market ETF.  Then we could really say that we may be seeing some type of bottom rotation starting to form.  Let’s look for more correlative signals.

 

This next chart is a Daily INDL (India Bull 3x ETF) and it is showing a similar pattern that has recently broken above the downward sloping price channel.  This is a good sign that price may be attempting a rotational upside move in the near future.  Yet, upon closer inspection, we can see that a double top is setting up $80 that may unsettle this move.  Additionally, the range of the price channel is rather deep – $68 to $80.  That $12 range may include a bit more RISK than we want to consider at the moment.  Certainly, this trade looks like it may have some potential, but there are still concerns that this trend may be a false flag type of move.

We would like to see more pronounced and defined “higher low” rotations in the process of creating this double top formation.  Currently, we have a few moderate higher low setups, but the deeper low near the end of June is concerning.  Ideally, we would wait for a low price move below $72~74 and watch for price rotation back to the upside as a better sign that price is “technically conforming to Fibonacci price rotation theory”.

Still, this pattern is setting up as resistance near $80 with a clear sign that a bottom could be forming in INDL at the moment.  Our opinion is to watch it and wait for a better setup before taking a position.  We believe we can identify a better entry point by waiting for price to show us it is ready to move higher instead of presuming this rotation WILL move higher.

 

Lastly, let’s take a look at this LBJ (Latin America Bull 3x ETF) Daily chart.  We find this chart very interesting for one simple reason – the big “U” shaped bottom formation near $17.50 and the clear upside price swing that is taking place right now.  You can clearly see the RED price channel slopes that are key to understanding price resistance and the more aggressive downward slope that was breached in mid-June.  Yes, should this ETF rally back to near $30 from this level, we would be looking at a 50%+ increase in value.  Yet, again, we have to learn to be patient and wait for the price to show us that it is preparing for an upward swing higher.

As of right now, we have “higher highs”, which is a great sign that the trend has changed to the upside.  Yet, we also have a clear GAP between $23.50 and $25.50 that could become immediate resistance.  We also don’t have any “low price rotation points” that we can use as a technical confirmation of price trend and price rotation.  In other words, we have what may be an impulse move higher with no real confirmation of longer-term upside potential.

We would caution investors from jumping into this trade at this time and urge them to wait for better confirmation – likely after the breach of the price GAP is filled and price rotates back below, or near to, $20.  Short and simple, this is a very interesting bottom formation in the works that has not qualified as a solid uptrend yet.  There are still too many unanswered concerns to allocate capital towards this trade.

 

While all of this is interesting and possibly a bit early in terms of bottom formation expectations, we believe the correlation across these multiple markets shows enough evidence of a potential emerging market bottom in select markets as it relates to these under performing Latin American and Indian markets.  Obviously, we still have to be cautious of any downside rotation that could be dangerous – these percent ranges still show quite a bit of risk.  But the upside potential for a perfectly timed entry may be just around the corner.

Want to learn more about what we do and how we help traders find success in the markets?  Visit www.TheTechnicalTraders.com to learn how our research team, with more than 50 combined years of trading experience, can assist you in finding tremendous trading opportunities each month as well as provide you with detailed market research, Daily market videos and much more.  Our job is to help you find and execute successful trades in the future and to help you stay aware of future market moves.

Visit www.TheTechnicalTraders.com/FreeMarketResearch to see how our research team has been ahead of these turns in the global markets for the past 8+ months.  We have an incredibly deep research library of posts available to all members/visitors at the link above.  We are certain you will find value in our work and our abilities to accurately predict the markets.  We’ve been calling for upside price moves in the US Equities markets since the middle of February when everyone was warning about a collapse.  We called the downtrend in China months before it happened and we recently called the downward rotation in Crude 4 days before it happened.

Recently, quite a bit of news has been originating from Malaysia, China and other areas of South East Asia.  Much of it is concerns with multi-billion dollar projects and excessive corruption and graft.  Malaysia is taking the lead with this issue so far with the new Mahathir administration.  Yet, we believe these issues are far-reaching and could result in quite a bit of market turmoil over the next few months – possibly much longer.

What is at risk is the exposure of “cooked books” across much of China, India and likely throughout the globe with infrastructure and real estate projects that were designed to boost numbers while hiding real economic concerns.  You may remember we alerted our members and the general public to this concern in March 2018 – nearly 4 months ago in this blog post.  If you have not read our multi-part research post regarding how China has set itself up for a massive economic collapse, please take a minute to read all of our earlier research.

How has this Ponzi scheme been setup to play out for so long?  Our assumption is that it goes something like this.  In late 2009/early 2010, China was feeling the crunch of the global credit market crisis and made an attempt to push easy credit out to internal and external infrastructure projects in an attempt to keep the manufacturing and export sectors in China clicking right along.  The objective was to keep building, while the capability was available and the supply was plentiful. The only thing China needed to do was to make it easy for capital (loans) to be acquired for builders and buyers.

Much like what happened throughout most of the world, China took advantage of an already steady economy to avoid any contraction in real economic output by creating capital out of thin air and allowing their banking institutions to loan capital for massive projects.  This fueled a huge wave of investment and speculation throughout most of Asia – including external projects like those in Malaysia, Africa, India and many other countries.  What we are learning, though, is that the projects may have been much more nefarious than we originally thought.

For example, the 1MDB investigation in Malaysia has shown that graft, corruption, nepotism and a host of other issues are raising many questions as to how and where multiple hundreds of billions of dollars vanished?  It appears one component of the 1MDB and other project were a commitment for the infrastructure project materials to be purchased from Chinese manufacturers and the payment schedule for said materials were set to be transmitted well before these materials were actually delivered.  In other words, China made a capital commitment to loan a portion of capital for an international project with the commitment being to purchase materials from Chinese manufacturers where the host country would also have a capital repayment agreement as their joint partnership in this project.  The problem was that China never really delivered on the materials and the host country, in some cases, has already paid for 80%+ of the project costs.  This is a classic “I’ll gladly pay you in advance for materials and work that I may never EVER see”.

In terms of how this type of deal cooks the books, think of it like this.  China just “booked” a $400 billion project where China must contribute 10~15% of the capital costs and the host country contributes the rest.  This results in a “sale” of $400 billion on the books with additional sales going out to manufacturers and suppliers.  As the host country begins payments for this project, China can quickly recover actual costs because they have not delivered much in terms of raw materials or actual building materials for this project.  Meanwhile they are bilking the host country out of hundreds of millions or billions on a “phantom project” that may never be completed.

It all seems to work well for the books because as long as no one actually finds out what is happening, China is selling “vapor projects” to other nations and booking profits for simply making a commitment – a shell game with billions, possibly trillions, at risk.

At the end of the day, China shows multiple massive infrastructure projects and this boosts their GDP, employment, and manufacturing data while covering the raw material and labor costs by sucking real revenues from host nations.  As long as the host nation does not lose faith in the deal or ask too many questions, no one is the wiser and China can keep playing their shell game.

We believe all of this started to change in early 2018 when the Chinese consumer sentiment started to change and when President Trump began to disrupt the “global think” in terms of trade, multi-national deals, and future economic expectations.  As soon as the curtain was pulled back and questions started being asked, China came under real pressure as consumers, nations, and corporations began to question the ongoing financial and economic capabilities of China suspecting that it had over-extended itself, it’s credit capacity and cooked the books with phantom projects, income, and economic output.  The real threat comes when the shadow banking system in China collapses as well as the investment grade debt, corporate debt, and project liabilities become too great for collapsing revenue.  This is when the collapse will accelerate beyond anyone’s imagination.

Right now, we believe we are in the early stages of a discovery process that could roil the markets a bit over the next 2~6+ months.  Once consumers in China get an idea of what is actually transpiring (if they ever really find out), they will move into protection mode and prices will decline in a massive asset bubble collapse.  Global debt issues will likely be resolved by the legal systems in place in various countries and a series of defaults will likely take place.  When one of my partners was doing business in SE Asia, he quickly learned that most Chinese businessmen keep three sets of books; one for partners – showing a big loss, one for the government – showing enough of a loss to not pay too much in taxes, and the last (real) set of books that shows the real profit or loss.

We believe the fallout from all of this could drop the Chinese economic credibility to new lows and could result in a massive wave of legal and financial woes as the Chinese credit, banking, manufacturing and asset markets collapse because of this.  It will start small with the Chinese government trying to inject billions into the economy to shore up failing enterprises and banks.  But once the total scope of this shell game is exposed, we believe it could disrupt nearly all of the Asian and partner nations economies and could land many foreign and domestic state and business officials behind bars or worse.  This is the kind of thing the ends very badly for some people.

We have been paying very close attention to the unfolding events in China and SE Asia.  We believe, for now, the US Equities markets seem immune to most of this, yet we believe we will soon start to see some credit issues spill over as trade issues and corporate liability repayments may soon begin to falter.  Be prepared for an unknown or unforeseen event to unfold very quickly over the next 6+ months.  We are not suggesting that investors or traders prepare for an immediate collapse in the global markets, but we are suggesting that the Chinese Dragon economy could very quickly unravel into a Chinese Gecko with little to really support pricing and valuations.

Our Custom China/Asia index has already retraced more than 38.2% from a recent price peak.  As of right now, we are not calling this a collapse because we have yet to cross critical price levels to the downside.  A move below the 50% retracement level, for us, would raise some additional concerns.

 

The Hang Seng Index has recently rotated above long-term resistance and collapsed back to the 2015 peak (support).  You can see from our BLUE price trend channel that support could still hold near these lows, possibly prompting a further upside rally.  Yet, we are watching these support/price channel levels because any break of the MAGENTA support line in conjunction with a breach of the price channel would be an ominous technical trigger that bottom has fallen out of the Chinese equity market – and possibly resulting in a massive asset valuation crisis.

 

Lastly, our BRICs custom index chart is showing a much deeper price correction that has already established a new downside price channel (in RED).  This is one of the bigger concerns that we have in regards to this Chinese debt/liability fallout.  China may be able to absorb some, or most, of the crisis by nationalizing companies and increasing capital through central bank activities.  But what happens to the other foreign nations that are left holding the empty bag of these failed infrastructure projects?  They could be out hundreds of billions with nothing to show for it except a “Chinese IOU”.  This Chinese shell game to “cook the books” could result in a global crisis involving some of the weakest and most vulnerable nations on the planet.  Yes, the BRICs emerging markets could be taking a wild ride in the near future if the fallout from all of this extends as we believe it could.

 

Our opinions at this point is that China is in a very fragile position; protect itself from complete disgrace and economic collapse by going “all-in” with central bank and currency manipulation while delaying or canceling projects in an attempt to gain control of this mess; or orchestrate a planned and organized economic crisis event that exposes the shenanigans that have been ongoing for a decade or more while attempting to “save face” and maintain some level of credibility throughout the world.  Remember, one of the most important aspects of the Chinese culture is “Asian face”. The term implies that one never disrespect or disgrace a leader or person of power.  It is, in some ways, the most disgusting and horrid thing that can happen to anyone – to lose honor and respect in front of one’s peers.

China is stuck between the proverbial “rock and a hard place”.  The only option they have at the moment is the “controlled/planned economic crisis event” (to the best of their abilities) while praying that nothing massive hits the news wires which could cause further damage to their fragile footing.  If something (think Malaysia/Mahathir and neighboring countries) does hit the news wires to further erode China’s plans – it could result in an all-out collapse of the Chinese economy.  Something that has really not been seen in well over 500 years (prior to the Qing Dynasty: 1644-1912).

We are advising our clients with regards to this unfolding event and continue to dedicate a large number of resources toward protecting our clients from unexpected and unknown issues.  We have developed a unique set of trade positions that we believe assist our clients in executing successful future trading strategies as well as executing a protected style of trading based on our research and objective analysis.  Our job is to deliver success for our clients and to keep them aware of the market turns and risks as we find and execute successful trades.

Visit www.TheTechnicalTraders.com to learn how we can help you create success, stay ahead of these market moves and deliver greater success for you as these incredible opportunities unfold over the next 6~24+ months.

Just before the July 4^th holiday, the US equity markets were about to rally above a defined wedge formation that has been defining price range for the past 7+ days.  As the markets opened on July 3^rd, prices had already started to rally and appeared to be ready to rocket higher by a decent amount.  Yet, by early morning, news that China had banned Micron chip sales in a patent case caused the markets to reverse quite steadily.  This news, as it relates to US chip manufacturers and a major part of the NASDAQ, creates a temporary speed bump in the perceived rally that we have been expecting for weeks.

The Technology sector makes up a very large component of the US major indexes.  Other than the DOW, technology firms are spread across nearly every sector of the US major indexes and this case may have some reach to it.  As the trade tariffs and trade issues continue to ramp up, these types of explosive news items can drive the markets up or down as the news hits.  We consider these external factors that push the market one way or another while the core market dynamics may want to drive prices in another direction.

Recently we showed a number of research posts indicating our proprietary predictive price modeling systems cycles and price projections that show the core market bias should be to the upside.  We believe these news events cause a price pause and an opportunity to take advantage of lower price rotation which moves against the core market dynamics.

This holiday week is certain to see news event drive price rotation as the volume is thin and many people are vacationing or out of town.  This means people will not be active in the markets as much and news events can push price in directions and trends that may not normally be as present in price.

This 240-minute chart of the ES shows the pennant/flag formation that we mentioned a few days ago.  We believe the support level near 2700 is key to the upside breakout that is likely to happen.  This pennant formation has already formed a completed 5 waves and should be pushing higher – although the news from China regarding Micron seemed to create a late price decline.  As long as that 2700 level holds, we believe the upside price move is the eventual play in this market.

 

This Weekly ES chart shows a longer-term perspective of the price rotation.  One can easily see the recent upside price rally from near 2550 to 2800.  The current downside price rotation, from 2800 to near 2700, appears to be aligning with our Tesla Vibrational price cycles and our time/price cycles in the form of a bottom cycle formation near July 15 with an upside price potential rally that could extend 4~7+ weeks.  Notice the GREEN vibrational range near the current price and notice the next outer RED range.  As we break the GREEN vibrational range, our Tesla theory suggests that price will attempt to move in the easiest direction towards the next vibrational range – the RED level.  This would suggest that price may attempt to rally well above 2800 within a trend that could last many months.

 

The NQ has reacted quite differently than the ES.  This 240 minute NQ chart shows the deeper price rotation recently as well as the pennant formation that has constrained price.  Additionally, one can clearly see the upside breakout of this pennant formation recently and the return of price to near-term support (near 7030). This return to support on the China news could indicate a renewed test of support before an upside move.  Although we don’t expect the NQ to rally as much as the ES and YM charts, we do still expect to see some upside price moves in the NQ over time.  7200 to 7300 would be our immediate upside targets.

 

This NQ weekly chart shows just how clean the upside move has been after the February price collapse.  While many people were initiating short positions thinking the markets were going to fall further, the rush of capital into the NASDAQ continued to drive capital valuations and appreciation.  Now, with Q2 earning right around the corner, we believe the NQ will rally a bit on earning news, yet fail to really push much beyond the 7400 level.  We believe the real earnings values will be in small caps, blue chips and the DOW and S&P.  We don’t believe we will see blowout earnings numbers from most of tech this time.

 

A move to near 7400 would be a renewed push to new NQ highs.  This would be a very positive move in the markets and would put incredible pressures on the shorts – creating a short squeeze.  Far too many people fail to understand that a large amount of foreign capital is trying to avoid devaluation and price depreciation.  Investors don’t like to sit on long-term holdings when a currency is devaluing excessively and stock prices (in that currency base) are devaluing as well.  It is like a double-whammy of loss for investors that can easily move that capital into something without these risks.  Therefore, as long as the emerging markets and foreign markets continue to experience some levels of price contraction, we believe the strong US Dollar and strong US Equity markets will be the “market of choice”.  This means a continued “melt up” as global traders rush to find an investment that can avoid the risks of local exchanges/equities.

Please don’t get caught off-guard with regards to this price rotation and what it means to the markets.  A massive price expansion pattern is setting up in the US markets that may drive prices much higher all the way through 2019 and possibly further.  We believe many of the major analysts have missed this pattern and we have positioned our loyal members to take advantage of this move in the future.

Visit www.TheTechnicalTraders.com to learn how we can help you stay ahead of this market and stay on the right side of price trends.  You owe it to yourself to learn how we can deliver superior research and trading signals to help you find profits and better manage your trades.

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