ADVFN Logo ADVFN

We could not find any results for:
Make sure your spelling is correct or try broadening your search.

Trending Now

Toplists

It looks like you aren't logged in.
Click the button below to log in and view your recent history.

Hot Features

Registration Strip Icon for discussion Register to chat with like-minded investors on our interactive forums.

Elliott wave pattern is complete on the S&P 500

Share On Facebook
share on Linkedin
Print

US investors have pushed the S&P 500 to all-time high while playing down the effect of the Coronavirus on the economy. Recently we learned that some of the largest companies in the world are lowering their earnings guidance due to the coronavirus. Burberry said that the coronavirus has wiped out three quarter of its sales in China. Apple said it will not meet its revenue guidance for the March quarter, the coronavirus slowed production and weakened demand in China. HSBC said that the full impact of the coronavirus outbreak has not fully been accounted for in its latest report. HSBC may raise its loan losses and lower revenue. When China sneezes we catch a cold.

How many more companies will warn in the weeks ahead? And investors are buying S&P 500? This is a distraction in my view, I can see markets will go down, but at the same time I can see strength in the S&P, how can I be confident markets will go down when the buying in the US is relentless? I can see equity will go down because the Elliott wave pattern is complete.

The S&P 500 is broken, it no longer responds to the economy and the earnings, however this is not new. Elliott wave is a description of the way people behave, they are driven by emotional states. In fact if the market moves up, sometimes this has nothing to do with the fundamentals, it is simply a reaction caused by positive mood. If you really fear that you will miss the rally then you will buy at any level. If we all behave in the same manner the market won’t go down. We need to be patient, we need to wait until the mood changes, until investors click.

Not easy to time this change of mood, but it will come. History repeats itself because people’s behaviour never changes. Central banks have made mistakes in the past, now they are making another mistake. Providing liquidity at a time when there is no crisis is a mistake. The spread of the coronavirus has not yet become a pandemic, what would happen if it became a global pandemic? Surely central banks should wait until there is an urgency before stimulating the economy.

 


This is why gold is rising, excessive amount of liquidity in the system puts pressure on bond yields and can push inflation up. This combination is bullish for gold. Plus gold is a safe haven. But the surprise will come from the S&P 500, as very few expect a correction I predict one. The probability of a trend reversal is high when the percentage of bears is at record low. And when this condition occurs after five waves up [i,ii,iii,iv,v (circle)], the odds of a trend reversal are high. There is nothing new in the stock market, when an Elliott wave pattern is complete you can expect a correction.

Thierry Laduguie is Trading Strategist at www.e-yield.com

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

This area of the ADVFN.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Plc. ADVFN Plc does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ADVFN.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.

Leave A Reply

 
Do you want to write for our Newspaper? Get in touch: newspaper@advfn.com