Tag: Adaptive Dynamic Learning (ADL)

Current Equities Rally Similarities To 1999

Posted on by Chris Vermeulen

Euphoria is a type of market rally where valuations, real market expectations, and global market concerns are pushed away from view while a trader based rush to rally takes place. One of the clearest examples is the 1995 to 2000 DOT COM US stock market rally. As the Internet burst into homes and businesses across the world, the US-led the way with dozens of new Internet-based IPOs touting glorious expectations, potential earnings and more. Everyone had the idea this new medium would dramatically change the economy for the better and breakthrough traditional economic boundaries.

The rally that took place in 1995 through 2000 was incredible. The S&P 500 rallied from 463 to 1535 – +235.57%. What we find interesting is the “price wave formation” that took place within that rally. There were a number of key price rotations that took place as the market continued to rally, we’ve labeled them A, B, and C. The first rotation, A, took place in July~Dec 1997. The second, B, took place from May 1998 to November 1998. The last, C, took place between January 1999 and November 1999. Technically, these rotations are significant because they represent “true price exploration” related to price advancement. The price must always attempt to identify true support/resistance levels while trending.

When we compare the rally from 1995 to 2000 with the current rally in the US stock market, we can see a defined level of euphoric price advance after the 2016 US elections. We must also pay attention to the previous price advance from the 2009 price lows as the global markets were struggling to recover from the Credit Crisis. Our research team identified the A, B, C rotations in the current price and associated them to the similar rotations in the 1995-2000 price rally as “key components of the current rally and a potential warning sign of a pending top formation”.

Our researchers believe the QE processes of the global central banks have set up a similar type of euphoric price rally in the current global markets even though current economic metrics are warning of weakening economic activity and weakening global market output. The US Fed and global central banks seem to want to keep pumping money/credit into the global markets to keep the rally going – most likely because they are fearful of what a crash/correction may do to the future growth opportunities around the planet. Continue reading "Current Equities Rally Similarities To 1999" →

Adaptive Dynamic Learning (ADL) Suggests Volatility May Surge

Posted on by Chris Vermeulen

Over the past few weeks and months, a number of key economic data has continued to rally the US major indexes towards new highs, hopes of a US/China trade deal, a continued shift of capital in the US markets for protection and safety, and moderately strong US economic indicators and an earning season that appears to be moderately strong for Q3 of 2019. The interesting facet of this move higher is that it is happening while trading volume has diminished dramatically in the SPY. The futures contracts, the ES, YM, and NQ, continue to show relatively strong volume activity though.

Additionally, the overnight Repo markets have risen to the attention of many skilled analysts. The concern is that the continued US Fed support of the overnight Repo facility may be a band-aid attempt to support a gaping credit crisis that is brewing just outside of view. We’ve been doing quite a bit of research over the past few weeks regarding this Repo market support by the US Fed and we believe there is more to it than many believe. We believe certain institutional banking firms may be at extreme risks related to derivative investments, shadow banking activities and/or global commodity/stock/currency/asset risk exposure. The only answer we have for the extended Repo facility at increasing levels is that the institutional banking system is starting to “fray around the edges”. Thus, we believe some larger credit risk problems may be just around the corner.

Our longer-term analysis continues to suggest that “all is fine – until it is not”. Our belief that a capital shift that has been taking place over the past 5+ years where foreign capital continues to pour into the US markets is driving US stock market prices higher. There is evidence that the capital shift into the US has slowed over the past 5+ months, yet one would not notice this by looking at these longer-term charts. The point we are trying to make today is that price peaks near current highs have, historically, been met with strong resistance and collapsed by 8 to 15% on average. Continue reading "Adaptive Dynamic Learning (ADL) Suggests Volatility May Surge" →

US Stock Markets Could Rally Beyond Expectations

Posted on by Chris Vermeulen

Late Sunday afternoon, President Trump surprised the global markets with the announcement of increased trade tariffs with China relating to the ongoing trade negotiations and delayed trade talks between the two global superpowers. The global markets reacted immediately upon the open Sunday night (Asian open). The VIX short position puts quite a bit of professional traders at risk of big losses today while those of us that were prepared for an increase in volatility and price rotation is poised for some incredible opportunities.

The US stock market is set up for a price move that will likely make many people very wealthy while frustrating many others over the next few months. We’ve recently posted many articles regarding the 2020 US Presidential election cycle and the fear cycle that comes from these major political events. In November 2016, we remember watching Gold rally $60 early in the election night, then fall $100 as news began reporting the surprise winner. There is so much capital, and future capital expectations that ride on these election cycles – it can actually drive the markets in one direction or another.

Right now, we have two things we want to alert you to regarding our proprietary Fibonacci price modeling utility. First, the current trend is Bullish and the chance of a downside price move is still valid. Remember, one of the primary price rules within Fibonacci price theory is that price must ALWAYS attempt to seek out new highs and new lows – at all times. This means that once price establishes new price highs, any failure to continue establishing new price highs, through standard price rotation, will result in its price attempting to establish new price lows. Continue reading "US Stock Markets Could Rally Beyond Expectations" →

How Close Are The Markets From Topping?

Posted on by Chris Vermeulen

Now that most of the US Major Indexes have breached new all-time price highs, which we called over 5+ months ago, and many traders are starting to become concerned about how and where the markets may find resistance or begin to top, we are going to try to paint a very clear picture of the upside potential for the markets and why we believe volatility and price rotation may become a very big concern over the next few months. Our objective is to try to help you stay informed of pending market rotation and to alert you that we may be nearing a period within the US markets where increased volatility is very likely.

Longer term, many years into the future, our predictive modeling systems are suggesting this upside price swing is far from over. Our models suggest that price rotation will become a major factor over the next 12 to 15+ months – headed into the US Presidential election cycle of November 2020. Our models are suggesting that the second half of this year could present an incredible opportunity for skilled investors as price volatility/rotation provide bigger price swings. Additionally, our models suggest that early 2020 will provide even more opportunity for skilled traders who are able to understand the true price structure of the markets. Get ready, thing are about to get really interesting and if you are not following our research or a member of our services, you might want to think about joining soon.

We are focusing this research post on the NQ, ES and YM futures charts (Daily). We will include a longer-term YM chart near the end to highlight longer-term expectations. Let’s start with the NQ Daily chart. Continue reading "How Close Are The Markets From Topping?" →

Financials Setting Up An Island Top Formation

Posted on by Chris Vermeulen

As we continue to scan the charts for setups and trigger to alert our followers, we’ve come across a setup that may be more ominous than what it appears. Recently we’ve posted articles about how the SPY and the NQ have pushed into new all-time high price territory and how Gold is setting up for a momentum base that should launch precious metals to near highs. We’ve also discussed how we believe the current upside price bias in the US stock markets should last another 10~35+ days before new price weakness sets up – possibly pushing prices lower in late May or early June 2019.

Our research team has been scanning the charts looking for anything that could give us an edge to the potential setup for this price weakness in the future. We believe the Transportation Index and the Financials could be keys to understanding how far the upside rally can continue and when a price peak may begin to warn of a potential price top or rollover.

An Island Top is a pattern that sets up with an upside price gap followed by sideways price action above that gap. In theory, this type of setup should promote the gap to be filled with downside price action before any further upside price move can continue. Although, gaps to the upside are fairly common in strong uptrends. Given the strength of the earnings data released early this week and the expectations that we have for some continued upside price bias over the next 10~35+ days, we are watching these Island Top formation in the Financials for any signs of weakness to alert our followers. Continue reading "Financials Setting Up An Island Top Formation" →