There’s a reason the market hasn’t rolled over yet—and it may not be bullish.
For a little change-up today, let’s look through the keyhole at how Peoplenomics thinks. Less hot air, more model-driven.
To understand it, you may benefit from exposure to the concept of X-waves.
In Elliott Wave Theory, an X-wave (also called an intervening or connecting wave) is a corrective wave that links two or more simple corrective patterns to form a larger complex correction, such as a double zigzag (labeled W-X-Y) or triple combination (W-X-Y-X-Z).
Unlike the numbered impulse waves that drive the main trend, the X-wave is always corrective in nature—typically taking the form of a zigzag, flat, or triangle—and moves counter to the preceding corrective leg before the next corrective wave (Y or Z) resumes in the dominant direction.
So, in the present market lineup, we can see the completion done last year, a Wave 1 down and what we thought was a Wave 2 (which should have completed this week). It hasn’t – yet. Don’t lose your focus.
If this is an X-wave (or variant) we could go to marginally higher all-time highs, but the wave could very well end around the (extended from previous highs) upper trend channel.
At the end of a major bull market (which peaks in a fifth impulse wave amid peak optimism and often lower volume), the ensuing bearish correction can unfold as one of these complex structures rather than a simple ABC pattern; the X-wave then appears as a deceptive counter-trend rally that interrupts the decline, luring in late bulls before the deeper sell-off continues.
This adds time and volatility to the downturn while keeping the overall corrective count intact. Which is why the next month, or two, are so critical. My out-of-the-money options for mid-summer have not collapsed on the floor, which could be a hint. If the market was indicating higher – and staying there – my options should have fallen harder and faster. But, they haven’t. Options markets are still pricing downside risk—something they wouldn’t do if a sustained rally were expected. Thus our X-Wave ponder.
One of two things seems likely: either this is a delayed Wave 2 top about to roll hard—or we are in an X-wave that can still push marginal new highs before the real decline begins. In either case, the larger risk remains lower prices ahead. The only open question is whether the market finishes out the current sucker rally before slamming the gates shut.
X-Waves are sort of rare, but far from unheard of. It doesn’t come as a surprise that an X-Wave could form when we have a huge “reality gap” between outlooks. My consigliere notes the U.S. hasn’t slowed its military prepping – and it’s a tough call in here whether talk of a Cuba Invasion (Pentagon ramps up planning for possible US military operation in Cuba) is real OR whether it’s a cover story to keep China and Russia, the Saudis and whoever else, from freaking the hell out.
Point here? In market history, such X-waves have been identified in the complex corrections following major tops—for instance, after the 1990s dot-com bull market peak in 2000, the Nasdaq’s bear phase featured a prominent W-X-Y structure where the X-wave produced a sharp but temporary 2001 recovery (trapping optimistic traders) before the final Y-wave leg drove prices to 2002 lows.
Wonder why the 2008-2009 collapse has multiple “top calls” along the way? In retrospect, analysts have noted X-waves in the 2007–2009 financial crisis correction after the prior bull run, where intervening rallies prolonged the decline and amplified the eventual crash.
These patterns underscore how X-waves often create false hope at bull-market exhaustion points, rewarding patient wave counters who recognize the complexity early.
I’m not the only one seeing it as “hang in, down is likely ahead” (not that any of us financial market gadflies offer advice), but a read of the Economic Fractalist’s column this week gets into the same turf, in fractal equivalents.
The slaughter house is still filling the pens. And our state variance extremes work is screaming “Overbought!” at near-record levels.
A Peoplenomics “Freebie”
There is a reason why our Peoplenomics ChartPack has grown from less than a dozen pages to sometimes passing 40 pages twice weekly. Charts offer tremendous insights.
Let me show you how to draw a very useful one with a ruler (or knowing how to use the drawing tools in a spreadsheet) and how to place two significant lines.
Step 1. You begin noticing if the trend (left to right) is going higher or lower. Obviously, we are going up (still). So we notice a convenient lower extreme of the chart (on the left) (see “A”) and one a ways to the right (see “B”):
Step 2: Connect them with a green line which – being a chart wizard trainee should become second-nature over time.
Step 3: Copy the green line – paste – and change its color to red.
Step 4: Slide your now red line up to the highest point between A and B. This, young racketeer is point “C”.
Step 5: Stare at what you see. Adults may wish a strong beverage or roasting of a bowl at this point. But what you’re trying to see is any similarities along the way.
Step 6: For me, the blue arrow sure looks interesting. So now, you can see how charts are “suggestive of” our Future. Does it help if I now tell you that’s a three-year view of the Dow?
Less work, but more meaning. Our ChartPack work on state variance extremes.
On the way (up-slope) things will occasionally get wild. Wild Optimism or jump from the bridge pessimism. To these tired eyes, we’re clearly up in lithium carbonate salts country today – especially in the techs:
The TEF figures another week. A retired Cisco DSP (PhD) schooled me long-ago:
“You can have time or you can have price – but not both at once.”
The “field changes” – like how dividends have been replaced by stock price-appreciation as how shareholders harvest value over time – and a host of other fine print (impacts of systemic long-term-inflation) is how ChartPacks got to be long, interesting, and (eventually) profitable.
OMG! Look at the clock, would you? Homework tonight: Radiation winds aloft dispersion models and a dusty bunny census in your own home…
Philly Fed, Jobless Claims, Drought
Most of the news flow this morning is so much re-hash, we could open a Denny’s.
From Philadelphia Fed:
New UI Vacation Applications
And “How Dry We Am”
Which gets us to mentioning the whole point of Thursday.
Near as I can figure, this day of the week exists for the sole purpose of allowing me time to figure out the coming weekend’s weather. Today and tomorrow will be hot so “Ride’em Mow Boy!” follows breakfast. Then 20% vinegar on the pesky weeds since we don’t do glyphosate. Rain Saturday means inside shop work. Sunday may see a ham radio antenna go up.
I’m headed for mow town today – showers overnight night mean no dust.
Does Other News Matter?
Not so much: US Democrats file impeachment articles against Pentagon chief Pete Hegseth. Up there in predictability with, oh, sunrise.
Drilling into Trump fog: White House denies US requested Iran ceasefire extension, says next talks ‘very likely’ in Pakistan. Yes, cue the actors: Trump’s ‘favourite field marshal’ Asim Munir arrives in Tehran to revive US-Iran peace talks. ?this could all take longer to fall apart that we expected. N100 masks with pressure relief are still on the restock list…along with sunscreen.
Here’s a head-scratcher for you: UK food supply at risk as Iran conflict threatens CO2 supplies – FarmingUK News.
Not enough to worry about in your life? Here’s one – on the house: Two supermassive black holes are now heading for a Universe-shaking collision | BBC Science Focus Magazine.
And in our Replaying 1929 Model, the outlook for the Guthrie case to play out the replay of the Lindbergh kidnapping continues on track: Savannah Guthrie’s Mother Nancy Guthrie Still Missing 75 Days After Chilling Tucson Abduction.
Around the Ranch: Andy’s Elixir
Prize gem in the Comments today is from reader RJ – who – at 88 -is on chair’s edge waiting for Andy – sailing the oceans blue – to tip his hand on the “Golden Elixir” that one old salt claims will put lead in your pencil and turn back the clock. Here’s here guess at what might be in it:
“GOLDEN MILK called THE “ELIXIR OF LIFE” is a nourishing Ayurvedic drink because it:
*Reduces Inflammation & Pain: Turmeric combats inflammation and helps manage joint pain. The black pepper and healthy fats (oil/ghee) increase the absorption of turmeric’s health benefits by up to 2,000%.
*Boosts Immunity: The combination of turmeric, ginger, and cinnamon provides antibacterial and antiviral properties.
*Supports Brain Health:
It may boost brain-derived neurotrophic factor (BDNF), potentially improving cognitive function and reducing Alzheimer’s risk.
*Improves Digestion & Skin: It supports a healthy gut microbiome and can contribute to clearer skin.
*Promotes Better Sleep: Drinking warm cozy drink at night aids in relaxation and better sleep quality.
*Antioxidant Powerhouse: Helps combat oxidative stress, protecting cells and promoting longevity.
*Balances Blood Sugar: Ingredients like cinnamon and ginger help manage blood sugar levels.
RECIPE:
1 cup Milk (Oat, Almond, Coconut, or Dairy)
1 tsp Ground Turmeric
1/2 tsp Cinnamon (ground or stick)
1/4 tsp Ginger (ground or freshly grated)
Pinch Black Pepper (essential for absorption)
1 tsp Maple syrup or Honey (optional)
1/2 tsp Coconut oil or Ghee (for maximum absorption)
INSTRUCTIONS:
Combine ingredients in saucepan.
Heat: Whisk everything together and warm over low-medium heat for 5-10 minutes, allowing the flavors to meld. Do not let it boil.
Sweeten: Remove from heat and stir in the sweetener.
Serve: Strain through a sieve if you used fresh ginger/turmeric and pour into a mug. Option: dust with more cinnamon.
About here, a couple of teaspoons of MCT oil (50% C8 and 50% C10) is about all we can handle. But yes, we too are awaiting the Pacific secret.
Write when you get rich,
Read the full article here
