Risk at a medium-term high

It appears that Equity indices did indeed go on to build fifth waves higher. I believe we are at a critical stage now, with volatility expected to rise significantly. Therefore, I would respect the breaks of Tuesday 28 July lows, and following a likely retracement of that move lower (if it were to happen), seek to establish a full short position.

Below are the updated hourly charts of the DAX and the NASDAQ100. While it is possible that the mini-rallies from Tuesday lows were just the first of the five waves that could make up the final higher degree fifth wave, I consider that highly unlikely.

DAX

NASDAQ100

Fifth waves higher in Equities?

Equity indices could be in the process of building fifth waves higher. Where that will end is open to debate. I think that final waves will be short in both time and extent. I would therefore use penetration of Tuesday 28 July lows as the first sign that the bear is back.

Below is a 15 minute chart of the Nasdaq100, where I believe we are in the post-triangle thrust higher.

Below is an hourly chart of the Swiss market index, where I believe the final fifth wave is unfolding.

Bund ready to rally; Stocks looking increasingly bearish

This is my bearish interpretation of the Nasdaq. The fifth wave looks like it may be finishing around these levels.

As expected (finally, something happens that is expected!), the Bund rallied today. It did so in what appears to be a five-wave impulse higher. This suggests that following a correction lower, the bund will continue its advance.

Below is an hourly chart of the Bund.

Risk at a medium-term high

I continue to build my core short risk position, looking to put on the third 1/5 of the full short index position at the US open today.

Below is an hourly chart of the Semiconductors index, which looks to have completed a clear impulse up, now pending a [substantial] correction. Bear in mind, that this sector led the advance from the most recent July low.

Similarly in Europe, I expect indices to top sometime soon.

Below is an hourly chart of the DJ EuroSTOXX 50 index, which, I believe, is completing its fifth wave around current levels, allowing for up to 1.5-2% additional upside.


Copper will likely peak simultaneously with equity indices, and is currently tracing out a clearer pattern, that also increasingly looks tired. Its fifth waves are finishing around here.

Below is an hourly chart of copper.

As far as equities are concerned, I believe that VIX - the SP500 volatility index has bottomed around current levels. While I consider it unlikely that the VIX will take out its 23% low, however even if it does, I strongly believe that it will only succeed in making marginal new lows.

Below is a daily chart of the VIX.


Finally, I am beginning a bond purchasing programme, establishing 1/5 of the intended long bonds position today.

Below is an hourly chart of the German Bund, which I believe is completing its corrective zig-zag down.

Scaling in to the short position - 2/5.

The DAX, along with other European indices may have completed the five waves from the previous significant low of 4519. It is certainly possible that more upside lies ahead, but I do not think that it is likely.

Below is a short-term, 15 minute chart of the DAX, highlighting the seemingly complete structure.

Going short equities

I am beginning to scale into my shorts, establishing 1/5th of the intended short position now.

Below is an hourly chart of the Semiconductor Index, which, to me, looks done and ready to fall.

Equities are approaching an intermediate term high

I am on alert for an intermediate to longer term high in Equities and other riskier assets. Similarly, I am looking for government bonds to begin their rally past previous highs.

I expect the high in risk to form within the next 24-72 hours, as the 5th waves take shape.

Below is an hourly chart of the Nasdaq, where waves I through to III seem to be complete. I am now waiting for waves IV and V. It is possible that IV and V waves will form in languid, diagonal fashion, or they could be a spectacular spike higher.

USD near to medium-term

The USD has gone nowhere for the last several weeks. The EUR/USD is tracing out a clear triangle pattern, which, upon breaking, should yield a move of about 4 figures. I believe that we are completing/done with a minor "d" wave of that triangle, pending a gradual fall towards 1.40, which would give a good entry level for longs against 1.3832

Below is a daily chart of EUR/USD.

Similarly to analysis above, I expect USD/ZAR to advance in a "b" wave and then to fall in what should be the end of the move for USD weakness. This has the potential of forming a neat inverted "head and shoulders" pattern.

Below is a four hourly chart of USD/ZAR.