I am getting a question whether we have the top referring to the recent, popular domed house formation. Now, I view the question from my perspective which illustrated below.
Good Trades & Best Wishes to All
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The question: The unanswerable question is "has the dome been completed?"
My answer: No, until proven otherwise, I do not think so.
What is the significance of the peak?
Let's go back to the big picture which I commented during the mid year bottom.
As much as I would like to see a top as noted on the peak of 8-yr global economic cycle (which I commented on it during the mid year bottom call with 8-yr global business cycle formation which I posted on 9/8/06 after commenting on the 4yr cycle analyses in July06), I do not think that we have the top of the 8-yr cycle.
From my point of view, the following is true.
The peak of 8-yr global economic cycle = the peak of domed house formation
We know that what really matters is actual price actions in short term even though fundamental factors will impact markets in longer term. Therefore, I do think that market will make a peak after it trades above the SPX 1550 top. This is based on the thinking that the Fed and the current administration will make sure that financial market will trade above the SPX top to mend the public sentiment on the war. Without going into greater detail, that is my market sense. In addition, as I noted during the mid year, the global economic boom gives a reason to bring up the US market to the level even though our economy is not as developing as China and India, for example.
We can only hope for a ST pull back, before market continues to advance to the SPX 1550 top. Until proven otherwise, I do believe that SPX will trade, at least, SPX 1550 before it makes a LT top.
As stated before, the worst thing can happen is that bears continue to short this market to fuel to upside; therefore, bears need to be very careful and move only based on price confirmation to downside.
8-yr Global Business Cycle
Domed house formation
the Domed House formation
November 15, 2006
SPX 1400 target is met as of today, intra high of 1401.35
June 2006 Bottom Call with target SPX 1350 is met on Oct 5, 2006
Jun 19 2006 7:58AM
Title: re SPX Trendlines & SPX 1350 +/-
The SPX target for the recent run is as shown on the chart, SPX 1350 +/- area which is upper trendline as shown on the weekly chart.
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September 8, 2006
8-yr Global Business Cycle:
The dominant 8yr cycle will support the 4-yr cycle transition since the peak of 8yr cycle peak is in the middle of the 4-yr cycle bottom.
Some traders think that markets can't make "New High" because they believe that we are in secular bear market after the 2000 secular bull market high. However, markets have made new highs during secular bear market period such as during 1965-1982.
It would be interesting to observe to change "neatly classified cycle timelines", but I believe that we are in the "8yr cycle" as shown on the VLT SPX chart. Hence, we will likely see "New High" during the bull market cycle.
As I further study the cyclical price actions, instead of considering 8.6yr Global Business Cycle, we can utilize 8yr Global Business Cycles which we can visually examine its repetition on the SPX chart with 4-8-16 cyclical notations.
When I briefly commented on the ECM last time, I used the same original chart that I analyzed on 4-8-16 yr cycles since the exact cyclical bottoms are not precise on projected timelines.
After reconsidering ECM 8.6 Global Business Cycle, the 8yr cycle is better to monitor than 8.6 ECM model since the model is not well received and is no longer studied. The model is pure when it represents simple financial market cycles.
As you can see on the SPX LT chart with 4yr projected timelines (blue) vs actual bottom (magenta) lines, the formation is irregular even though we can identify the ~ 8 cycle repetition during the last 20 yrs as noted by 8yr (ECM) overlay on the SPX chart. The ECM bottoms are coincide with the major lows that we had during the last 20 years., i.e. 1985 (1987) bottom, 1994 bottom, and 2002 bottom; hence, we can give due-credibility to the model since the original date is 1997 which projected the relative highs and lows during the last 10 years since the ECM was introduced. We are yet to see the 2002-2011 cycle replication of the ECM, hence, the purpose of this analysis.
We can clearly see, "8-yr Dominant Cycle" on the chart; hence, the 4yr-cycle-low is not going to be what many traders are looking for, i.e. major 4-yr cyclical bottom for another strong bull market to begin.
As commented before, I believe that we have seen the low for the year during Jun-Jul bottom process as we have seen extremely high volatility with extremely negative sentiment.
The ECM model which will be faded with Dominant 8-yr Business Cycle will likely continue to play in future cycle projections.
8 year cycles - Modified Global Business Cycle
My previous post on 4-yr cycle and mid year bottom call
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SPX LT Trendline View -- SPX 1438
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VIX
I commented on VIX breakout during Jan-Feb 2006 that we will likely see a breakout from 4yr DT and was observing a breakout. On Jun 13, 2006, I alerted the VIX breakout with climactic sell-off. Now, VIX traded down below the LT DTL and is still below the resistance as shown on the LT chart. Also, VIX is still trading below ST resistances on three different levels; thus, VIX moving above the resistances will be additional signal for a market pull back.
VIX LT Downtrend
Need to see a rising multi-decade low VIX level to trigger a profit taking. Unless we see a profit taking which is followed by short-side, shorts will be squeezed.
