Traders: Intermediate Cycles Attempting to Kick In

07/26/2017 5:59 am EST

Focus: STRATEGIES

Jeff Greenblatt

Director, Lucas Wave International, LLC

Even if you do take a vacation in the next couple of weeks, keep an eye on your trades or investments. Others are very complacent. You shouldn’t be, asserts Jeff Greenblatt, director of Lucas Wave International and editor of The Fibonacci Forecaster.

Recently I called for a low in the precious metals. As you know Silver found a low in the 261-day window, and can you believe it is already 261 hours up?

That cycle was achieved on Tuesday (July 26). It is important to note the near term high in the very least because it is being aided by another cycle.

This time we have a developing low at 144 days in the U.S. dollar. Observing turns in the Greenback is always interesting because it’s hard to get the turn. Traditionally it behaves like an oil tanker which takes some effort and elbow grease to get the reversal.

This time has been no different as there has been a few false starts since the middle of June. But if the Greenback turns, then it likely means a high in the euro/U.S. dollar (EUR-USD) which is at an extremely important resistance level.

Even as this post is being written the Fed said inflation remained low as the economy continued to improve. All the gains for the week in the Greenback evaporated so we remain on the back end of the cycle, pivots are holding but just barely. The tanker has not reversed yet.

chart

The weekly EUR-USD chart shows exactly the time frame and price level of the start of the ECB QE program in 2015 which was tied to the Charlie Hebdo terrorist attack in Paris.

This is important because two years of greasing the skids to stimulate the continent’s economy has produced little. The Local Fr, a website devoted to presenting France’s news in English, on February 21 reported for 2016 the Paris region had 1.5 million fewer tourists compared to 2015 due to terrorism.

The London Evening Standard of March 27 reported visitor numbers at London’s tourist attractions have plummeted. Tourism and related industries are also on the decline in Italy, Germany, Sweden, and Brussels.

On Thursday and Friday, the CAC hit the skids as traders got very skittish about the euro rising to these levels. The CAC recovered due to hitting its own 55 (Fibonacci) day level as it filled the gap from late April, thus extinguishing the excitement of the developing Macron candidacy and election. What has happened since the French election is nothing like what happened in our election cycle.

As far as the stock market is concerned it’s like a Timex, it continues to take a licking and keeps on ticking.

Today the CBOE Volatility Index (VIX) hit a low of 8.84. Considering everything that is going on, it’s simply incredible. My data goes back to 1990 and this is the lowest level on my chart. Every time it has been in the 9’s, the market did not have a happy ending.

Prior to this cycle, the last time the VIX had a 9 handle was December 2006. We know the market started peaking seven months later. If history is an example, this is not a matter of if but when. Nobody knows for sure but there are major cycles maturing starting in a month from now through October.

Are you looking for the catalyst? I’ve discussed several in this space with health care and taxes right at the top of the list.

Usually, the lazy days of summer are devoted to paint drying but as I look at the information flow, there is a steady stream of topics to keep markets stimulated. We may very well get a couple of slower weeks in August which traditionally does have some of the lowest volume of the year.

Even if you do take a vacation in the next couple of weeks, keep an eye on your trades or investments. Others are very complacent, you shouldn’t be.

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