The Road to 3000 and then 3200: Under the HOOD
As of now you know my process. MACRO -------> MICRO....and then back on up...over and again...
I chart The big boy indices. The smaller brethren indices. The foreign indices. Interest Rates, Commodities....Then down to Individual Sectors that represent the S&P 500, and inside of them the Sub-sectors....getting all the way to what I call Microland (All individual stocks that compromise the mass indexes), so yes thousands....
Is this a lot of work. Yep. Is it Fun :) . Damn straight...I live and breathe this stuff. I really honestly have no clue what I'd do with myself if I had never found Technical Analysis and EW...throw em together and bingo bango its an incredible system.
So here is my full embedded Dump right here and now as Many are SCARED of this TAPE at 2900.
Here is why I have high conviction we are headed higher....and much much higher potentially.
Make no mistake we are in the final throws of this move from the February of 2016 lows (wave 5) and the final throws of the Bigger Wave (3) from the 2009 lows.
But this tape needs a good blow off to setup sentiment for the eventual 25/30% decline....and this is how we can get it.
Big Boy Indices (Domestic): SPX about to breakout and start running to 2975/3000, then 3050 and ultimately 3200+. So how do we get there. Lets look under the hood.
Interest Rates. 10 year treasury breaking out in its final ascent. Targeting 3.3-3.5%. My correlation on rates to equities signaling risk on over the past few years is fantastic. Rates heading higher is signaling a risk on market.
World: Europe (EFA), Emerging Markets (EEM), China (FXI), India (EPI)...all done with major 4th wave corrections and about to play catch-up to our Domestic indexes. They help big time with this next ascent.
Sectors: In order of Size in SPX.
Tech: Way further along here, but some squiggles and some upside left. All tech has to do is stand in-line, no more outperformance required.
Health-Care: Similar to tech, but a little behind it. HC still has 10% higher left, it took leadership over from the summer and has helped carry the tape of late a lot. It can mkt perform and tape is great.
Financials: Well the laggard, only up 2% YTD. It is springing up and out of a 3rd wave of lower degree. Financials should take over some leadership and help carry the tape. It takes slack from Tech and Discretionary which have done much of heavy lifting YTD already.
Discretionary: Further along, but still decent upside left. If XLY can simply mkt perform tape is in great shape. Discretionary is best performing sector YTD, so can't expect it to do all the heavy lifting.
Industrials: A tad bit ahead of Financials and behind HC...firing in the heart of its 3rd wave higher it started leading big time this month and that should really continue for the duration of this last cycle higher. It does the heavy lifting.
Energy: Fits and starts as far as varying leadership over past year. Makes sense very different chart then all the above sectors. But should stage a late cycle leadership stake. Based since May, now showing signs of legging up to next regions.
Crude: Looks great for a last 5 wave move up and out to $77, then 80;s....helping the above energy sector. My base case last Summer was the red box, so clearly you can see that has been achieved, but the micro count projects up to the mid/high 70's and then 80 potentially yet.
Materials: Laggard, which will move to leader. Materials have a lot of upside in the charts. Not a heavy weight of SPX, but should nonetheless should be a help, not a hindrance.
Top Mkt Cap NAMES or Generals: AAPL, AMZN, MSFT, GOOGL, BRK.B, JPM, XOM
All pointing to new highs....and just like SPX all except XOM are pretty much in the same count where we are nearer the end of this move than the beginning, and risk has inverted. IE more downside than upside each move higher.
In conclusion, My conviction level in trading gets quite high when i get a confluence in my work. Just like nailing the top of the tape in March above 2700 screaming we needed another 2500 print....everything in my work was in confluence. Today, similar picture. There is a lot of upside to be had on the daily charts as shown....some more than others. But the odds favor this tape topping much higher before getting the big bad wave (4) which will bring some to their knees. My goal as always is to catch both.
The I'm wrong levels I have. Sub 2850-40 and sub 2800 tells me something is really really wrong. I never analyze and trade thinking I'm always right. I trade probabilities until they shift. And my work is uniformly bullish.
I know very few are really ready for this move in earnest. So take a step back, get your head right, come up with a plan, and execute it. Never lose sight of risk-management. Ever. That's the only free lunch we have, well the only other one i know is Hard work.