Elliott Wave Outlook for Ford

I think that Ford (F) has exhibited classic Elliott Wave patterns since the bear market low in 2008, and the chart below shows where the stock appears to be now.

Ford July 2016

It appears that Ford has completed two primary waves (labelled in blue) since the 2008 bear market low. Primary Wave 1 had a nice five wave subdivision. The fifth wave (Aug. 2012 – Nov. 2013) came slightly short of making a new high but that happens sometimes when you have a very powerful 3rd wave like Ford had from 2009-2011.

The Primary Wave 2 downturn began in Nov. 2013, and it appeared to take the form of a complex correction, bottoming out in Feb. 2016. The idea behind a complex correction is that there are two corrective patterns separated by a zigzag. This separating zigzag is the X- Wave. In our case, it appears that Ford had an expanded flat from Nov. 2013 to Oct. 2014 (comprising Wave W in white on the chart). After that, there was an upward zigzag to Mar. 2015 (Wave X).  Then, the terminal corrective pattern was a zigzag to Feb. 2016.

Since February, we appear to have completed two significant waves. I am not sure whether the end of Wave 1 occurred on Mar. 4 or Apr. 28. But from either point, you can find a 3-wave pattern leading to the July 1 low, which looks like a Wave 2 bottom. It looks like Ford is in a 3rd wave now.

As for how high the 3rd wave would go, I would expect it to be at least as big as the 1st wave on a percentage basis. That gives a minimum target of 15.09 or 15.48, depending on where you consider Wave 1 to have ended.

 

 

 

Updates on the U.S. Stock market and Gold (7/11/2016)

With the S&P 500 closing at record highs on Monday, I now think there is an 80% chance that the pullback which began in April is over. I expect that by the end of this bull market, we will see the Dow over 20,000, the S&P over 2300, the NASDAQ Composite over 5400, and the NASDAQ-100 over 5000.

Given that I consider the U.S. markets to be in the 5th wave of an Elliott Wave bull market, those targets are using a Wave 5 = Wave 1 relationship, point basis. I think those targets are conservative on the Dow and S&P given that, for the calculations, I assumed that Wave 1 ended in April 2010 (as opposed to the significantly higher high in May 2011). The reason I used the 2010 terminus across the board was that I am using the NASDAQ-100 for my primary Elliott Wave count, and for that index, I consider Wave 1 to have ended in 2010 instead of 2011.

For the calculations, I assumed that Wave 5 began at the Feb. 2016 lows.

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I last commented on gold in November 2014. At that time, I thought that a major rally was imminent, within a secular bear market. It turns out my timing was off as gold drifted lower for another year. However, gold did begin a sustained rally in late-2015 which is still underway. Below is a chart of the SPDR Gold Trust (GLD).gold july 11 2016

I still think that gold is in a secular bear market, due both to Elliott Wave theory and economic/market factors. Gold had a pretty clear 5-wave pattern down from the 2011 peak to the 2015 low. Elliott Wave theory does not expect a stand-alone five wave decline to complete a bear market. Thus, it makes sense to look at the current rally as a B-wave. As for how high this rally will go, I have the 50% retracement level as well as the Fibonacci  38.2% and 61.8% levels labeled on the chart above. Gold is only 2.8% below the 38.2% target now.

I think the dramatic gold surge from 2008-2011 was driven by investors seeking protection from hyperinflation, which many thought was imminent due to central banks across the world loosening monetary policy to unprecedented degrees. However, gold started declining as hyperinflation did not materialize, and the global economy started to stabilize.

As mentioned earlier, I think the U.S. stock market is in the 5th Wave of the current bull market. Typically, in 5th waves, the economic news is decisively positive and investor sentiment is very enthusiastic. I am not sure how much those characteristics can be manifested this time around. Nevertheless, I expect that as this 5th wave unfolds, we will at least see the current cloud of anxiety subside, and economic growth should continue firming up after having essentially flatlined in 2015. I also think that European stock markets are on the verge of entering a powerful bull market phase, so I would expect European economies to get stronger as well and rely less on monetary stimulus in the coming years. These factors will likely push gold to new lows.

 

 

Heading Higher ??

Last week’s market activity was very bullish on the major U.S. indices. I am slightly inclined to say that the drop from the April highs is over (especially given that the Dow and NDX show nice 3-wave zigzags down from the April highs, and the NDX had a total drop of 9% which is rather substantial). But there have been sooooo many rallies since late-2014 that looked really promising but failed. I would say there is a ~55% chance that we’re headed to new highs now.

From a contrarian standpoint, considering how tall the “wall of worry” is, whenever we finally make new highs, the market could end up charging higher like it did in early 2013 when it zoomed higher to everyone’s astonishment following the angst of 2012.