Are we entering a bear phase? Or will the bull market resume? I'm still uncertain. It's a question of which time frame.
First the bull case. This one scopes a longer time frame.
Barrons Confidence Index (BCI) can be tracked on StockCharts.com using the code ratio FAGIX:VUSTX.
How's BCI measured? See this link, dated with charts from 2011, but still very instructive. http://prudenttrader.com/?p=17838
This 5-yr weekly chart below comparing BCI with the S&P500. Sometimes the BCI leads the SPX, sometimes not.
Coming out of a deeply printed low 2 years ago, BCI and SPX moved in lockstep. See orange rectangle.
In Q4 2016, BCI then escalated steeply while SPX corrected. So was that a choreographed sell down while smarties got set? Or was it just plain ol' politics? Trump's been there for 13 months and did the BCI see him coming? Tax cut promises - you know.
What's interesting right now is that the BCI is printing a major degree 5-wave pattern. Wave 4 is in the green box. Wave 5 is now flying while the SPX corrects. See blue circles.
Wave counters confer. The SPX throwover top was a major degree wave 3 that gave its signal late November '17 and alerted wave counters for a sell off sometime only weeks away. But BCI topped for a W3 print a half year earlier.
History tells us that a soaring BCI tows the SPX sooner or later. Maybe a half year later.
The other stunner is that this chart of 5 years has never seen so much confidence and now reads 89%.
So, long term I'm bullish. The imminent cataclysm being spruiked by many is eyewash. The cataclysm is queuing up for the 20s. Could it be 2029 to honour WD Gann?
We know the mother of all bull charts is 5 waves up. A correction then follows with 3 waves down. Then the bull ramps up again for another set of five.
The sub-divisions give the tip offs. See schematic below.
This correction we just had took 10 days to travel down to the DJIA 23,360 low on 9 FEB. And that move was printed with 5 waves.
Then the bounce over the following 6 days retraced 64% on the DJIA and 65% on the SPX and ended with a bearish hammer candle.
This bounce may continue and we'll see next week but a dip may come before the continuation.
Ultimately, I'm expecting a 5-wave southward move beginning next week to deliver the final wave C of the correction. Last Friday's intra-day selling of the DJIA suggests to me that a few got off to a head start.
So I'm short term bearish and possibly into the middle of March.
Monday in USA is President's Day so Tuesday AM will not give the ASX any direction. We wait for Wednesday.
My other half thinks I'm totally wrong. I can live with that.
