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Final market update for 2018

Posted by: Brian Dennehy
Membership level: Free
In yesterday’s teleconference for Gold Members I updated the latest stock market analysis, among other things. Here’s a bit more meat on that.
You will recall (recording here) that earlier this year our analysis highlighted the “most likely” outcome for 2019 was falls of about 25% once the markets had hit another peak. The UK and US markets hit that peak in Spring and Autumn respectively. If the markets continue in line with that analysis, there is another 10-15% on the downside.
This analysis from January was based on a mixture of Elliott Wave analysis (particularly highlighting the peak to come in 2018) and simple lines of support/resistance (highlighting where markets would fall after that peak).
The analysis was as near perfect as any of us can expect, at least so far. Frankly it isn’t always so straightforward, and I can assure you there will be periods ahead where I will also have to be swift of foot to change course.
But at the very least we do have some straightforward tools to build that “most likely” picture of the road ahead, and also the limits to it e.g. if the market moves to x level instead of y, something else is happening.
As Darwin might have said, it is not the strongest that survive but those most adaptable to change.
Since the teleconference yesterday the US market stumbled lower, and I write this ahead of an important day in the US market, when they have “quadruple witching hour”, when lots of derivatives expire, often with increased volatility for the main market.
The charts below show both the S&P 500 (US market) and the FTSE 100 (UK market) since the 2016 low. As highlighted yesterday, both markets have broken down through a line of support, and there is now a gap of about 10% before more support is reached (which would give us our fall of about 25% in both markets). 
Chart 1
Chart 2
If our original picture of the road ahead holds good, from those lows the market will begin a new uptrend to a larger peak – and you can make decent money from this. This is represented in chart 3 below, and most of you have seen this before. Many analysts cannot easily visualise this as they are obsessed by the latest Trump tantrum or Brexit hysteria – thankfully our analysis does not attempt to allow for emotional political flip-flopping.
Chart 3
But our analysis can still be wrong. Which is why we also show you chart 4 below. In that case it would mean the whole uptrend from 2009 is already over – and it is going to get very ugly. We will obviously be keeping an eye on that possibility. Also possible (more positively) is that the recent downtrend is already over and new highs will be here sooner than we thought likely. We will stay on our toes.
Chart 4
Thank you for all of your feedback and kind comments in 2018, all of which are appreciated by myself, Sam and the rest of the team. Have a great Christmas break with your families.
Topic: Market commentary


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