Critical Fibonacci Extensions May Mark End Of Trump Rally

By: Chris Vermeulen & John Winston | Wed, Mar 29, 2017
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Our research is showing critical Fibonacci extensions are in place for US Major Markets that may be foretelling of a massive market correction. Part of our research is to search for and study events and resources that are a bit abstract. One component of this research is to identify critical price levels and early warning triggers from abstract price data. The major US indexes and most individual all showing price advanced over the past years and many are showing extended price rallies since the US Presidential election on November 8, 2017. Yet, none are as foretelling as our "US Custom Index".

The INDU is showing a price advance equal to a 1.8765 Fibonacci expansion.
The SPX500 is showing a price advance equal to a 1.9165% Fibonacci expansion.

What is the relevance of these expansions? Many Fibonacci retracements and expansions fail near a n.875 ~ n.9231. Now, you may be asking, "why should I be concerned about failure at these levels?". The answer is simple, one of the most important components of Fibonacci analysis is an abstract theory regarding "Failure to Succeed or Failure to Fail". Another very important component of Fibonacci theory is that "price is always attempting to establish new highs or lows". How this relates to our understand of what to expect in the future depends on expectations that are presented by understanding Fibonacci ratios, price projections and simple key components of the Fibonacci theory.

Without going into too much detail, "Failure to Succeed" is the failure to match or meet expected price objectives or actions. "Failure to Fail" is the ability of price/trends to exceed expectations or objectives and extend beyond expected target levels. Again, price is always attempting to establish new highs or lows within Fibonacci theory. Therefore, success or failure at critical levels means price should attempt to either reverse or extend.

As you are probably well aware, we have been expecting an increase in the VIX to coincide with extensive major market volatility between March 15th and April 24th. So far, the VIX has jumped form the March 15th low over 41%. You can read more about this by reviewing THE VIX ARTICLE. Our analysis, originated in late January, and warns of an extreme potential for massive price movements across the globe. This all depends of a number of factors correlating to prompt these expected swings, but so far, everything we predicted is starting to happen.


VIX Chart

Weekly VIX Chart

This next chart of the NAS100 Index shows a number of key components at play.  First, the 2.618% Fibonacci expansion level is currently providing strong resistance.  Additionally, it shows a series of price cycle bottoms that originate from 2014 & 2015 price lows. Lastly, it shows current price highs are also lining up on a 1.50% Fibonacci Expansion from the recent price rotation illustrated by the last red rectangle on the chart. One should pay attention that the two red rectangles are copies of one another and illustrate that price rotation has been in nearly identical volatility ranges since the end of 2014. Only after the US Presidential election was price able to breakout of these ranges and extend to current levels.

Further, the arcing analysis on the chart represents Fibonacci vibrational price analysis. It is designed to show us where and when price may break out of or into new trends/channels. As you can see, the arcs align relatively well with price activity and price has recently extended beyond the most recent arc level on the right edge of the chart.

Combine all of this analysis into a simple message, one would likely resolve the following : Current Fibonacci price extensions are providing clear resistance.  Price cycles state we should establish a new price low near April 24th and price has recently extended beyond a vibrational cycle that coincides with Fibonacci resistance. Historical price ranges show us that June 5th, 2017 may begin a new price trend cycle


NAS100 Chart

NASDAQ100 Chart

The "key" in terms of our analysis and understanding of the current market setup is seen on our US Custom Index. This custom index is made up of key components of the US Economy (US Retail, Real Estate, Consumer Finance, Consumer Discretionary and the SPY). The reason we have selected these for our index is we believe they relate a broad scope of "early movers" as related to the overall health of the US economy. In other words, this custom index should relate early strength or weakness in the relation to general US economic activities rather well.

This chart is showing a number of key components, but most important is the YELLOW line near the top which represents a near EXACT 1.272% expansion of price from recent highs set in 2007 (2.272 % expansions from the lows in 2009).  The n.272 Fibonacci expansion levels, like most other Fibonacci expansion levels prompt one of two possible outcomes; a. Price congestion followed by further advance, or b. a moderately deep price retracement (often greater than 25% of the recent move).

This chart, as we stated earlier, is the "key to understand the potential of and expectations of all of this analysis. With the VIX expected to "spike" between now and April 24th, the NAS100 chart showing massive expansion (2.618) that is correlating with recent 1.50% resistance and key vibrational resistance and, this Custom Index, pivoting off of critical 1.272% Fib Expansion, near the beginning of our expected VIX expansion, near Fibonacci Vibrational levels on April 10th and near the lower range of a multi-year historical Standard Deviation channel, we are preparing for an immediate potential price rotation (correlating with a spike in the VIX) that may drive equity prices down to near 2016 lows (a drop of potentially 15~20%).


Custom Index Chart

Custom Index Chart

Our analysis is showing that many key elements of cross market analysis are aligning to warn that we may see a moderate term end to the "Trump rally" and a relatively deep retracement that could shake the markets. We are not predicting a 2009 style crash. We are, although, expecting healthy market rotation that will setup additional opportunities for traders to identify profitable trades.

At this point in time, we wanted all of our readers to be aware of the multiple correlations that support our analysis and the fact that volatility is set to start rising. Keeping this in mind, we are positioning ourselves and our clients to take advantage of these expected moves and we will continue to monitor the markets price action to take advantage of opportunities as they form.

 


If you want know more of our unique Momentum Reversal Method (MRM) and our trade setups, please visit www.ActiveTradingPartners.com to learn more.

 


 

Chris Vermeulen

Author: Chris Vermeulen

Chris Vermeulen
President of AlgoTrades Systems
www.TheGoldAndOilGuy.com

10126 Hwy 126 East, RR#2
Collingwood, ON, L9Y 3Z1

Chris Vermeulen

Chris Vermeulen, founder of AlgoTrades Systems., is an internationally recognized market technical analyst and trader. Involved in the markets since 1997.

Chris' mission is to help his clients boost their investment performance while reducing market exposure and portfolio volatility.

Chris is also the founder of TheGoldAndOilGuy.com, a financial education and investment newsletter service. Chris is responsible for market research and trade alerts for of its newsletter publication.

Through years of research, trading and helping thousands of individual investors around the world. He designed an automated algorithmic trading system for the S&P 500 index which solves his client's biggest problem related to investing in the stock market: the ability to profit in both a rising and falling market.

AlgoTrades' automated trading systems allows individuals to investing using either exchange traded funds or the ES mini futures contracts. It is supported by many leading brokerage firms including:

- Interactive Brokers
- Trade MONSTER
- MB Trading
- OEC OpenECry
- The Fox Group
- Dorman Trading
- Vision Financial

He is the author of the popular book "Technical Trading Mastery - 7 Steps To Win With Logic." He has also been featured on the cover of AmalgaTrader Magazine, Futures Magazine, Gold-Eagle, Safe Haven,The Street, Kitco, Financial Sense, Dick Davis Investment Digest and dozens of other financial websites. His list of personal and professional relationships approaches 25,000, people with whom he connects and shares is market insight with out of his passion for trading.

Chris is a graduate of Seneca College where he specialized in business operations management.

Chris enjoys boating, kiteboarding, mountain biking, fishing and has his ultralight pilots license. He resides in the Toronto area with his wife Kristen and two children.

Copyright © 2008-2017 Chris Vermeulen

John Winston

Author: John Winston

John Winston,
Chief Investment Strategist
Active Trading Partners

John Winston

John Winston, Chief Investment Strategist of Active Trading Partners.com. is a recognized industry expert who specializes in providing financial advisors, hedge funds and individual traders with accurate market forecasts and trading opportunities. John's mission is to bring a unique combination of relevant market news, experience, and dynamic crowd behavioral trading ideas.

Prior to Active Trading Partners.com, He spent years studying human behavioral patterns, fundamental analysis, Fibonacci retracements, and Elliott wave patterns. He knows investors love to chase stocks up and by doing so, they increase their risk without knowing it. And that the crowd loves to sell low and buy high, John attempts to do the opposite.

Chris Vermeulen of TheGoldAndOilGuy.com met John in late 2008 as the financial crisis was unfolding. After numerous months of following the trading profits of and methodologies that John employs now at ATP, Chris suggested that a joint venture be formed and we offer this service to a select group of partners (subscribers).

Over a 23 year period, John learned how to consistently profit from investor behavior outperforming the market in both bull and bear market cycles. These strategies have become the foundation for his premium Stock and ETF trading alert service.

Copyright © 2017 John Winston

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