Volatility in 2018-2019 & The Financial Earthquake
Forex – Metals – Energy – Indices
Introduction & Summary
The markets have been trading within complex structures during the 1st and 2nd quarters of 2018, and as the 3rd quarter started, wild swings started occurring, thus extending the complexity behind the larger patterns.
In the previously released 3rd Quarter Report it has been noted that the Market could have been located at a crucial point, a juncture. What a juncture it was!
As mentioned in that report, intense volatility was witnessed during the 3rd quarter, with the Volatility Index (VIX) indeed starting a terrific spike. This gradual and rather dangerous rise in volatility implied a shift in investors’ sentiment, from a complacent state of mind towards an official risk-off period.
During those unpredictable times, market’s participants moved their attention towards the greenback as the safe haven asset, with the USD gradually and steadily gaining ground.
With the 3rd quarter approaching its end, so did most of the corrective and complex structures, thus paving the way for the 4th quarter’s impressive and sustained swings.
Moving towards present times, the 4th quarter of 2018 seems to be the most important one, if not decisive.
October started with a bang!
Gold (XAU/USD) and Silver (XAG/USD) bounced off significant supports, after the damaging decreases in values over the entire year.
Euro and Pound also took advantage of the Dollar’s first weakness signs, with EUR/USD and GBP/USD starting to show opposing forces, with bullish reactions.
Indices however painted an entirely different picture. With the VIX rapidly continuing the spike, stock exchanges across the globe were heavily hit by a bearish storm.
Dow Jones Industrial Average (US30) gave in approx. 2500 points since the start of this red month, while the Deutscher Aktienindex (GER30) gradually dropped approx. 2150 points since the second half of 2018.
As the 4th quarter keeps on unfolding and with 2018 coming to an end soon, it seems as if the Market could be once more on the verge of surprising its participants.
Current structures seem to be aligned for a possible shift in directions and/or continuation of larger degree patterns.
Wave counts presented in this report have been labeled under the presumption that the current and overall position of the Market would reflect an end of a complex corrective cycle, thus pointing towards the possibility of sustained swings awaiting their turns.
An in-depth technical analysis will be provided further, with the views to be treated as medium towards long-term possible scenarios.
Charts & Symbols
- Volatility Index (VIX)
- Dollar Index (DXY)
- GOLD (XAU/USD)
- SILVER (XAG/USD)
- Crude Oil (WTI)
- Dow Jones Industrial Average (US30)
- DAX30 (GER30)
Elliott Wave Technical Analysis
VIX – CBOE Volatility Index – Weekly Chart (picture)
The VIX indicator is used by analysts to measure the state of buy-sell investors’ emotions, complacency versus the fear effect. In simple terms, a rise in the VIX would or could bring with it a sharp fall in Stocks and/or Indices. Such sharp declines in stock prices and sustained sell-offs were witnessed back in early February 2018, but also in the beginning of October 2018, when the VIX rose towards higher grounds, thus implementing a “fear” period and a risk-off sentiment.
A break-out could be possible and this could lead towards more up-side for this indicator, all this of course leading towards the possibility of more weakness in global Indices in the short-term projections.
Dollar Index (DXY) – Daily Chart (picture)
The rise in the Dollar Index (DXY) since February 2018 until present times has been labeled in a bullish corrective cycle in Primary B (blue) degree, with its sub-waves composed out of Intermediate (A)(B)(C) (turquoise).
Intermediate (A) (turquoise) has been marked with a five-wave sequence in its Minor degree 12345 (blue), topping out in the middle of August 2018.
Intermediate (B) (turquoise) has been labeled as a rather complex structure, within a Flat Correction. After Minor A (red) finalized its declines, the correction began unfolding for Minor B (red), which appears to reveal itself as a Double Three in an ascending wedge formation.
In this scenario, Minor C (red) would need to commence a last bearish swing needed in order to complete the degree for Intermediate (B) (turquoise).
Should the current labeling be on track, then Minor C (red) could complete the bearish impulse at or around the 92.65 levels or 91.50 levels. At those mentioned levels, several technical signs could be awaiting a bounce-off and a continuation for Intermediate (C) (turquoise.
Intermediate (B) (turquoise) could finalize at or around the 50-61.8% Fibonacci Retracements of Intermediate (A) (turquoise), with a possible Inverted Head & Shoulders formation.
Dollar Index (DXY) – Daily Interactive Chart
DXY – Support & Resistance:
- Resistance: 96.80 / 97.25 / 100.00 / 101.00 / 102.30
- Support: 94.20 / 92.65 / 91.50 / 90.40
DXY – Summary:
- Expected to commence a bearish impulse from around the 96.80 – 97.25 area, which could reach as low as 92.65 or even 91.50 levels.
- Sustained bullish impulse expected to start unfolding at or around the 92.65 or 91.50 levels.
EUR/USD – Daily Chart (picture)
EUR/USD – Daily Interactive Chart
The bearish reversal which started back in February 2018 for EUR/USD has been labeled as a complex three-swings sequence in Cycle Wave X (blue). Its Primary degree sub-waves have been labeled as ABC (red), with Primary A (red) finalizing the sell-off with the end of May 2018.
Primary B (red) has been labeled as a Double Three structure, with its Intermediate (W)(X)(Y) (turquoise) sub-waves developing under a complex corrective sequence.
Primary B (red) could be classified as a possible Expanding Flat formation, with most of its swings complete, and with the last Intermediate (Y) (turquoise) awaiting to begin a bullish impulse and possibly complete the entire structure.
A bullish reaction could begin in an impulsive manner, from the 1.1380 or 1.1300 area, towards the vibration zone marked between the 1.200 and 1.2150 levels.
Primary B (red) could finalize at or around the 50-61.8% Fibonacci Retracements of Primary A (red), with a possible Head & Shoulders formation.
EUR/USD – Support & Resistance:
- Resistance: 1.1500 / 1.1700 / 1.1800 / 1.2000 / 1.2150 / 1.2550
- Support: 1.1380 / 1.1300 / 1.1200 / 1.0900 / 1.0650
EUR/USD – Summary:
- Expected to commence a bullish impulse from around the 1.1380 or 1.1300 area, which could reach as high as 1.2000 or even 1.2150 levels.
- Bearish Impulse expected at or around the 1.2000 or 1.2150 vibration zone.
GBP/USD – Daily Chart (picture)
Cycle wave W (turquoise) top has been tagged at the end of January 2018, when the Triple Three pattern concluded with its Primary sequence WXYXZ (purple).
The bearish breach which followed until mid-August has been labeled as Primary W (red), the first leg of Cycle wave X (turquoise).
Since mid-August 2018, when GBP/USD bounced off the 1.2750 support, a bullish corrective sequence could be noticed in what has been labeled as Primary X (red).
Intermediate (A)(B)(C) (orange) appears to be developing as an attempt to recover some of the previous losses, within a possible ascending channel. Intermediate (A) (orange) has been corrected almost entirely by Intermediate (B) (orange), with what appears to be a Flat formation.
If the labeling is correct, then Intermediate (C) (orange) should begin a bullish impulse, one which could reach as high as 1.3500 or even 1.3700 levels.
GBP/USD – Daily Interactive Chart
GBP/USD – Support & Resistance:
- Resistance: 1.3150 / 1.3300 / 1.3500 / 1.3700 / 1.3900 / 1.4200
- Support: 1.2750 / 1.2670 / 1.2400 / 1.2200 / 1.2020
GBP/USD – Summary:
- Expected to commence a bullish impulse from around the 1.2750 levels, which could reach as high as 1.350 or even 1.3700 levels.
- Bearish Impulse expected at or around the 1.3500 and 1.3700 vibration zone.
USD/JPY – Daily Chart (picture)
Ever since late March 2018, USD/JPY has been rising consistently towards October 2018 highs, with shallow and short-lived pullbacks. The bullish trend has been labeled as Intermediate (A) (turquoise), with its Minor sub-waves 12345 (green) unfolding within an Ascending Channel, under a Leading Diagonal structure.
In order for Primary Y (blue) to continue its swings in a cleaner manner, a proper correction in Intermediate (B) (turquoise) would be needed.
Within Intermediate (B) (turquoise), the first decline has been labeled as Minor A (red), and the swings which are showing corrective features has been labeled as Minor B (red).
Minor B (red) could be rejected form the strong resistance area and vibration zone located at the 61.8% Fibonacci Retracements of the yearly decline.
Minor C (red) could commence at or around the 113.45 levels and could cause a bearish breach, one which could lead towards the 109.50 or even 108.40 levels. Should this scenario occur, then an Inverted Head & Shoulders formation could also be possible, which would lead towards a bullish outcome for the medium-term.
USD/JPY – Daily Interactive Chart
USD/JPY – Support & Resistance:
- Resistance: 113.45 / 115.00 / 117.50 / 119.00
- Support: 111.60 / 109.50 / 108.40 / 106.75 / 105.50
USD/JPY – Summary:
- Expected to commence a bearish impulse from around the 113.45 levels, which could reach as low as 109.50 or even 108.40 levels.
- Bullish Impulse expected at or around the 108.40 vibration zone.
GOLD (XAU/USD) – Daily Chart (picture)
The sustained and impulsive decline from February 2018 and down until August 2018 lows has been labeled as a complex Double Three in the Intermediate (W) (turquoise) degree.
In mid-August XAU/USD reacted with a bullish swing, and this move has been labeled as Minor A (light blue) within the larger degree Intermediate (X) (turquoise). Following that bounce-off, the sideways correction has been labeled as Minor B (light blue).
XAU/USD continued to rise afterwards, in what appears to reflect a possible Ending Diagonal scenario in Minor C (light blue).
Minor C (light blue) would be expected to continue the bullish sequence and retest the previously breached trend-line (dotted-red), after which it could be rejected and commence a bearish impulse towards new yearly lows, as the 1115.00 levels could be seen as turning points in a Flat Pattern for Cycle Wave B (black).
Minor C (light blue) would be expected to continue its bullish sequence from around the 1210.00 levels and rise in an impulsive manner towards the 1265.00 or even 1290.00 vibration zone.
GOLD (XAU/USD) – Daily Interactive Chart
XAU/USD – Support & Resistance:
- Resistance: 1240.00 / 1265.00 / 1290.00 / 1304.00 / 1320.00
- Support: 1210.00 / 1195.00 / 1180.00 / 1160.00 / 1115.00 / 1085.00
XAU/USD – Summary:
- Expected to start a bullish impulse from around the 1210.00 levels and possibly retest the 1290.00 Levels.
- Bearish and sustained impulse expected at or around the 1265.00 and 1290.00 vibration zone.
SILVER (XAG/USD) – Daily Chart (picture)
Silver (XAG/USD) price action has been continuously dropping, especially after the second part 2018. The sell-off which got interrupted by a bullish reaction in September 2018 has been labeled as Intermediate (W) (red).
The bullish reaction could represent a series of bullish sequences towards the completion of Intermediate (X) (red), in which Minor Y (turquoise) could begin a bullish swing from around the 14.35 levels.
If the bullish sequence would unfold, then Intermediate (X) (red) would be expected to get rejected from around the 15.80 or 16.25 vibration zone and could lead towards new yearly lows, as the 13.20 levels could be seen as turning points in a Complex Pattern for Cycle Wave X (black).
SILVER (XAG/USD) – Daily Interactive Chart
XAG/USD – Support & Resistance:
- Resistance: 15.00 / 15.35 / 15.80 / 16.25 / 16.80
- Support: 14.35 / 14.00 / 13.80 / 13.50 / 13.20
XAG/USD – Summary:
- Expected to start a bullish impulse from around the 14.35 levels and possibly retest the 15.80 or 16.25 vibration zone.
- Bearish and sustained impulse expected at or around the 15.80 or 16.25 vibration zone.
Crude Oil (WTI) – Daily Chart (picture)
Crude Oil (WTI) has been labeled with a Leading Diagonal in Intermediate (A) (green), which started in June 2017 and ended in May 2018. Following those sustained bullish sequences, WTI has been unfolding within a larger degree sideways movement, in what appears to be a Flat Pattern in Intermediate (B) (green).
The Flat Pattern structure could unfold in two scenarios, in either a Running or Expanding Flat. In a Running Flat scenario, Minor C (red) would not exceed the end of Minor A (red), while in an Expanding Flat scenario Minor C (red) would pose as a deep sell-off and a sustained bearish impulse. An impulsive move higher than the 74.00 could be a favorable sign for a Running Flat, while a bearish breach of the 62.00 levels could lead towards more weakness ahead for WTI.
Crude Oil (WTI) – Daily Interactive Chart
Crude Oil (WTI) – Support & Resistance:
- Resistance: 72.00 / 74.00 / 78.00 / 82.00 / 86.00
- Support: 68.00 / 64.00 / 62.00 / 58.00 / 54.00 / 49.00
Crude Oil (WTI) – Summary:
- Expected to get resistance at or around the 72.00 levels, and according to that, more details could be gathered for the Running or Expanding Flat scenarios.
CBOE Volatility Index (VIX) – 2H Chart
The VIX has been classified in a Flat Structure with the Intermediate degrees (A)(B)(C) (orange) acting as the three-swings sequence required for this type of pattern.
Intermediate (A) (orange) reflects the previous spike witnessed in early February 2018, while Intermediate (B) (orange) reflects the attempt to correct that shock-wave, also the attempt for Indices across the world to reenter the complacency periods.
In early August, after the complex structure on the down-side completed, the VIX initiated once again an alarming rise, which turned into an actual spike in volatility and the official return of the bears when it comes to stocks and indices.
Intermediate (C) (orange) has been labeled in a five-swings sequence in its Minor sub-waves 12345 (red), and its sub-waves should exceed the end of Intermediate (A) (orange), if this swing were to complete the Flat Structure mentioned.
Such a rise in the VIX, if it were to take place, would translate into a continuation of the bearish sentiment already evolving around stocks and indices globally.
From a mathematical perspective, the 100% Fibonacci Extensions of Intermediates (A) & (B) (orange) could define a possible finish line for fear season.
CBOE Volatility Index (VIX) – 2H Interactive Chart
GER30 – Daily Chart (picture)
GER30 concluded a drop of approx. 2100 points since June until October 2018, getting heavily hit by the sudden spike in volatility. Since the start of the year the German index is displaying a loss of approx. 18% in value.
The entire bearish sequence which began in late 2017 has been labeled as a Cycle Wave IV (green) degree, with its Primary sub-waves WXY (purple) unfolding within a complex sequence and with conflict of degrees.
Primary W (purple) represents the first sell-off which occurred back in February 2018, and primary X (purple) has been classified as the potential left shoulder in a Head & Shoulders scenario. Primary Y (purple) however, has been classified as more of a complex structure, with a Descending Channel in Intermediate (B) (orange).
Intermediate (C) (orange) would represent the last piece of the bearish puzzle and the possible end of the entire cycle degree correction. Its structure has been labeled as a bearish impulse with a five-swings sequence in its Minor sub-waves 12345 (red).
Assuming that one more volatility wave would occur, and that the technical analysis shared could be on track, then this would lead towards more possible weakness ahead for GER30. Intermediate (C) (orange) could retest the 61.8% Golden Ratio before the bull market would return.
GER30 – Daily Interactive Chart
GER30 – Support & Resistance:
- Resistance: 11650.00 / 11950.00 / 12250.00 / 12650.00 / 13000.00 / 13650.00 / 14400.00 / 15000.00
- Support: 10800.00 / 10550.00 / 10250.00
GER30 – Summary:
- Expected to complete the current sell-off at or around the 10800.00 and 10550.00 vibration zone.
- Support is expected to occur around the 10800.00 and 10550.00 vibration zone, which could send GER30 on a bullish impulse towards the 13650.00 or even 14400.00 levels.
US30 – Daily Chart (picture)
US30 has been classified as a Flat Pattern in a Primary 4 (blue) degree. The structure consists of a three-swings sequence in its Intermediate (A)(B)(C) (red) sub-waves.
Intermediate (A) (red) reflects the 13.50% sharp decline which took place in early February 2018, while the rising sequences which unfolded towards early October 2018 has been labeled as the Intermediate (B) (red).
Intermediate (B) (red) has been identified as a Double Three pattern in its Minor sub-waves WXY (turquoise), due to the complexity and conflict of degrees behind its appearance.
Minor W (turquoise) and Minor X (turquoise) defined the structure with excessive swings and corrective sequences. Minor Y (turquoise) unfolded with a Leading Diagonal in Minute A (blue) and an Ending Diagonal in Minute C (blue).
Because of the fact that Intermediate (B) (red) exceeded the start of Intermediate (A) (red), the Flat Pattern could be classified either as a Running or an Expanding Flat structure. In a Running Flat scenario, the 100% Fibonacci Extensions of Intermediate (A) & (B) (red) could pose as a support and the continuation of the bull market towards higher grounds than 27500.00 levels. However, in an Expanding Flat scenario, this would imply a much bigger wave in volatility and an Extension in Intermediate (C) (red).
Intermediate (C) (red) has been classified as an impulse, with a five-swings sequence in its Minor sub-waves 12345 (red).
Minor 3 and Minor 4 hovered around the ascending channel’s lower trend-line, which eventually lead towards a bearish breach and a technical hint that US30 could have officially entered the bearish territory.
Minor 5 (red) could end its bearish sequence at or around the 23350.00 or 23150.00 vibration zone, where Intermediate (C) (red) could also resonate a possible end of the bearish sentiment and a probable continuation of the bull market.
US30 – Daily Interactive Chart
US30 – Support & Resistance:
- Resistance: 24850.00 / 25000.00 / 25250.00 / 26000.00 / 26750.00 / 27500.00
- Support: 24150.00 / 23350.00 / 23150.00 / 22500.00 / 22000.00 / 21450.00
US30 – Summary:
- Expected to complete the current sell-off at or around the 23350.00 or 23150.00 vibration zone.
- Support is expected to occur around the 23350.00 or 23150.00 vibration zone, which could inflict a bullish impulse for US30, one which could aspire for levels beyond the 27500.00 horizon.
Thank you for taking the time to go over the presented material.
Hopefully it will be useful to you when charting or would be of assistance when about to make an important trading decision.
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Many pips ahead,