LT wave for August

US markets have reached new record highs. Hurray! Or, last hurray?? S&P 500 and Nasdaq have done exactly what I expected to happen per my recent posts: Ready for 2500 and Show Time. The S&P 500 is stalling just below 2500, and Nasdaq has climbed to 6400 but seems to encounter air pockets up there. A few weeks ago I said that kind of price action would be a sign of weakness. Let’s see how that looks like in the current chart:

The same drawing I posted on July 11, with the S&P now moving nicely into the projected blue target circle. That’s not the product of some magical crystal ball I have, but merely linear interpolation of the recent trends. That obvious trend will stop eventually and the big question is when and where. My Earl indicator has turned down already, and the slower Earl2 has all but negated the recent rally. That’s what I warned for and this is a reason to be very cautious at this point. It looks weak but as long as no trend lines are broken things are holding up. How much longer? I don’t know. All we can do is watch and be ready.

The LT wave did a fair job in July and here is the wave for August:

Expected weakness until around the 20th proved much more short-lived. The S&P 500 bottomed on the first expected low near the 8th and then climbed steadily into the expected highs around the 26th. Intra-day peak came on the 27th, no perfection in this world…
For August the wave suggests weakness until around the 15th, followed by an unusually strong period until the 25th. The lowest LT wave value comes on the 10th and then goes to a very high LT wave reading on the 23rd. If the S&P gets through the weak period without technical damage then a major high may be seen on 23rd (+/- 1 day). If we get a significant drop first then 23rd is more likely to become a rebound high in an ongoing decline. That are the two major scenarios I would consider at this point. As always, please remember the LT wave is experimental and will not always work perfectly.

I also want to revisit my June post: Get ready for the August eclipse. As expected, news media and astrologers are getting very excited about this event, e.g. this Newsweek article: http://www.newsweek.com/total-solar-eclipse-trump-astrology-prediction-643776. Basically, if anything serious happens to the US or its president in the next two years then astrologers will conveniently blame it on this eclipse and take it as proof that their methods work. Question: and when was the last time nothing significant happened over a two year period?
Don’t get blinded by this eclipse, I would rather keep an eye on the 1987 chart comparison I posted. The recent 6 weeks price action has continued to be exceptionally similar. Here is a more detailed comparison chart updated for July:

History doesn’t repeat, but sometimes it rhymes. As far as direct year to year comparisons go this is as good a rhyme as you will ever see. The rates of change differ, but the important highs and lows keep matching well. At some point the rhyming will stop, but we don’t know when. An S&P surge above 2500 in August, with breakout above the blue line, would make the historic comparison even more compelling. A similar October crash, taking into account the differing rates of change, would then target 2150 (= the 2015 highs).
I never have more than 60% confidence in any scenario, including this one. But I am keeping an eye on it.