Another Look At The K-Wave

10/17/18 04:06:03 PM

by Koos van der Merwe

A Kondratieff Wave is a long-term economic cycle. How accurate is its prediction?

Security: SPX
Position: Sell

The Kondratieff Cycle has in the past been reasonable in forecasting market tops and bottoms of the S&P500 Index. Reasonably accurate because the K-Wave has not accurately predicted the day/week/month or year the index will correct, but it has suggested that a correction is likely to occur.

With an Elliott wave count placed on the S&P500 index, a better idea of the fact that a correction is likely to occur in the near future is dominant.

Figure 1. Monthly chart of the S&P500 Index.

Graphic provided by: AdvancedGET.

The chart in Figure 1 is a monthly chart of the S&P500 index with an Elliott wave count suggesting that a correction is just around the corner. The chart suggests that the index is probably completing a WAVE V. Both the RSI 14-period and MACD indicators are suggesting that a sell is on that cards. Being a monthly chart, this sell could occur in the coming months, weeks or days depending on market volatility. How reliable are the indicators? A look at the chart does show that the indicators are more reliable in giving a buy signal than a sell signal. However, there are many other indicators out there that could be more accurate. One should test them out.

Figure 2. Monthly chart of the S&P500 Index suggesting a possible future sell.

Graphic provided by: Omnitrader.

The chart in Figure 2 is an Omnitrader chart showing the monthly buy/sell signals on the Vote line. The Vote line is still in buy mode based on the Aroon and Vervoort stop strategies. The chart itself has suggested a sell because the candlestick has turned red.

Figure 3. Monthly chart of the S&P500 Index with the K-Wave.

Graphic provided by: AdvancedGET.

Looking at the chart in Figure 3 with the S&P500 Index and the Kondratieff Wave, one can see that the K-Wave is calling for a correction in 2019. This could occur at anytime in 2019, possibly even occurring in early 2020 as suggested by previous corrections on the chart.

With American elections in November; with the recent political drama with Brett Kavanaugh election to the Supreme Court; and with the K-Wave calling for a major correction around the corner, caution prevails. With talk-show host Ellen DeGeneres tweeting on Saturday, October 6 about Christine Ford's testimony, "You started a movement and we will see it through. If they won't listen to our voices, then they'll listen to our vote," the K-Wave correction could be in the offing.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.