REVIEW

The main driver of economic news this week was the monthly payrolls report. The Unemployment rate nudged up to 9.5%, monthly Job losses increased from 322K to 467K, and the average Workweek dropped to 33.0 hours. Weekly unemployment claims remained over 600K: 614K v 630K. Consumer confidence dropped to 49.3% v 54.8%, Construction spending dropped to -0.9% v +0.6%, Pending home sales dropped +0.1% v +0.7% and Case-Shiller home prices were -18.1% v -18.7% year over year. Chicago PMI improved, as did the ISM index and Factory orders, and Auto sales continued to decline between 30% to 40%, but Ford was only down about 10%. The equity market started the week on the upside, but then gave it all back after the payrolls report. For the week the SPX/DOW were -2.2%, and the NDX/NAZ were -2.3%. Bonds gained 0.4%, Crude dropped 3.5%, Gold lost 1.1%, and the Euro slid 0.4%.

LONG TERM: bear market

We have arrived at an interesting juncture in the worldwide equity markets. After more than a year dominated by downtrends many markets have surged: India (+94%), Brazil (+87%), China (+86%), and Hong Kong (+69%), while the SPX has rallied 43%. Most market pundits have become bullish, claiming a new bull market. While others have remained skeptical, suggesting fundamentals do not support sustainable economic growth at this time. We are beginning to see some technical evidence that both may be right, depending upon which equity market one is observing. The four foreign markets mentioned above may have seen their bear market lows. Yet, none of the other markets we follow; Australia, Canada, Germany, Japan, the UK, or the US, display any technical evidence of having reached their bear market lows yet. An OEW technical review of the US bear market displays why we maintain this view.

At the October 2007 high the US stock market completed a multi-decade Supercycle bull market, (1932-2007). Our bear market, thus far (Oct 07-Mar 09), has been only seventeen months. Even if the 2007 high completed only a Cyclical bull (1974-2007) market, historically the subsequent bear market would take between two and five years to complete. From the SPX 1576 high we counted three Major waves: Mar 08 (SPX 1257), May 08 (SPX 1440) and Mar 09 (SPX 667). This 58% drop in the SPX represents only Primary wave A, of a Primary ABC bear market. All bear markets unfold in three waves. A few days after the SPX 667 low we projected that Primary wave B was underway. The market then rallied to the high of SPX 956 in just three months, a 43% gain. When the end Primary wave B is confirmed, then Primary wave C will take the market to its eventual bear market lows. The wave structure of Primary C will determine if the SPX holds the 667 low, or breaks lower into the 400 area to end the bear market. With the SPX closing just under 900 this week, the long term risk remains to the downside.

MEDIUM TERM: DOW downtrending, SPX yet to be confirmed

The uptrend from SPX 667 to 956 continues to be counted as a zigzag. Wave A concluded at SPX 833, then wave B at SPX 780, and wave C unfolded in five waves concluding at SPX 956. At the highs many negative divergences appeared on all timeframes, and the longer term charts were the most overbought they had been for the entire bear market. This is typical of a Primary wave B high. On June 12th the SPX started to decline. The decline ended on June 23rd when the SPX hit 889. This 67 point drop was the largest downwave since the uptrend began on March 6th. During this decline the Housing index (HGX) confirmed a downtrend. Then the regional banking index (KRE), three of the sectors in the nine sector SPX, and the DAX and FTSE all confirmed downtrends. The technicals definitely began to deteriorate. After that low the market rallied until July 1st, when the SPX hit 932, slightly more than a fibonacci 61.8% retracement. We have counted the declime as Minor wave 1 (SPX 889) and the rally as Minor wave 2 (SPX 932) of the next downtrend. On thursday the DOW was the first of the four major US indices to confirm a downtrend. Expecting this next wave of selling to be Minor wave 3. All the counts mentioned are noted on the charts in the link below.

SHORT TERM

Support for the SPX is at 848 and then 789, with resistance at 912 and then 935. Short term momentum is extremely oversold as of the close on thursdsay. The decline wednesday/thursday from SPX 932 to the close 896 is displaying signs of a third wave. This fits with our short term count of Minor wave 3. This initial decline would be the first wave of a Minor third wave. Typically the market will try to rebound at some point, possibly to the OEW pivot at 912, before entering the third wave of Minor wave 3. Observe the pattern of the hourly RSI during the first decline, and this should give you a good idea of what to expect. Best to your trading!

FOREIGN MARKETS

The Asian markets averaged a 0.4% gain for the week. India and China rallied while the others declined.

The European markets were -0.75%, as both the FTSE/DAX declined in their confirmed downtrends.

The Commodity Equity markets were -1.2%, as both Canada and Brazil were lower.

COMMODITIES

Bonds (bear mkt) gained 0.4% on the week as they rally in a potential uptrend.

Crude (bear mkt) lost 3.5% on the week. Crude is very close to confirming a downtrend.

Gold (bull mkt) lost 1.1% on the week, and is also close to confirming a downtrend joining Silver which has already done so. Support now appears around $875.

The Euro (-0.4%) appears to be downtrending, the USD (+0.5%) appears to be uptrending, and the Yen (-0.8%) remains in a downtrend.

NEXT WEEK

Monday starts the economic week with ISM services at 10:00. Then wednesday the Consumer credit report. Thursday, the weekly Jobless claims. Then on friday the Trade deficit, Import prices index, and Consumer sentiment. The FED again is quiet. Best to your weekend and week!

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987 

SHORT TERM: US futures end mixed, DOW -4

Overnight the Asian markets were mixed. Europe opened higher and closed mixed as well. The FED issued the following press release after the market closed on thursday: http://www.federalreserve.gov/newsevents/press/bcreg/20090702b.htm. Also seven regional banks were closed, six of them in Illinois. In the futures market the SPX was +0.50, DOW +4.0, and the NDX -2.0. Bonds were down 2 ticks, Crude lost 60 cents, and Gold was off $1.00. Quiet overnight trading. Best to your weekend!

MEDIUM TERM: DOW in downtrend, SPX not yet confirmed

LONG TERM: bear market

CHARTS:  http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987

SHORT TERM: unemployment report disappoints market, DOW -223

Overnight the Asian markets ended mixed again. Europe opened lower and closed -3.2%. US index futures were slightly lower overnight and at 8:30 headed lower. The weekly Jobless claims were 614K v 627K, monthly Job losses were 467K v 345K, unemployment nudged up to 9.5%, and the average workweek dropped to a multi-decade low at 32.0 hours. At the open the SPX gapped down from yesterday's close (922) to 916 and continued lower. At 10:00 Factory orders were reported at +1.2% v +0.7%, and by 10:30 the SPX hit 902. From a short term oversold level the market tried to rally, but could only rise three points to 905 by 11:00. After that the market slipped lower (901) and then started to flat line between the SPX 901-903 area. In the last hour the market headed lower and closed at the lows for the day: SPX 897. For the day the SPX/DOW were -2.80%, and the NDX/NAZ were -2.50%. Bonds were up about 18 ticks, Crude dropped $2.65, Gold slid $11.00, and the Euro was lower. Support for the SPX drops to 848 and then 789, with resistance now at 912 and then 935. Short term momentum was extremely oversold for most of the day. Tomorrow is a holiday in the US, but we'll probably post the weekend update, as well as, a daily update on the foreign markets.

Yesterday's rally to SPX 932 looked similar to the short term double top in mid-May at 930. This supports the technical 'head and shoulders' pattern: 930-956-932. Naturally from an OEW perspective we are counting that topping formation differently: Minor wave 1 from SPX 956 to SPX 889, then Minor wave 2 to SPX 932. Today's selloff adds support to that count and the potential start of Minor wave 3. Additional downtrend evidence has been observed over the past couple of weeks. The DAX/FTSE are in confirmed downtrends. The three banking sectors we follow (KBE/KRE/XLF) are in downtrends. Four of the nine SPX sectors (XLB/XLE/XLF/XLI) are in downtrends. Plus, housing (HGX) and two of the Tech leaders (FSLR/RIMM) are in downtrends. And now the DOW is in a confirmed downtrend. Best to trading tomorrow, and your weekend!

MEDIUM TERM: uptrend likely topped at SPX 956

LONG TERM: bear market 

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987

SHORT TERM: market continues to rally off yesterday's lows, DOW +57

Overnight the Asian markets were mixed again. Europe opened higher and closed +2.1%. US index futures were higher overnight on USD selling. At 8:15 the ADP employment index was reported at -473K v -523K. At the open the SPX was a few points higher than yesterday's 919 closed, at 923. At 10:00 with the SPX at 928, ISM was reported at 44.8% v 42.8%, Pending home sales were at +0.1% v +7.1%, and Construction spending at -0.9% v +0.6%. The market pulled back on the news to 924 and then quickly rallied to 932 by 10:30. That was the high for the day, which was slightly above yesterday's high of 930. After that the market gradually headed lower. At 1:00 Auto sales were reported lower: GM -33.4%, Chrysler -42.0%, and Ford gained market share -10.9%. Nearing the close the SPX was back to its opening levels. For the day the SPX/DOW were +0.45%, and the NDX/NAZ were +0.60%. Bonds were down 2 ticks, Crude was off 65 cents, Gold rallied $13.00, and the Euro was higher. Support for the SPX remains at 912 and then 848, with resistance at 935 and then 961. Short term momentum was overbought this morning with a slight negative RSI divergence, and heading lower at the close. Tomorrow, the weekly Jobless claims, the Unemployment rate, and Non-farm payrolls at 8:30. Then Factory orders at 10:00.

After hitting SPX 913 yesterday, the market rallied right back to yesterday's highs around SPX 930. Yesterday the market held support at the 912 pivot, and today ran into resistance again at the 935 pivot. The decline from today's high looked quite choppy and there doesn't seem to be any conviction on the downside. The USD appears to be moving this market more than fundamentals. For now, we continue to label the 930-932 high as the topping of Minor wave 2. I should note for those who do not review the charts often. All three of our bank indices (KBE, KRE, XLY) are in downtrends, and four of the nine SPX sectors are in downtrends. Please refer to the charts, or yesterday's post for more details. Best to your trading!

MEDIUM TERM: uptrend may have topped at SPX 956

LONG TERM: bear market

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987      

SHORT TERM: market slides after economic reports, DOW -82

Overnight the Asian markets were again mixed. Europe opened higher but closed -1.3%. US index futures were relatively flat overnight, and at 9:00 Case-Shiller reported housing prices -0.6% month over month, and -18.1% year over year. This compares to an -18.7% rate year over year last month. The market opened relatively flat at SPX 927 and rallied a few points to 930 by 10:00. At that time the Chicago PMI was reported to have improved at 39.9% v 34.9%, but Consumer confidence dropped to 49.3% v 54.8%. The market immediately sold off on the news, and the USD started to rally. By 11:30 the SPX hit 913, below yesterdays low, and right at the 912 OEW pivot. When the USD started to pullback the market stabilized and tried to rally. At 3:30 it had managed to add eight points to SPX 921. At the close the SPX/DOW were -0.90%, and the NDX/NAZ were -0.45%. Bonds lost about 6 ticks, Crude lost $1.40, Gold dropped $13.00, and the Euro was lower. Tomorrow, the ADP employment index at 8:15, ISM manufacturing and Construction spending at 10:00, then Auto sales after noon. Support remains at SPX 912 and then 848, with resistance at 935 and then 961. Short term momentum went from overbought to oversold during the day, and then rose to neutral during the afternoon.

For the past three months the SPX/DOW, as well as the NDX/NAZ, have had strong month over month gains. That ended in June with the SPX/DOW mixed, and the NDX/NAZ +3.2%. Short term, the SPX failed to break through resistance at the OEW 935 pivot early this morning. SPX 930, btw, is the exact same level that the SPX hit in mid-May before hitting the 956 high in mid-June. Technically, as some in our group have pointed out, this is a potential head and shoulders topping formation. With today's break through yesterday's low (916) momentum is now to the downside. It would now take a rally over SPX 930 to reverse this. We continue to maintain the count of an uptrend high at SPX 956, a Minor wave 1 down to SPX 889, and a Minor wave 2 at today's 930 high. A drop below the Minor wave 1 low would most likely confirm the downtrend. Best to your trading as we start the second half of the year.

MEDIUM TERM: uptrend but may have topped at SPX 956

LONG TERM: bear market

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987

SHORT TERM: morning rally holds, DOW +91

Overnight the Asian markets were mixed. Europe opened higher and closed +1.80%. US index futures were higher overnight but retraced those gains heading into the open. At the open the SPX hit 921 and then pulled back to 916 by 10:00. Holding that low the SPX then rallied until 12:30 when it hit SPX 928. The market then drifted lower over the next hour and a half while only pulling back three points. At 2:00 the FED made the following press release: http://www.federalreserve.gov/newsevents/press/bcreg/20090629a.htm. The SPX then started to edge higher, but made little progress heading into the close. For the day the SPX/DOW were +1.00%, and the NDX/NAZ were +0.30%. Bonds were up about 3 ticks, Crude gained $2.30, Gold dropped $2.00, and the Euro was higher. Support for the SPX remains at 912 and then 848, with resistance at 935 and then 961. Short term momentum was overbought at the highs with a slight negative RSI divergence. Tomorrow, Chicago PMI and the Consumer confidence reading around 10:00. Today the SPX rallied to the first level of resistance at 927 noted over the past few days. The next resistance is at the OEW pivot SPX 935. It appears the SPX will need to drop below todays low to get momentum moving to the downside again. Best to your trading!

MEDIUM TERM: uptrend may have topped at SPX 956

LONG TERM: bear market

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987 

SHORT TERM: quiet day with tight trading range, DOW -34

Overnight the Asian markets were all higher. Europe opened higher but closed -0.4%. US index futures were lower overnight, and at 8:30 Personal income was reported higher +1.4% v +0.4%, as well as Consumer spending +0.3% v 0.0%. At the open the market traded down to SPX 915, and then rose to 920 in the opening minutes before turning lower again. At 10:00 the UoM reported Consumer sentiment at 70.8% v 69.0%. At 11:00 the SPX held support at the OEW pivot when it hit 913. After that the market tried to rally for the rest of the day. Despite a lower USD, neither Crude nor Stocks could make much progress. At 2:30 FED chairman Bernanke gave a speech at the BoLS: http://www.federalreserve.gov/newsevents/speech/bernanke20090626a.htm. Nearing the close the SPX hit its best level of the day at 922, and then tailed off into the close. For the day the SPX/DOW were -0.30%, and the NDX/NAZ  were +0.40%. Bonds were up about 6 ticks, Crude dropped 85 cents, Gold gained $1.00, and the Euro was higher. Support for the SPX remains at 912 and then 848, with resistance at 935 and then 961. Short term momentum stayed near neutral and was rising heading into the close. Nothing has changed from yesterdays update. Overhead resistance remains at 927 and then the 935 OEW pivot. The market still appears to be in Minor wave 2 of the next downtrend. Best to your weekend!

MEDIUM TERM: uptrend may have topped at SPX 956

LONG TERM: bear market

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987 

SHORT TERM: market surges after USD declines, DOW +173

Overnight the Asian markets were mostly higher. Europe opened lower and closed -0.70%. US index futures were higher overnight but pulled back when the weekly jobless claims were reported at 627K v 612K, and the Q1 GDP revision came in at -5.5% v -5.7%. The market bounced around at the open and hit yesterday's low at 896 within the opening minutes. That was the low for the day. As the market started to rally FED chairman Bernanke's testimony was released just past 10:00: http://www.federalreserve.gov/newsevents/testimony/bernanke20090625a.htm. At 10:30 the SPX hit 910, near the 912 pivot, and the USD started to rally. While the USD was rallying the SPX hardly budged, pulling back to 906 by 11:00. Then when the USD started to decline the SPX resumed its rally. At 12:00 the FED released the following statement: http://www.federalreserve.gov/newsevents/press/monetary/20090625a.htm. At 1:30 the SPX hit 921 and then began to pullback. This represents a 32 point rally from tuesday's SPX 889 low, and it's the biggest rally since the market started its decline from SPX 956. For the day the SPX/DOW were +2.10%, and the NDX/NAZ were +2.05%. Bonds were up a full point, Crude gained $1.50, Gold added $4.00, and the Euro was higher. Support for the SPX jumps up to 912 and then 848, with resistance at 935 and then 961. Short term momentum was again overbought at today's highs after pulling back to neutral earlier. Tomorrow, Consumer income and Personal spending at 8:30, then a Consumer sentiment reading at 10:00.

We were a bit surprised by the strength of the market rally today. Yesterday the DOW made new lows for the decline and we expected downside momentum to continue. Instead the market retested the the 896 low and then rallied over 20 SPX points. Clearly Minor wave 3 was not underway. This became apparent when the SPX did not break as the USD rallied this morning. As a result of today's activity it appears that the short term count has morphed into a slightly different count. We now consider the entire decline from SPX 956 to the recent low at SPX 889 as Minor wave 1. This choppy rally from that tuesday low is Minor wave 2. Resistance for Minor wave 2 would be at SPX 927 (the 4th wave) and the 935 OEW pivot. After this rally concludes, then Minor wave 3 should be underway. Best to your trading!

MEDIUM TERM: uptrend that may have topped

LONG TERM: bear market

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987     

SHORT TERM: market ends mixed after a volatile day, DOW -23

Overnight the Asian markets were all higher. Europe opened higher and closed +1.95%. US index futures were higher overnight and spiked higher after Durable goods orders were reported +1.8% v +1.8% at 8:30. At the open the SPX traded at 900, it closed at 895 yesterday. At 10:00 New homes sales were reported slightly lower: 342K v 344K. By 11:00 the SPX rallied right up to the 912 OEW pivot when it hit 911. That was the high for the day, and it is 22 points above the 889 low reached yesterday. Over the next few hours the market pulled back and awaited the FED's decision from the FOMC meeting. Around 2:15 the FED released its statement: http://www.federalreserve.gov/newsevents/press/monetary/20090624a.htm. The USD rallied on the news and the market became quite volatile. By 2:30 the SPX hit 898, rallied to 903 by 3:00, then dropped to 896 by 3:15 before stabilizing heading into the close. For the day the SPX/DOW were mixed, and the NDX/NAZ were +1.60%. Bonds lost about 15 ticks, Crude slipped 65 cents, Gold rallied $7.00, and the Euro was lower. Support for the SPX remains at 848 and then 789, with resistance at 912 and then 935. Short term momentum was quite overbought at todays highs and was heading lower at the close. Tomorrow, the weekly Jobless claims, and the last revision to Q1 GDP at 8:30. At 10:00 FED chairman Bernanke testifies about the acquisition of Merrill Lynch by Bank of America. This should be interesting.

After hitting a low of SPX 889 yesterday, and an extreme oversold condition. The market rallied some and then continued that rally today. This morning the market became overbought as the SPX hit 911, right at the OEW 912 pivot. After the FED announcement, the market sold off and the DOW made new lows while the SPX stopped at 896, seven points above yesterdays 889 low. This suggests that downside momentum is resuming. At the moment it appears that the decline from last week at SPX 927 to tuesday's 889, was wave one of Minor wave 3. The rally today to SPX 911 should then be wave 2, and wave 3 should soon be underway. Best to your trading!

MEDIUM TERM: uptrend that may have topped

LONG TERM: bear market

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987

SHORT TERM: market stabilizes on USD weakness, DOW -16

Overnight the Asian markets were all lower. Europe opened lower but closed mixed. US index futures were higher overnight and the market opened a few points higher at SPX 895. Within the first half hour the market moved up to 898 when Existing home sales were reported at 4.77m v 4.66m, and FHFA home prices were -0.1% v -1.4%. That was the high for the day as the market sold off on the news. By 11:00 the SPX hit 889, a few points lower than yesterday's low (893). That was the low for the day. For the rest of the day the market stayed within the opening range (889-898) despite weakness in the USD. At the close the SPX/DOW were mixed, and the NDX/NAZ were -0.10%. Bonds gained about 11 ticks, Crude rose $1.65, Gold added $5.00, and the Euro rallied as well. Support for the SPX remains at 848 and then 789, with resistance at 912 and then 935. Short term momentum was extremely oversold at this mornings low and started to edge toward neutral by the end of the day. Tomorrow, Durable goods orders at 8:30, and New home sales at 10:00. Then after 2:00 the FOMC will make their announcement.

It's been eight trading days since the SPX hit 956. The market has now dropped 67 points from that high. This is the largest short term drop since early March, and the biggest rally during the decline has only been 23 points. The chartacteristics of this market have definitely changed. Certainly looks like a downtrend is underway. Best to your trading!  

MEDIUM TERM: uptrend may have topped

LONG TERM: bear market

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987 

SHORT TERM: selling resumes as market declines, DOW -201

Overnight the Asian markets were mostly higher. Europe opened lower and closed -2.8%. US index futures were lower overnight and continued lower heading into the open. When trading started the SPX opened at 913, eight points below friday's close. After 10:30 the SPX broke through the recent low at 904, and continued lower until the SPX hit 894 at 1:30. With short term momentum extremely oversold the market stabilized but struggled to generate a rally. After an hour and a half the SPX had only managed a five point rally. Also at 3:00 the following FED testimony was released: http://www.federalreserve.gov/newsevents/testimony/white20090622a.htm. Then heading into the close the SPX hit a lower low at 893 and closed there. For the day the SPX/DOW were -2.70%, and the NDX/NAZ were -3.20%. Bonds gained nearly 3/4 points, Crude lost $2.95, Gold dropped $14.00, and the Euro was lower as well. Support for the SPX drops to 848 and 789, with resistance at 912 and then 935. Short term momentum was oversold at today's low and stayed oversold. Tomorrow, Existing home sales and FHFA housing prices at 10:00, also the FED starts its two day FOMC meeting.

Today's gap down opening after friday afternoons action from the SPX 927 high: (916, 924), appears to fit with the beginning of a Minor wave 3 down wave. Resistance is now at the OEW 912 pivot as the market begins to approach the important SPX 876 level. A drop below this level with likely confirm a new downtrend. Thus far we have confirmed downtrends in the housing index (HGX), the regional banking index (KRE), and three of the SPX sectors: XLB (materials), XLE (energy), XLI (industrials). Lastly Germany's DAX and England's FTSE are now in confirmed downtrends too. Best to your trading!

MEDIUM TERM: uptrend that may have topped

LONG TERM: bear market

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987

REVIEW

This week economic reports remained mixed. Housing starts rose but the home builders index declined. The PPI and CPI both remained positive and edged 0.1% higher. The Empire manufacturing index dropped, but the Philly FED rose. Industrial production continued to decline and is now at post WW II levels. The weekly jobless claims remained over 600K, while leading indicators remained positive. As for the markets, they declined for the first first since mid-May. The SPX/DOW  were -2.8%, and the NDX/NAZ were -1.5%. Asians markets would have dropped 4.3%, but China's 5.0% rise put the average at -2.5%. The European markets were -3.4%, and the Commodity equity markets were -3.6%. Bonds were flat, Crude was -3.8%, Gold -0.5%, and the Euro was -0.6%.

LONG TERM: bear market

We continue to maintain the position that this bear market is not over. At best we see a retest of the Mar 09 low (SPX 667) in the months ahead, at worse SPX 400. Historically, US bear markets of this degree have taken between 23 months and 60 months to unfold. It took only 17 months for the bear market to hit the Mar 09 low. In addition to time there is the OEW wave structure. All bear markets unfold in three waves, not fives. Bear markets are the corrections to previous five wave bull markets. The depth of the bear market correction depends upon the degree of the bull market it is correcting. In our present situation this bear market is correcting the Supercycle bull market from 1932-2007. During the first 17 months of this bear market we counted a complete zigzag from SPX 1576 to 667, a 58% decline. We labeled this as Primary wave A, with the following Major waves defining the zigzag: Mar 08 SPX 1257, May 08 SPX 1440, and Mar 09 SPX 667.

Within a few days of the SPX 667 low we projected the kickoff of Primary wave B. Historically these types of counter-trend bear market rallies last for about five months, and either rally 50% off the lows, or, retrace 50% of the entire bear market decline. This projected a rally from SPX 667 to either SPX 1001 (50% rally) or SPX 1122 (50% retracement). Thus far the uptrend from March has made a high of SPX 956, a 43% rally off the lows. This is already fairly close to what we have observed, historically, for Primary wave B counter-trend rallies. And, it provides an excellent selling, or hedging, opportunity for those still holding, or committed to holding, stocks. When Primary wave C is confirmed, the second leg down of the bear market will be underway.

MEDIUM TERM: uptrend may have topped

From the SPX 667 March 6th low we can count a potentially completed zigzag into the SPX 956 June 11th high. When labeling this as Primary wave B, we can count a five wave rally into the late March SPX 833 high as Major wave A. Then a pullback to SPX 780 for Major wave B. This is then followed by a more extended five wave Major C: wave 1 SPX 876, wave 2 SPX 827, wave 3 SPX 930, wave 4 SPX 879, and wave 5 SPX 956. Notice that Major wave C unfolded in a classic EW pattern. Wave 3 (103 points) was the longest, wave 5 (77 points) the shortest, and wave 4 (flat) alternated with wave 2 (zigzag). Also note that Major wave C (176 points) was similar in length to Major wave A (166 points). The technical indicators we follow also support this potential Primary wave B top scenario. At the highs there were negative RSI divergences on all timeframes. Plus this is the first weekly negative divergence since May 2008, and the most overbought monthly condition since May 2008 as well. Lastly the SPX 956 high hit the long term OEW pivot at 961. Everything is pointing to a potential Primary wave B top. We are, however, maintaining an alternate count on the DOW charts. This alternate count suggests that a downtrend could be followed by another uptrend to complete Primary wave B a couple of months from now. The structure of the downtrend, when confirmed, will determine which count is actually underway. Nevertheless, after a 43% rally in just three months the risk/reward ratio favors hedging or exiting the equity market.

SHORT TERM

Support for the SPX remains at 912 and then 848, with resistance at 935 and then 961. Short term momentum was oversold at wednesday's low (SPX 904), overbought at friday's high (SPX 927), and is now heading lower. Thus far, the decline from SPX 956 appears to be impulsive. This small wave down, we have labeled Minor wave 1 unfolded as follows: 936, 946, 920, 928, 904. The small rally from that low appears to be Minor wave 2 and has unfolded as: 918, 909, 927 so far. The OEW pivot at 935 remains an important resistance area. Should the market break through this pivot to the upside the uptrend could be extending. As long as the market stays below this pivot the potential downtrend remains in force. On the downside, a break below the 904 low would suggest a resumption of the selling pressure, and a drop below the SPX 876 level would likely confirm the downtrend. As long as the SPX 935 OEW pivot holds we're expecting a downtrend.

FOREIGN MARKETS

The Asian markets lost 2.5% on the week with only China showing a gain. Most of these indices are displaying negative RSI divergences at extremely overbought longer term levels.

The European markets were -3.4% on the week. The leader, Germany's DAX, continues to lag the FTSE.

The Commodity equity markets were -3.6% on the week. Both Canada and Brazil are displaying negative RSI divergences on the daily and weekly charts.

COMMODITIES

Bonds were flat on the week, and this bear market will likely last for quite some time. However, we have positive RSI divergences forming in Bond prices and they are due for a rally soon.

Crude was -3.8% on the week, and displays a negative RSI divergence from an overbought condition. Expecting a downtrend.

Gold was -0.5% on the week. The pullback from the $990 high has been orderly with support around the $915 level.

The Euro (-0.6%) continues to pullback, the USD (+0.1%) continues to rally and the Yen (+2.2%) is rallying now as well. Expecting the USD to top in early July (82+) which should coincide with a Euro bottom.

NEXT WEEK

The most important event(s) on the calendar this week is the FED's FOMC meeting on tuesday/wednesday, and FED chairman Bernanke's testimony before the Congress about the acquistion of Merrill Lynch by Bank of America. There has already been testimony by Ken Lewis, the CEO of BAC, suggesting coersion by the FED chairman and the then Treasury secretary Paulson. With HR 1207, the Federal Reserve Transparency Act of 2009 (audit the FED), already receiving 232 cosponsors. Every word of the FED chairman's testimony is likely to receive a lot of attention by the Congress, investors and the public. On the economic front, the week also starts on tuesday with Existing home sales and FHFA home prices. Wednesday we have Durables goods and New homes sales. On thursday the weekly Jobless claims and the nearly final revision to Q1 GDP. Then on friday Personal income, Consumer spending, PCE and the UoM Consumer sentiment reading. Best to your week!

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987    

SHORT TERM: market closes mixed after early gains, DOW -16

Overnight the Asian markets were all higher. Europe opened higher and closed +0.80%. US index futures were higher overnight and the SPX gapped up slightly to 923 at the open. It closed at 918 yesterday. By 10:00 the SPX hit 927, then made a small pullback to 923 by 10:30, before hitting 927 again at 11:00. After getting overbought on short term momentum at that level, the market started to head lower. At 2:30 the SPX hit 916 and then rallied to 924 just before the close. For the day the SPX/DOW were mixed, and the NDX/NAZ were +1.15%. Bonds were up 12 ticks, Crude lost $1.85, Gold gained $1.00, and the Euro was higher. Support for the SPX remains at 912 and then 848, with resistance at 935 and then 961. Short term momentum was overbought at todays high and ended the day near neutral.

Todays rally to SPX 927 retraces about 50% of the decline from 956 to 904. This is typical of a Minor wave 2 in this bear market. While this market still can move a bit higher in the short term. The OEW pivot at 935 should offer good resistance, if we have indeed ended the uptrend at SPX 956. Best to your weekend!    

MEDIUM TERM: uptrend may have topped

LONG TERM: bear market

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987

  

SHORT TERM: market continues rally off of wednesday's low, DOW +58

Overnight the Asian markets were mostly lower. Europe opened lower but closed +0.45%. US index futures were relatively flat overnight and at 8:30 the weekly Jobless claims remained over 600K: 608K v 605K. The market opened flat at SPX 911 and then started to rally. At 10:00 Leading indicators were +1.2% v 1.1%, and the Philly FED manufacturing apparently improved: -2.2% v -22.6%. Also Treasury secretary Geithner was pushing the expansion of FED powers on Capital hill: http://www.marketwatch.com/story/geithner-we-must-move-quickly-on-bank-reform-plan?siteid=bnbh. The rally continued until about 10:30 when the SPX hit 920. After a small 5 point pullback to 915 by 11:00 the market started moving higher again. By 1:00 the SPX hit 922, then pulled back to 917 by 2:30 and stayed within that range going into the close. For the day the SPX/DOW were +0.75%, and the NDX/NAZ were -0.10%. Bonds dropped about 1 1/4 points, Crude gained 10 cents, Gold lost $2.00, and the Euro was lower. Support for the SPX remains at 912 and then 848, with resistance at 935 and then 961. Short term momentum was oversold at yesterday's low and is now reaching overbought. Tomorrow is Options expiration.

Last thursday the SPX hit 956, the high for the uptrend. Since then, the market has worked its way down to SPX 904 as of yesterday. The decline appears to be five waves: 936, 946, 920, 928 and 904. At the lows the market was extremely oversold and due for a rally, which has been underway. The rally from SPX 904 has unfolded in three waves, thus far: 918, 909, 922. Plus the market is beginning to reach overbought levels. With the rally over SPX 920 today we can now mark a potential Minor wave 1 at the 904 low. The same parameters noted yesterday remain in effect. Options expiration fridays can be quite volatile. Best to your trading!

MEDIUM TERM: uptrend may have topped

LONG TERM: bear market

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987  

SHORT TERM: market stabilizes after reaching oversold levels, DOW -7

Overnight the Asian markets were mixed. Europe opened lower and closed -1.5%. US index futures were higher overnight after the Treasury made this announcement: http://www.marketwatch.com/story/treasury-fed-to-set-higher-bank-captial-standards?siteid=bnbh. At 8:30 the CPI was reported at +0.1% v 0.0%, and just after 9:00 FED chairman Bernanke's speech was released: http://www.federalreserve.gov/newsevents/speech/bernanke20090617a.htm. The market opened slightly to the upside and hit SPX 913 before turning lower. By 11:00 the SPX hit 904, a 52 point drop from the recent 956 high. This decline fits exactly within the range, (49-53 points), of all the pullbacks during the uptrend. From this extremely oversold level the market started to rally. Around 11:30 President Obama announced proposals for overhauling the financial system: http://money.cnn.com/2009/06/17/news/economy/regulatory_reform/index.htm?postversion=2009061713. The market continued to rally as the USD declined on the news. By 2:30 the SPX made a short term double top at 918 and began to pullback. Also announced today, GS/JPM/MS have all paid back their TARP loans. For the day the SPX/DOW were -0.10%, and the NDX/NAZ were +0.75%. Bonds gained about 4 ticks, Crude added 35 cents, Gold rose $8.00, and the Euro was higher. Unleaded gas, btw, has risen for 50 days in a row. Support for the SPX remains at 912 and then 848, with resistance at 935 and then 961. Short term momentum was extremely oversold at todays low and moved above neutral during the rally. Tomorrow, the weekly Jobless claims at 8:30, and then Leading indicators and the Philly FED at 10:00.

If we count the SPX 956 high as the end of the uptrend. Then the decline from that level can be counted as a five wave Minor wave 1: 936-946-920-928-904. From today's oversold levels we would now get a rally, Minor wave 2, back to the previous 4th wave (928), or even challenge the 935 OEW pivot. This should generate an overbought short term momentum reading before the market turns over and enters a declining Minor wave 3. The 935 OEW pivot should act as significant resistance during this rally. Should the market break through this resistance then some other wave count is at work. Shold the market break below SPX 904 before rallying above 920, then Minor wave 1 would be extending. Best to your trading!

MEDIUM TERM: uptrend that may have topped

LONG TERM: bear market

CHARTS:  http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987      

SHORT TERM: market pullback continues, DOW -107

Overnight most of the Asian markets were lower. Europe opened higher and closed +0.05%. Last night FED governor Duke's speech was released: http://www.federalreserve.gov/newsevents/speech/duke20090616a.htm. US index futures were slightly higher overnight and at 8:30 the PPI was reported at +0.2% v+0.3%, and Housing starts were 532K v 454K. At 9:15 Industrial production was reported: -1.1% v -0.7%. The market opened slightly higher to SPX 927. It vacillated for a while before slipping down to 924 by 10:30. The market then tried to rally but only made it up to 928 by 11:00. After that the USD which opened lower started to rally and the SPX headed lower. At 1:30 FED governor Warsh's speech was released: http://www.federalreserve.gov/newsevents/speech/warsh20090616a.htm. By 2:30 the market hit the OEW pivot at 912, held support, and then tried to rally. After a push to 917 by 3:30 it turned over and closed the day at exactly 912. For the day the SPX/DOW were -1.25%, and the NDX/NAZ were -1.00%. Bonds gained about 13 ticks, Crude lost 10 cents, Gold added $8.00, and the Euro was higher. Support for the SPX remains at 912 and then 848, with resistance at 935 and then 961. Short term momentum was again extremely oversold at today's low after rising to near neutral earlier in the day. Tomorrow, the CPI and current Accounts at 8:30. FED chairman Bernanke gives a speech at project HOPE in Wash, DC at 9:00.

After the market declined to SPX 920 yesterday it could only manage an 8 point rally to 928 over the next few trading hours. At 12:30 it dropped below 920 and hit 912 by 2:30. We can now count this move down from SPX 956 as a potential five wave structure: 936, 946, 920, 928, 912. This uptrend is very close to breaking down, and the OEW pivot at 912 is an important area. Should the market break through this pivot the uptrend is likely over. Short term momentum continues to the downside, but the market is currently a bit oversold. Best to your trading!

MEDIUM TERM: uptrend, but may have topped

LONG TERM: bear market

CHARTS:  http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987     

SHORT TERM: market continues pullback as USD rallies, DOW -187

Overnight the Asian markets were mostly lower. Europe opened lower and closed -3.05%. US index futures were lower overnight, and at 8:30 the Empire state manufacturing index was reported sharply lower: -9.4% v -4.6%. Then around 9:00 FED governor Tarullo's speech was released: http://www.federalreserve.gov/newsevents/speech/tarullo20090615a.htm. The market opened lower at SPX 938 and continued lower. It closed at SPX 946 on friday. A few minutes after 10:00 the SPX broke through the 935 OEW pivot, and by 11:30 the SPX hit 922. For the next hour and a half the market could only manage a two point rally to 924. At 1:00 the Home builders index was reported lower: 15% v 16%. After the SPX hit 924 it started to slip lower again, and at 1:30 the SPX touched 920. Over the next hour a four point drift back to 924 was followed by a retest of 920 by 3:00, just in time for a last hour rally. Today the last hour rally was a meager five points to SPX 925. For the day the SPX/DOW were -2.25%, and the NDX/NAZ were -2.25%. Bonds gained about 10 ticks, Crude slid $1.50, Gold dropped $11.00, and the Euro was lower. Support for the SPX drops to 912 and then 848, with resistance now at 935 and then 961. Short term momentum was quite oversold at today's lows. Tonight a speech from FED governor DUKE at 6:00 in Wash, DC. Tomorrow, Housing starts/permits at 8:30 along with the PPI. Then at 9:15 Industrial production and Capacity utilization, and at 1:15 a speech from FED governor Warsh at the IIB (Institute of International Bankers) in NYC.

Last thursday the SPX (956) failed to break through the SPX 961 pivot when it was immediately turned away. On friday the SPX (936) dropped right to the 935 pivot and then bounced higher to close at 946. Today's selling pushed the SPX below the 935 OEW pivot. This is the first sign of selling after the potential uptrend top. Also, the typical last hour buying was not present today. We posted a 'green' label on the SPX chart (Primary wave B) and the alternate count DOW chart (Major wave A). To continue this potential downtrend the SPX needs to break through the 912 OEW pivot next, after a reasonable bounce from 920. This would continue the current downside momentum. Should the SPX rally back above the 935 pivot it would neutralize this momentum. Best to your trading!

MEDIUM TERM: uptrend, but cautious after a potential top

LONG TERM: bear market

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987         

REVIEW

A relatively quiet week and the index results clearly display that: SPX/DOW +0.55%, and the NDX/NAZ were mixed. Economic reports were light. The twin Deficits (budget/trade) continued to worsen, wholesale/business Inventories continued to decline, and weekly Jobless claims remained over 600K. Monthly retail sales turned positive, but so did Import prices. The 10YR bond rate moved over 4.0% for the first time since October, and ended the week at 3.79%. The 10YR was at 2.04% just six months ago. The 30YR bond hit 5.0% this week before closing at 4.63%. Crude soared 6.3% this week, Gold was -1.6% and the Euro was +0.3%. In foreign markets, Asia was +1.6%, Europe was mixed, and the Commodity equity markets were +0.6%.

LONG TERM: bear market

All Supercycle/Cycle bear markets unfold in three Primary waves: ABC. The first wave down, Primary wave A, usually consists of a zigzag or complex three wave pattern. The market typically loses about 50% of its value, completes this first wave, and then a very strong counter-trend Primary wave B unfolds. This wave gives all the appearances of a new bull market. From extremely oversold levels this wave soars either 50%, or retraces 50% of the entire bear market, but also takes the form of a three wave structure. When Primary wave B concludes the negative part of the investor psychology cycle resumes, and the next leg down, Primary wave C gets underway. This is exactly what occurred between 1929-1932, 1937-1942, and to a lesser extent 1973-1974.

At the March 2009 low, SPX 667, we counted a completed zigzag from the bull market October 2007 high, SPX 1576. The three Major waves that formed the zigzag were: wave A Mar08 SPX 1257, wave B May08 SPX1440 and wave C Mar09 SPX667. Observe that the length of wave C (~800 pts.) was about 2.618 times the length of wave A (~300 pts.). Major waves A and C subdivided into five Intermediate waves. Please review the weekly SPX chart in the link below. Two days after the SPX 667 low, we noticed that the market started to impulse higher, and that Primary wave B was likely underway. That was three months ago. Since then the SPX has rallied 43% and the DOW 37%. When applying the historical 50% rally/50% retracement scenario to the SPX, we arrived at an upside targeted range of SPX 1001 and SPX 1122. Thus far the SPX has rallied to 956, and it's still about 5% below the 50% rally level. The current wave structure for this uptrend, however, gives us reason for concern, as described below.

MEDIUM TERM: uptrend, but cautious

This uptrend, from SPX 667, has been quite unique in elliott wave terms. All three significant pullbacks have been symmetrical, between 49 and 53 points. All four rallies have unfolded in different types of impulsive patterns. The first rally from SPX 667-833, ended in a fifth wave diagonal triangle. The second rally from SPX 780-876 was a diagonal triangle. The third, from SPX 827-930 was a simple five wave structure. And the current fourth rally, from SPX 879-956, displays a triangular 4th wave. These rallies are all different forms of impulse waves. You might want to print an hourly chart for future reference. Since the first rally was the strongest, (166 points), and a five wave structure, we labeled it Major wave A. The following pullback to SPX 780 we labeled Major wave B. Major wave C has clearly rallied in another five waves, but much more detailed and complex than Major wave A: wave 1 SPX 876, wave 2 SPX 827, wave 3 SPX 930, wave 4 SPX 879 and wave 5 underway. Also of note, Wave 3 (103 points) is longer than wave 1 (96 points), and wave 4 (a flat) alternates with wave 2 (a zigzag). The total length of Major wave C is currently 176 points (956-780), which compares favorably with the 166 (833-667) point rally of Major wave A. Also you will note that wave 5 (77points) is getting close to the length of wave 1 (96 points) and wave 3 (106 points). With all this symmetry aligning, we are also noticing significant negative RSI divergences on all timeframes. This is the reason for concern. Fortunately, this symmetry has setup some nice parameters on the upside as well as the downside, as described below.

SHORT TERM

Support for the SPX remains at 935 and then 912, with resistance at 961 and then 990. Short term momentum was slightly oversold at friday's SPX 936 low and rising at the close. The support and resistance pivots just noted, align exactly with the short term wave structure. The SPX challenged the 961 pivot on thursday and was immediately turned away. On friday the pullback bottomed at the 935 pivot and then rallied into the close. Should the SPX break through the 961 pivot it should be on its way to the 50% rally level at 1001. When the SPX drops below the 935 pivot, downside momentum should take hold. Then when the SPX drops below the 912 pivot, it will be a good signal that the Mar-Jun uptrend may have ended. With a 40% gain in hand, and a potential 5% further gain ahead, the risk/reward ratio favors a cautious position. Best to your trading!

FOREIGN MARKETS

The Asian markets gained 1.6% this week, but the leaders China (-0.4%), India (+0.9%) and Hong Kong (+1.3%) lagged.

The European markets were mixed with the leader Germany (-0.2%) lagging.

The Commodity equity markets rose 0.6%, and again the leader Brazil (+0.5%) lagged.

COMMODITIES

Bond prices gained 0.8% on the week despite the 10YR hitting 4%, and the 30YR hitting 5% yield. Yield uptrend getting close to ending.

Crude surged 6.3% as it hit nearly $74/bbl. This uptrend has negative divergences in place.

Gold lost 1.6% on the week and has been under a lot of selling pressure since the USD has rallied off its lows. $990 might have been it for the uptrend.

The USD (-0.6%) is displaying some strength after hitting 78.33 on the index. The downtrend may be over for now. The Euro (+0.3%) may have topped at 143.31, and the Yen (+0.4%) continues its consolidation.

NEXT WEEK

Monday kicks off an interesting week with the Empire State index. On tuesday Housing starts, Building permits, the PPI and Industrial production. Wednesday we have the CPI and Current accounts deficit. Thursday the weekly Jobless claims, Leading indicators and Philly FED. Then on friday Options expiration. The FED is also active this week. Two speeches on monday: FED governor Tarullo in NC in the morning, and FED governor DUKE in DC in the evening. On tuesday a speech from FED governor Warsh in NYC, and on wednesday a speech from FED chairman Bernanke at project HOPE in DC. Next week, June 23rd and 24th is the FOMC meeting. Best to you and yours.

CHARTS:  http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987              

SHORT TERM: market closes mixed in quiet trading, DOW +28

Overnight the Asian markets were mixed. Europe opened lower and closed -0.6%. US index futures were lower overnight, and at 8:30 Import prices were reported edging up again +1.3% v +1.1%. The market opened lower at SPX 942, and continued lower to 936 by 10:00. That was the low for the day. At 10:00 the UoM Sentiment reading edged higher to 69.0 v 68.7. The market rallied for an hour to SPX 943 by 11:00, pulled back to 939 by 1:00, then rallied to 946 by 3:00. For the whole day the market stayed within a ten point range. At the close the SPX/DOW  were +0.25%, and the NDX/NAZ  were -0.35%. Bonds were up about 6 ticks, Crude slipped 50 cents, Gold dropped $21.00, and the Euro was lower. Support for the SPX remains at 935 and then 912, with resistance at 961 and then 990. Short term momentum touched oversold territory at today's low, and then rose above neutral during the day. Today the morning push lower held support at the 935 OEW pivot, and then didn't threaten that level for the rest of the day. Nothing has changed short, medium or long term. Enjoy the weekend!

MEDIUM TERM: uptrend but cautious

LONG TERM: bear market

CHARTS:  http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987