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August 20 wednesday updateSHORT TERM: market closes higher while FNM/FRE melt down, DOW +69
Overnight the Asian markets were mostly higher, and Europe opened higher while closing +0.75%. Stocks opened slightly higher to 1270, but quickly sold off to the 1261 pivot by 10:00. That was the low for the day. An oversold rally followed to 1276 by 11:00, the high for the day. When FNM/FRE started to make new bear market lows, the market headed lower. Despite $5 trillion in guarantees, FMN/FRE are now selling at a lower market cap than the largest truly public mortgage lender Washington Mutual. The market certainly thinks these two GSE's will be nationalized. By 2:30 the SPX made a slightly higher low at 1263, then moved higher into the close. For the day the SPX/DOW were +0.60%, and the NDX/NAZ were +0.25%. Bonds were up about twelve ticks, Crude added 95 cents, Gold gained $3.50, and the Euro was lower. Support for the SPX remains at 1261 and then 1240, with resistance at 1287 and then 1316. Short term momentum was oversold this morning, bounced above neutral during the early rally, then settled above neutral. The near term indicators edged up a bit. Tomorrow the weekly unemployment report at 8:30 is followed by the Philly FED and leading indicators at 10:00. Still no short term confirm on the SPX, but did post a tentative "green" labeling of 1-2-3-4 down from the 1313 high on the hourly chart. Best to your trading!
MEDIUM TERM: uptrend high at SPX 1313
LONG TERM: bear market
August 19 tuesday updateSHORT TERM: financials lead market lower again, DOW -131
Overnight the Asian markets were mostly lower. Europe opened lower and closed -2.35%. At 8:30 housing starts were reported down 11%, making new lows to 1991 levels. The July PPI was reported +1.2% exceeding estimates. I read four short articles on the PPI, and could not find one that quoted the annualized rate of change. So I ventured to the FED's website and did the calculations myself, annualized rate +9.9%. No wonder the controlled media didn't mention it. While at the FED I compiled this chart: http://research.stlouisfed.org/fred2/fredgraph?chart_type=line&s[1][id]=PPIFCG&s[1][transformation]=pc1. This is non-seasonally adjusted PPI finished goods, from the 1940's to present, directly from the FED. It actually looks to be over 12%. At the open stocks gapped down on the news as the SPX hit 1274, below yesterdays low in the opening minutes. That was the high for the day. The decline continued until 12:00 when the SPX neared the 1261 pivot and hit 1264. A slight bounce to 1271 by 1:30 was followed by a slightly lower low to 1263 by 3:00. After that, like yesterday, the market bounced around into the close. For the day the SPX/DOW were -1.05%, and the NDX/NAZ were -1.30%. Bonds were up two ticks, Crude rallied $2.40, Gold gained $19.00, and the Euro was higher. Support for the SPX remains at 1261 and then 1240, with resistance at 1287 and then 1316. Short term momentum was quite oversold this morning, and was heading higher into the close. The near term indicators are beginning to get oversold as well. Tomorrow the economic slate is clean, so it should be all technical. The SPX has still not confirmed a wave one down, but is getting close. The DOW, however, did confirm today and it is again leading the market. After the SPX confirms we can start counting a new downtrend. Selling continues in the financials, and the techs are following. Best to your trading!
MEDIUM TERM: uptrend high at SPX 1313
LONG TERM: bear market
August 18 monday updateSHORT TERM: financials decline market follows, DOW -181
Overnight the Asian markets were mixed, Europe opened lower and closed -0.15%. The market opened slightly higher, hitting SPX 1300 in the first few minutes. That was the high for the day. A pullback to 1290 followed by 10:30, and then the market rallied a few points to 1296. After that the financials headed lower taking the general market and the techs with them. By 12:30 the SPX broke through the 1287 support pivot and continued lower to last weeks low at 1275. After finding support around 3:00 at that level the market bounced around a bit into the close. For the day the SPX/DOW were down 1.55%, and the NDX/NAZ were -1.35%. Bonds gained 9 ticks, Crude lost 95 cents, Gold rallied $17.00, and the Euro was higher. Support for the SPX drops down to 1261 and then 1240, with resistance now at 1287 and 1316. Short term momentum was quite oversold at todays lows and finished there. The near term indicators turned down as well, while still displaying the negative divergences from last weeks high at SPX 1313. Today the home builders index was reported to be still at record lows. Tomorrow the July PPI and housing starts will be reported at 8:30.
Thus far the August 11th high of SPX 1313 remains the high for the uptrend. The first pullback from that high occurred last wednesday on the 13th to SPX 1275. On friday the 15th the SPX managed to rally back to 1302 during options expiration. Today the same 1275 was tested in the last hour heading into the close. A break below this level should force additional technical selling. Our near term indicators are displaying their first major weakness since this uptrend began on July 15th at SPX 1200. We continue to feel that a break below the OEW pivot at 1261 will signal the start of the next downtrend. Best to your trading!
MEDIUM TERM: uptrend high SPX 1313
LONG TERM: bear market
August 17 weekend updateREVIEW
The SPX posted its high for the week on monday at 1313, and then its low on wednesday at 1275. Then remained relatively quiet despite a robust increase in the July CPI +0.8%, (+5.6% annualized) reported thursday, and options expiration on friday. For the week the SPX/DOW were mixed, and the NDX/NAZ were +1.6%. The commodity markets remained quite volatile: Crude -1.1%, the CRB -1.3%, Gold -8.4%, the Euro -2.2%, and Bonds were +0.7%. With several of these markets now hitting key support levels I took some extra time to review all the markets.
LONG TERM: bear market
In the art of tracking the markets using EW, one has to always be aware of potential completed counts. Naturally OEW defines the significant waves quantitatively, which makes identifying patterns and counting a lot easier. Yet, using wave patterns alone only provides a picture of what has occurred, not what might occur in the future. This is why OEW combines the wave patterns with technical indicators of various degrees. In reviewing the markets this weekend, which I suggest everyone should do on a regular basis. I found that the internal strength of several key stock market indices was improving. During a long term downtrend this is usually not that important, unless, there is a potential completed wave pattern. Which could indicate a signficant low was recently made. In our 2008 forecast, posted in the picture section upper right of the webpage, we anticipated an ABC down into 2008, followed by a strong ABC rally into 2009. That forecast still holds. Yet, it is important at this juncture, to be aware of a potential alternate count. Referring to the DOW charts, we counted five waves down from the October high into the March low (14,200-11,700) ending Major wave A. Then a Major wave B rally to 13,100 in May. From May to July the DOW dropped from 13,100 to 10,800, making a significantly lower low, which nearly equalled the Oct-Mar decline (2,300 vs. 2,500). This could be a completed wave pattern, a 5-3-5 zigzag. When this count is combined with the improving internal strength of the major indices it offers the possibility that Major wave C completed at the July lows. What this would imply is that a bear market counter-trend rally into 2009 may be underway. Since many of you trade the SPX, the key levels to watch would be 1327 and 1364. SPX 1327 has been our upper limit, or a 50% retracement of the recent downtrend. SPX 1344, the next higher pivot is a 61.8% retracement. The SPX 1364 pivot is well beyond the normal bear market downtrend retracements, which would indicate that this alternate count could then be in play. For now we continue with the count posted, suggesting that a new downtrend should be underway soon. This alternate count is posted on the DOW charts, while the posted SPX count remains the same.
MEDIUM TERM: uptrend high at SPX 1313
Returning to our preferred count posted on the SPX charts. The uptrend from the SPX 1200 downtrend low hit 1313 on monday, close to the upside targeted 1316-1327 range. As mentioned above this represents a 50% retracement of the recent downtrend. When the market hit this targeted range on monday, and started to selloff. We expected to get a confirmation of the first wave down, or wave one. That did not occur as the SPX found support at 1275 on wednesday and then rallied back to around 1300 by friday. Downtrends in this bear market have been led by the financials, then followed by the general market, and finally the techs. The strength of the techs into options expiration held everything at bay. The key level we have been observing is SPX 1261. Should the market break below this pivot, then the next downtrend should be underway. Technically the SPX/DOW continue to display negative RSI divergences on the daily charts, while the NDX is displaying a negative divergence on the hourly charts. Should these divergences take hold the market should start selling off this week. The daily MACD is already overbought in the major indices.
SHORT TERM:
Support for the SPX remains at 1287 and then 1261, with resistance at 1316 and then 1327. Short term momentum is just above neutral, and the near term indicators are rising, with negative divergences from the highs still in place. The uptrend from 1200 started off quite simple, but has now turned complex. We had a simple ABC rally from 1200-1291, for a larger wave A. Then an ABC decline to 1234 to complete a larger wave B. Since that low the action has become complex. At SPX 1325 wave C equals wave A. That's still a possibility. For now this is a day traders market.
FOREIGN MARKETS
The Asian markets continue mixed. The only index in an uptrend is India's BSE. The rest remain in downtrends.
The European markets are uptrending along with the US.
The Commodity markets have had significant selloffs, missing the entire upmove in the world markets.
COMMODITIES
Bonds rallied this week to a new uptrend high, with negative divergences starting to appear.
Crude continued its downtrend, and has now reached a significant support level, see charts. Still bullish.
Gold dropped $73 this week, 8.4%. It is now trading at close to the support level we expected to see after it reached $1,000 in March. If you recall, after the March highs we expected a correction to the previous 4th wave at $773. Gold did selloff but found support at $846 and rallied to $990. Now it's back to where it should have been in May. Still bullish.
The Euro/USD have changed characteristics in recent weeks. Again after the March low at USD 70.70 we expected a potential bull market kickoff, but only experienced a diagonal triangle uptrend. Then after a correction into July the market took off. The strength in the USD is creating many possibilites in other markets. Since this looks similar to the uptrend between 2004-2005 we should expect a long term move to at least the mid-80's in the USD index.
NEXT WEEK
On monday the home builders index, and PPI with housing starts on tuesday. Then thursday the weekly unemployment report, and leading indicators. On friday FED chairman Bernanke gives a speech in Wyoming. Certainly looks like a technical week. Best to your trading!
August 15 friday updateSHORT TERM: market opens higher then closes mixed, DOW +44
Overnight the Asian markets were mixed, Europe opened higher but closed mixed as well. With overnight selling in the commodity sector the US index futures moved higher. At 9:15 July industrial production was reported +0.2% vs. +0.4%, and remains flat for the past year. The market opened slightly higher, then rallied to 1302 in the first few minutes. That was the high for the day. After a pullback to SPX 1291 by 10:00, the market stayed within that trading range into the close. For the day the DOW/SPX were +0.35%, and the NDX/NAZ were -0.25%. Bonds were up about eleven ticks, Crude lost $1.25, Gold dropped $20.00, and the Euro was lower. Support for the SPX remains at 1287 and then 1261, with resistance at 1316 and then 1327. Short term momentum remained around neutral, and the near term indicators edged up slightly. While the USD, currencies, and commodities made big moves this week. The equity market ended mixed, with the SPX/DOW slightly lower and the NDX/NAZ higher. The USD appears to have broken out of its 3-year downtrend. But it's not certain if it has ended its 7-year bear market. Since this rally already looks similar to the 2004-2005 uptrend, it should retrace back to about 83 on the USD index by 2009. This should continue to pressure the commodity sector in the coming months. Crude oil, the leader in the sector, most likely will bottom first. It continues to hold support, while the precious metals decline. Best to your weekend!
MEDIUM TERM: uptrend high at SPX 1313
LONG TERM: bear market
August 14 thursday updateSHORT TERM: market gaps down and then rallies, DOW +83
Overnight the Asian markets were mixed, Europe opened higher and closed +0.60%. At 8:30 the July CPI was reported +0.8%, pushing the year over year rate to +5.6%. The highest inflation rate in 17 years. The market sold off on the news, opening at SPX 1277. Defying logic, as if to imply that the market is logical from day to day. The market then rallied, closing the downside gap and hitting SPX 1300 by 1:00, as Crude and Gold sold off. A pullback followed to SPX 1289 by 3:00, and then the SPX inched higher into the close. For the day the SPX/DOW were +0.65%, and the NDX/NAZ were +1.10%. Bonds were up about 12 ticks, Crude lost $1.05, Gold dropped $19.50, and the Euro was lower. Support remains at 1287 and then 1261, with resistance at 1316 and then 1327. Short term momentum stayed around neutral for most of the day. The near term indicators flattened out. Tomorrow, industrial production at 9:15, consumer sentiment at 10:00, and options expiration at the close.
While the market has sold off from the SPX 1313 high posted on monday, to yesterdays low of 1275. It has not triggered a confirmed wave 1 down yet. Rather than breaking lower to get that confirmation today. The market reversed right at the open and headed higher. Only Techs made a new high for the uptrend, and continue to support this market. Still need a breakdown below the 1261 pivot to help confirm a new downtrend.
MEDIUM TERM: uptrend high at SPX 1313
LONG TERM: bear market
August 13 wednesday updateSHORT TERM: market lower as financials continue to slide, DOW -110
Overnight the Asian markets were all lower, Europe opened lower and closed -2.00%. US index futures were quiet overnight, and at 8:30 the Commerce Dept. reported July retail sales had slipped into negative territory: -0.1% vs. +0.3%, and were 0.5% lower than last month with auto sales excluded. At the open the market hit 1287 and headed lower. By 12:00 it hit the low for the day at SPX 1275. A sharp rally followed straight up to 1294 by 3:00, then the SPX turned over again. The market effectively toggled the 1287 pivot for the whole day. At the close the SPX/DOW were -0.60%, and the NDX/NAZ were mixed. Bonds were down about 1/4 point, Crude gained $3.50, Gold rallied $20.50, and the Euro was flat. Support for the SPX remains at 1287 and then 1261, with resistance at 1316 and then 1327. Short term momentum was oversold at the lows this morning, and finished around neutral. The near term indicators continue to decline. Tomorrow the weekly unemployment claims and the July CPI will be released at 8:30. The financial sector and the general market continue to weaken following mondays high at SPX 1313. Techs, however, are remaining relatively steady. When the Techs turnover the next downtrend will be underway in earnest. Continue to monitor the SPX 1261 pivot for signs of a breakdown. Options expiration is on friday. Best to your trading!
MEDIUM TERM: uptrend high still at SPX 1313
LONG TERM: bear market
August 12 tuesday updateSHORT TERM: market follows financials lower, DOW -140
Overnight the Asian markets were mostly lower, Europe opened lower and closed -0.25%. US index futures traded flat, and at 8:30 the June trade deficit was reported better than expected: $57B vs $59B. The market opened slightly lower at SPX 1302, and that was the high for the day. The market pulled back to 1295 by 10:30, then rallied to 1301 by 11:30. But the financials continued to weaken. Leading the financials lower was Goldman Sachs (-$10.50), after receiving a downgrade to hold. At 2:00 the July budget deficit was announced: $102B vs $36B. Unbelievable! The market headed lower on the news hitting SPX 1286 by 3:30. It then rebounded with a small bounce into the close. For the day the SPX/DOW were -1.20%, and the NDX/NAZ were -0.20%. Bonds rallied over 3/4 points, Crude dropped $1.15, Gold slipped $5.25, and the Euro was higher. Support for the SPX remains at 1287 and then 1261, with resistance at 1316 and then 1327. Short term momentum continued lower today and nearly reached oversold. The near term indicators turned lower as well, with negative divergences in place. Tomorrow retail sales and the import price index at 8:30, then inventories at 10:00. After hitting our targeted range of the 1316 - 1327 pivots yesterday, the market pulled back into support at the 1287 pivot today. Tonight at midnight the SEC ban on naked short selling expires, and will not be renewed. They are, however, working on a broader rule which will take months to work out the details. Reminds me of 1938, when the selloff following the 1937 bull market high was blamed on short selling. The SEC then created the uptick rule: stocks could only be shorted after an uptick, and with borrowed shares. This rule was recently revoked on July 6, 2007. Perfect timing! Yesterdays rally to SPX 1313 may have been it for the uptend. A drop below the 1261 pivot would confirm. Best to your trading!
MEDIUM TERM: uptrend hit SPX 1313 monday
LONG TERM: bear market
August 11 monday updateSHORT TERM: another wild day in many markets, DOW +48
Overnight the Asian markets were mostly higher, Europe opened higher and closed +0.85%. US index futures were quiet overnight and lacking any new developments the market opened slightly lower hitting SPX 1291. Despite the conflict between Georgia and Russia, the market started to rally and Crude started to selloff again. By 1:30 the SPX had hit the 1316 pivot, reaching 1313 and then pulled back to 1300 by 3:00 as Crude recovered. After a quick six point rally the SPX dipped below 1300 but held into the close. For the day the SPX/DOW were +0.55%, and the NDX/NAZ were +0.90%. Bonds lost about 1/2 point, Crude dropped 65 cents, Gold slid $34.00, and the Euro was lower. Support for the SPX remains at 1287 and then 1261, with resistance at 1316 and then 1327. Short term momentum was extremely overbought this afternoon, then pulled back to neutral. Some of the negative divergences were cleared, but others still remain. The near term indicators are rising and some negative divergences cleared here as well. Tomorrow the trade deficit is reported at 8:30, and then the budget deficit at 2:00. With the market reaching our SPX 1316 - 1327 targeted range today, now waiting for some weakness in the financials to signal a downturn. Only FNM/FRE were weak today. Best to your trading!
MEDIUM TERM: uptrend hits new high at SPX 1313
LONG TERM: bear market
August 09 weekend updateREVIEW
The first week of August came in with a bang. While the FED and ECU decided to leave rates unchanged, the major markets were anything but unchanged. The US equity market was quite volatile ending with the SPX/DOW +3.3%, and the NDX/NAZ +5.0%. Bonds were flat +0.2%, but Crude lost 7.9%, Gold dropped 5.8%, the CRB lost 6.9%, and the Euro dropped 3.4%. While we are now accustomed to volatility in many of these markets, the move in the USD/EUR was quite unusual. The USD is clearly trying to break out of its three year bear market.
LONG TERM: bear market
Despite all the recent volatility the stock market continues to move along as expected. The recent downtrend low at SPX 1200 confirmed the end of Intermediate wave A in our ongoing Major wave C. The end of this downtrend, like all the others during this bear market, was triggered by government action. This time it was the temporary ban on naked short selling of the Primary dealers (banks and ibanks) and the GSE's. This temporary ban expires tuesday August 12th. At the March low, it was the FED's historical move of opening the discount window to all the Primary dealers, rather than just the banks. At the January low, the FED made an unprecedented 125 bps cut in the discount rate in just two days. If you are unfamiliar with the Primary dealers: http://www.newyorkfed.org/markets/pridealers_current.html. Upon examination of this link you will notice that there are eighteen banks and ibanks that are the Primary dealers for the US gov't Treasury market. And, they are not all US financial institutions. Only eight are US corporations, four are based in the UK, two are Swiss, two are in Japan, and then one in France and Germany. Yes, the FED opened its discount window to ten foreign banks doing business in the US. Interesting! A GSE link: http://en.wikipedia.org/wiki/Category:United_States_government_sponsored_enterprise.
Upon completion of this uptrend, Intermediate wave B, the market should waterfall in wave Intermediate C. This next downtrend should then complete Major wave C, and Primary wave A of the bear market. Major wave A completed in January 2008 at SPX 1270, and Major wave B ended at SPX 1440in May. See charts in the link below, or the 2008 projection in the photo section above right. We continue to maintain our SPX target of under 1100 for the end of Primary wave A. The SPX closed at 1296 friday.
MEDIUM TERM: uptrending from SPX 1200 low
Intermediate wave A bottomed abruptly in mid-July after an extended two month downtrend from 1440. None of the rallies during this downtrend ever exceeded 36 points. When Intermediate wave C begins, we are expecting a similar type of decline. Since Intermediate waves A and C of Major wave A were similar in nature. We're expecting Intermediate waves A and C of Major wave C to be similar in nature as well. The current uptrend, Intermediate wave B should be nearing completion. At the beginning of the rally, we anticipated an abc uptrend, limited by the OEW pivots: 1287 - 1240 - 1327. The market rallied to 1291, then pulled back to 1234, and now has rallied to a high of 1298 on friday. The OEW pivots have worked remarkably well since their inception. Also of note, a typical fibonacci retracement of the 240 point Intermediate wave A suggests: 38.2% @ SPX 1292, and 50% @ SPX 1320. Therefore both technical approaches suggest this uptrend is now approaching its upper limits. Lastly, as we noted in friday's report, we are beginning to see negative divergences appearing on several timeframes. Specifically, the SPX/DOW hourly is displaying negative RSI/MACD divergences; the SPX/DOW daily is displaying a negative RSI divergence, and reaching the typical upside limit for MACD; and the SPX/DOW weekly is reaching its typical RSI limit, with a lackluster MACD. Remember to sell bear market rallies and buy bull market corrections.
SHORT TERM
Support for the SPX remains at 1287 and then 1261, with resistance at 1316 and then 1327. Short term momentum is displaying negative divergences as noted above. The near term indicators are rising and displaying negative divergences as well. Unless this market can surge through SPX 1300, and clear the divergences, the upside for this uptrend appears limited. Let's lower our upside target into the 1316 to 1327 pivot range, and maintain our uptrend continuation limit at the 1261 pivot. As we enter options expiration week, we might look for a reversal on monday/tuesday. Tuesday also coincides with the end of the SEC ban on naked short selling. Best to your trading!
FOREIGN MARKETS
The Asian markets have remained weak. The only market in an uptrend is India's BSE, as the rest have had meager rallies.
The European markets are following the US markets. Both the DAX and FTSE look to be in uptrends.
The Commodity markets Canada and Brazil, have not participated at all in this US uptrend. Commodities are still correcting.
COMMODITIES
The bond market is still uptrending from the June lows, as the 10YR has dropped below 4%. This bear market should resume shortly.
Crude has had quite a correction from the July $148 high, as it hit $115 on friday. It's currently in the middle of our $110-$122 support zone, and has nearly reached the 34 wma at $114. Expecting this wave 4 downtrend to end shortly.
Gold and the CRB have also been caught in the Crude selloff in their own fourth waves. Expecting the entire commodity sector to bottom shortly.
The USD/EUR had a explosive week rallying 3.4%. USD remains in an uptrend, and may have reversed its three year downtrend.
NEXT WEEK
Options expiration will be the main focus for the upcoming week. On the economic front the trade and budget deficits will be reported tuesday. Then retail sales and inventories on wednesday. On thursday the weekly unemployment claims and the CPI, and followed by industrial production and consumer sentiment on friday. Nothing scheduled from the FED. Best to your week!
August 08 friday updateSHORT TERM: USD rallies, Crude drops, market rallies: DOW +303
Overnight the Asian markets were mixed, Europe opened lower but closed +0.25%. US index futures were relatively quiet before the open, and the mornings economic reports were just more of the same. At the open the SPX dipped to 1262, held the support pivot and rallied. In a seemingly non-stop rise, the SPX hit the 1287 pivot by 12:30, paused for about an hour, then moved even higher still. Nearing the close the SPX hit a new uptrend high at 1298, and nearly closed there. For the day the SPX/DOW were +2.50%, and the NDX/NAZ were +2.50%. Bonds dropped four ticks, Crude lost $5.00, Gold slid $13.00, and the Euro was much lower. Support for the SPX pops up to 1287 and then 1261, with resistance at 1316 and then 1327. Short term momentum is overbought, and market momentum is starting to display negative divergences on several timeframes. The near term indicators are displaying these negative divergences as well. If this market can break through SPX 1300 and clear away these momentum divergences, then 1327 would seem likely. Monday certainly will be key to any further upside, as next week is options expiration week. Also of note, the SEC ban on naked short selling of the Primary dealers and the GSE's lifts on tuesday. Best to your weekend!
MEDIUM TERM: uptrend makes at a new high at SPX 1298
LONG TERM: bear market
August 07 thursday updateSHORT TERM: AIG report and financials drag market lower, DOW -225
Overnight the Asian markets were mostly higher, but Europe opened lower and closed -0.20%. After the close yesterday AIG reported disappointing earnings and the index futures sold off on the news. This morning at 8:30 the weekly unemployment report continued to slip lower -455K. At the open the market gapped down from yesterdays SPX 1289 close, opening at 1282. Within the first few minutes it hit 1273, but steadied and started to rally. At 10:00 pending home sales were reported +5.3%, mostly foreclosure bargain hunting. By 10:30 the SPX hit 1282, pulled back to 1276 by 12:00, and then rallied back to 1283 by 1:00. Failing to break through the 1287 pivot, which it closed above yesterday, the market again headed lower. By 3:00 the SPX broke through the lows for the day, and headed to the 1261 pivot, hitting 1264 at 3:30. Considering the market only spent an hour at 1292 yesterday, this was a fairly quick reversal. At the close the SPX/DOW were -1.85%, and the NDX/NAZ were -0.85%. Bonds rallied over one point, Crude gained $1.25, Gold lost $2.00, and the Euro was lower. Support for the SPX drops down to 1261 and then 1240, with resistance at 1287 and then 1316. Short term momentum put in a negative divergence yesterday at the highs, and is now already oversold. The near term indicators are now declining as well, and displaying negative divergences. SPX 1261 becomes an even more important pivot if this uptrend is going to continue. Tomorrow at 8:30 Q2 productivity and unit labor costs, then at 10:00 wholesale inventories.
Typically at the uptrend tops in this bear market, first the financials start to break down from their highs. Then the general market starts to weaken, but is supported by a rally in the techs. Then when the techs turn over the entire market moves lower. Today, the financials started to break lower. Let's see if the techs can rally from here and support the general market for a few days. If not, SPX 1261 will probably fail to hold support and the uptrend will have likely ended yesterday. Best to your trading!
MEDIUM TERM: uptrend being tested after just one day at SPX 1292
LONG TERM: bear market
August 06 wednesday updateSHORT TERM: rally continues to new uptrend highs, DOW +40
Overnight the Asian markets were all higher, and Europe closed +0.60%. US index futures edged lower after FRE reported an $800 mln Q2 loss. At the open the SPX hit 1282, then pulled back to 1276 by 11:00. As Crude continued to sell off on the weekly inventory report the market started to rally. From the 11:00 low to nearly 3:00 the market moved higher with hardly a five point pullback. Just before 3:00 the SPX hit a new high for the uptrend at 1292. Our minimum double top target: 1291 - 1292 has been achieved. At the close the SPX/DOW were +0.35%, and the NDX/NAZ were +1.35%. Bonds lost about 5 ticks, Crude dropped 70 cents, Gold gained $2.00, and the Euro was lower. Support for the SPX is now at 1287 and then 1261, with resistance at 1316 and then 1327. Short term momentum was overbought at todays highs and then backed off a bit. The near term indicators are still rising. Tomorrow, weekly jobless claims before the open, pending home sales by 10:00, and then consumer credit at 3:00. With many of the indices we follow now in confirmed uptrends, it's time to start looking for a top. It's still a bear market. Remember, we sell bear market rallies and buy bull market corrections. Technically the uptrend still looks good to reach our 1327 pivot target. Remember our projection from SPX 1200: 1287-1240-1327. However, the market should not break below the 1261 pivot before it gets there. Speaking of bull markets. Let's not forget commodities are still in a bull market, and have been in a correction for a month or longer. Crude traded close to our first downside target today. Expecting a bottom soon.
MEDIUM TERM: uptrend from SPX 1200 continues
LONG TERM: bear market
August 05 tuesday updateSHORT TERM: market rallies following Europe higher, DOW +332
Overnight the Asian markets were mostly lower, but things started to improve as the sun moved west. India's BSE displayed a good rally, and Europe opened higher and closed +2.60%. US index futures rose overnight, then at 8:30 ISM services reported a slight contraction (49.5), but an improvement over last month. At the open stocks gapped up to 1257 within the first few minutes, yesterday's close was 1249. With Crude moving lower, the SPX continued to rally through the 1261 pivot and right into the FOMC results at 2:15: http://www.federalreserve.gov/newsevents/press/monetary/20080805a.htm. When the FED announced rates were staying unchanged, and they remained concerned about the economy, the SPX hit 1278. A quick, but short reversal to 1270 by 2:30 was followed with another new high on the day heading into the close. For the day the SPX/DOW were +2.90%, and the NDX/NAZ were +3.20%. Bonds were down 1/4 point, Crude lost $2.75, Gold was $23.50 lower, and the Euro was down as well. Support for the SPX now jumps back up to 1261 and then 1240, with resistance at 1287 and then 1316. Short term momentum was quite overbought at the close, while the near term indicators turned back up. Nothing on the economic agenda for tomorrow, so it should be a technical day.
Interesting juncture for this uptrend. The market finally broke out of its multi-day malaise and soared without any special news. The FED did what was expected, the ISM report was nothing special, and Crude dropped again like it has been for nearly a month now. It feels like the market is making its last push higher to complete the uptrend. We can now raise our uptrend breakdown warning level from SPX 1234 to 1247. For now, the market should continue higher into our SPX 1327 pivot. Best to your trading!
MEDIUM TERM: downtrend bottomed at SPX 1200
LONG TERM: bear market
OEW tutoringFor the past twelve months the economy has been in a period of transition. The days of rising housing prices, low energy prices, and moderate food prices are gone. Consumer home equity is now depreciating, retirement accounts are eroding, savings are losing their purchasing power, and disposable income is diminishing. The FED reacted by drastically reducing interest rates, and took extraordinary steps to reduce the downward pressure on the banking industry. Market pundits have turned reservedly bullish, the FED has saved the day! Certainly economic opinions, during a period of transition, can vary widely. From "expecting strong growth in the second half of the year" to "the economy is already in a recession". Yet, all this talk does not change the facts. Housing prices are plummeting, energy costs are soaring, low interest rates are eroding savings, and disposable income is still diminishing. Opinions are often biased on the "glass is half full, or half empty" syndrome. In other words people are bullish or bearish because of their perception of the economy, the country, the world. And of course, there is always political bias, and self-interest bias. After personally observing the markets for over 40 years. I have learned there is only one opinion that counts: the market itself. Let's review the last few years and determine what the market was predicting in relation to housing, energy prices, commodity prices and the stock market. Housing stocks were in a bull market until mid-2005, and started to decline into a bear market, which was confirmed by OEW analysis in early 2006. That's a full year before anyone even noticed there was a problem in the housing market in 2007. Crude oil has been rising since 1998, when it was $10.00 a barrel. When the US invaded Iraq it was $25/bbl. It reached nearly $148/bbl recently. OEW confirmed every leg of this ongoing bull market. Commodity prices as measured by the old CRB (CCI) have been rising since 2001. This new bull market was confirmed by OEW in 2002. Yet only now, in 2008, are the rising prices beginning to impact economies worldwide. The US stock market had been bullish from 2002 - 2007, when it doubled. Despite some steep corrections, OEW remained bullish until early 2008, when a bear market was confirmed. Again, like housing, crude and commodities, it may take a while before this bear market becomes obvious. The markets are a discounting mechanism. They discount all the possible scenarios, and then move in the most probable direction. OEW quantitatively determines what that probable direction is by confirming the long term trend of the market. Some trends can last for a few years, others for over a decade. In the end market opinions are just opinions, and only the markets matter. If you are interested in learning OEW feel free to email me at caldaro@msn.com.
August 04 monday updateSHORT TERM: market closes lower in choppy trading, DOW -42
Overnight the Asian markets were all lower, and Europe opened lower and closed -0.70%. At 8:30 the Commerce Dept. reported inflation adjusted consumer spending and disposable incomes declined. PCE inflation for the month of June rose 0.8%, the highest monthly rise in 27 years. The PCE is now rising at an annual rate of 4.1%. At the open stocks were unchanged, but quickly pulled back. At 10:00 factory orders were reported +1.7%, but the pullback continued. At 10:30 the market hit 1248, stabilized there for an hour, and then started to rally as Crude sold off. By 12:30 the SPX hit 1257, pulled back to 1252 by 1:00, and then rallied to 1260 by 3:00. Failing to break through the 1261 pivot, the SPX then sold off into the close, making a slightly lower low (1247). For the day the SPX/DOW were -0.65%, and the NDX/NAZ were -1.15%. Bonds were flat, Crude lost $4.00, Gold dropped $12.00 and the Euro was higher. Support for the SPX drops down to 1240 and then 1219, with resistance at 1261 and then 1287. Short term momentum was oversold this morning then edged higher. The near term indicators are now around neutral. Tomorrow at 10:00 ISM services, then at 2:00 the regular FOMC meeting announcement. The market slipped below friday's low today to 1247. Even after a $4.00 drop in Crude this market could not sustain any sort of rally. Still feel the market will move higher, but keep an eye on that SPX 1234 level. A break below that could put this rally in jeopardy.
Joe A. of our OEW group just launched his own free blog: http://www.tradingpoints.net/. Joe provides a quantitative fibonacci approach to day trading ES, and other markets as well. He's been updating our group on a regular basis now for a few months. Check it out!
MEDIUM TERM: downtrend bottomed at SPX 1200
LONG TERM: bear market
August 02 weekend updateREVIEW
After lots of economic data this week, and most of it neutral to negative, the markets closed relatively flat. The SPX/DOW ended mixed, and the NDX/NAZ were -0.5%. Housing prices continued to decline nationwide -15.8%, Q2 GDP was reported +1.9% but Q4 2007 was revised to -0.2%, and unemployment moved up to a 4 year high at 5.7%. Bonds gained 1.4%, as did Crude, but Gold dropped 2.1% amd the Euro lost 0.9%.
LONG TERM: bear market
Reviewing our 2008 projection, posted in the photo section, the bear market has moved along about as expected. The projection called for a Major wave A decline, comprised of three Intermediate waves to under SPX 1300, a Major B wave rally to SPX 1400. Then a Major C wave decline, comprised of another three Intermediate waves to under SPX 1100. Thus far, referring to the SPX weekly chart posted in the Chart link below. The Major wave A three wave decline ended in January at SPX 1270. The Major wave B rally was a bit more complex than expected, also of three Intermediate waves, and rallied to SPX 1440. Then the recent decline should have ended Intermediate wave A at SPX 1200, with Intermediate wave B in progress. This will be followed by an Intermediate wave C into the lows. When examining Major wave A we find that the two downtrends were Nov (170 pts.) and Jan (250 pts.). From that low Major wave B rallied effectively 170 pts. (1440-1270). Now the first downtrend of Major wave C was 240 pts. (1440-1200), similar to the Jan 250 point decline. Should this rally carry the market to the SPX 1320 area, a 50% retracement. Then we should expect the next downtrend to decline about another 250 points, or from 1320 to 1070. During the 2002 - 2007 bull market, Primary waves I and III were simple structures, and Primary wave V extended. Typically the bear market that follows one with an extended fifth wave, retraces that entire extension. Since Primary wave V started at SPX 1061, a correction to SPX 1070 falls in line with typical Elliott Wave expectations.
MEDIUM TERM: downtrend ended at SPX 1200
From the July 12th low at SPX 1200 the market has rallied in a series of abc's. This is typical of a B wave counter rally during a bear market. The first abc, wave A, topped on July 21st at 1291. We counted wave A from 1200: 1267-1249-1291, or 91 points. The wave B that followed dropped to 1234. Then projecting that wave C will equal wave A we arrive at a target of 1325 (1234 + 91). Since the entire Intermediate wave A decline was 240 points (1440-1200), a 50% retracement would target a rally to SPX 1320. Therefore SPX 1325 is in line with expectations. Thus far the rally from 1234 has progressed to 1285 on July 31st, then a pullback to 1255 on friday. Expecting this low to hold, we now anticipate a rally into the 1320's area. One last note. During the wave A rally from 1200: 1267-1249-1291, the pullback to 1249 took only one day.
SHORT TERM:
Support for the SPX remains at 1261 and then 1240, with resistance at 1287 and then 1316. Short term momentum was oversold early friday, and then edged higher. The near term indicators have moved below neutral after being overbought. At thursday's high of 1285 the hourly RSI put in a negative divergence, just as it did when the market hit 1267 during the middle of the wave A rally. Thus far, this counter trend rally appears to be symmetrical. One final point. If the SPX breaks below the recent low of 1234, a wave C failure might have occurred at the recent high of 1285. Best to your trading!
FOREIGN MARKETS
The Asian markets have responded differently to this rally. India's BSE and Hong Kong's HSI have rallied well, but the others have hardly rallied at all.
In Europe, England's FTSE and Germany's DAX have followed the US market fairly well.
The commodity markets in Canada and Brazil have been hampered by the recent selloff in commodities.
COMMODITIES
Bonds remain in an uptrend from the June lows, after quite a selloff from the March highs. Expecting the bear market to resume shortly.
Crude confirmed a downtrend after a five month rally to $148. Expecting Crude to find support at about $115 to end the correction.
Gold has been under selling pressure as well after rallying to $990. Expecting Gold to find support around $870.
The USD is now uptrending, and the Euro downtrending. Both currencies have been in neutral longer term since March.
NEXT WEEK
On monday: core PCE, consumer spending and factory orders. Then tuesday we have ISM services and the results of the FOMC meeting, expecting talk and no action. Then thursday is the weekly unemployment report and pending home sales. Finally friday, wholesale inventories and productivity. Enjoy the week!
August 01 friday updateSHORT TERM: market lower in quiet trading, DOW -52
Overnight the Asian markets were mostly higher, but Europe opened lower and closed -1.15%. At 8:30 the US gov't reported that non-farm payrolls had dropped for the seventh straight month, 463K jobs have been lost since December. Unemployment rose to 5.7% a 4 year high. Nevertheless, the market opened higher as the SPX hit 1271, the high for the day. A pullback followed until 10:00 when the SPX hit 1255, the low for the day. Also at 10:00 ISM manufacturing reported a slight downturn, and construction spending was reported -0.4%. Off this low the market essentially toggled the 1261 pivot for the rest of the day, while maintaining a 10 point trading range. At the close the SPX/DOW were -0.50%, and the NDX/NAZ were -0.90%. Bonds were up over 1/4 point, Crude gained $1.05, Gold slipped $3.25, and the Euro was lower. Support for the SPX remains at 1261 and then 1240, with resistance at 1287 and then 1316. Short term momentum rose a bit off of oversold levels, while the near term indicators continued to edge lower. Thus far, the 1261 pivot is holding support and the market should rally to higher highs next week. Best to your weekend!
MEDIUM TERM: downtrend bottomed at SPX 1200
LONG TERM: bear market
July 31 thursday updateSHORT TERM: GDP report rattles market, DOW -206
Overnight the Asian markets were mostly higher, Europe opened higher but closed mixed. US index futures were relatively higher overnight, but sold off rapidly before the government released the results for Q2, ending June 30th. The results +1.9% were a bit lower than the generally accepted optimistic expectations of +2.3%. But what caught my attention was the revision downward of the already final Q4 2007 GDP from +0.6% to -0.2%. Also at 8:30 the weekly unemployment report was worse than expected +448,000 claims. At the open the market gapped down to SPX 1274, it closed at 1284 yesterday. Within the first few minutes it stabilized and then rallied above yesterdays close to 1285 by 11:00. Another pullback followed when the market failed to break through the 1287 pivot, and by 12:30 the SPX hit 1271. Again the SPX rallied, this time to 1283 by 2:30, before turning over and closing at a new low for the day. At the close the SPX/DOW were -1.55%, and the NDX/NAZ were -0.20%. Bonds gained nearly one point, Crude dropped $2.65, Gold rallied $9.75, and the Euro was higher. Support for the SPX remains at 1261 and then 1240, with resistance at 1287 and then 1316. Short term momentum was extremely overbought yesterday and has since turned lower after putting in a negative divergence on the hourly chart. The near term indicators were also overbought and edged slightly lower. Tomorrow at 8:30 the monthly non-farm payrolls report, then at 10:00 ISM manufacturing and construction spending.
Today's failure to break through the 1287 pivot was not surprising, considering the short term negative divergences forming at todays high. This type of divergence also occurred at 1267 on July 21st, when the market quickly sold off to 1249 the next day, before rallying to 1291. Expecting the 1261 pivot to hold during this pullback, and then the market should rally to another set of higher highs. Staying with the 1287 - 1240 - 1327 scenario for Intermediate wave B. On another note.
How can the government revise a quarterly GDP report that already had several opportunities for revision in the three months following the initial report in late January? Several major economists came out in December/January stating that the economy had turned negative. Then when the published government reports suggested they were incorrect, these economic forecasts were discounted. Now we find that they were correct afterall. Will we also find, three months from now, that Q1 2008 was also negative. Therefore qualifying the economy as being in a recession already? No wonder the FED, in January, first made a surprise rate cut, then an unprecedented 75 basis point fed funds cut on the 22nd. What did they know that we weren't told? Fortunately, this ongoing bear market is not misleading anyone.
MEDIUM TERM: downtrend bottomed at SPX 1200
LONG TERM: bear market
July 30 |
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