REVIEW

Market rallies to new uptrend highs (SPX 952) on deceleration of the recession and economic news. During the week reports from ISM manufacturing and services displayed a slight improvement in their contraction. Pending home sales, Factory orders, Construction spending and Auto sales all displayed modest gains. The weekly Unemployment claims were steady at 600K+, monthly job loss contracted to 350K, but the employment rate rose to 9.4%. For the week the SPX/DOW  were +3.2%, and the NDX/NAZ were +4.1%. Bonds fell 3.0%, Crude rose 3.2%, Gold was -2.5%, and the USD gained +1.8% versus losses in both the Euro (-1.3%) and the Yen (-3.1%). The Asian markets showed goods gains (+3.5%), but both Europe (+1.7%) and the Commodity equity markets (+1.1%) lagged.

LONG TERM: bear market

On March 10th (SPX 720) we posted that the low at SPX 667 probably ended the Jan-Mar downtrend. A completed OEW pattern from the SPX 1576 bull market high to the recent low at SPX 667 could now be counted, and the best rally of the bear market should now be underway. This pattern, a 5-3-5 zigzag, consisted of three Major waves: SPX 1257, SPX 1440 and SPX 667, completing Primary wave A of the expected Primary ABC bear market. We anticipated that the uptrend, Primary wave B, would carry the market to between SPX 1001 (a 50% rally) and SPX 1107 (a 50% retracement) over the next several months. Since the March low the market has rallied for three months and has gained 43% during this period. We also noted that there would be claims of a new bull market, bullish sentiment would reach bull market levels, and the Nasdaq (+47%) would likely lead. The market is now approaching those targets as the SPX hit 952 on friday. With most of the gains already in the books it's time to start looking for signs of an end to this uptrend. When Primary wave B does conclude, a declining Primary wave C will take the market back to the March lows, or even lower. This bear market is not over yet.

MEDIUM TERM: uptrends hits new highs

From the March 6th low at SPX 667, we counted five waves up to SPX 833 and then a pullback to SPX 780. We labeled this Major waves A and B. From that low the market has been rallying in another fives waves: wave 1 SPX 876, wave 2 SPX 827, wave 3 SPX 930, wave 4 SPX 879 and wave 5 underway. At SPX 946 this second series of fives waves, Major wave C, equalled Major wave A. The rally has carried a bit beyond that level to SPX 952. Just above the market is a long term OEW pivot at SPX 961. Long term pivots have halted every uptrend of this entire bear market. Should this market get significantly above 961, the next long term pivot is not until SPX 1041. Another characteristic of this bear market is that every uptrend but one ended on a negative RSI divergence on the weekly charts. We now have a negative RSI divergence in place. In fact, there are also negative RSI divergences on every time frame. Below friday's close at SPX 940, there are two levels of importance: SPX 912 and SPX 876. A decline below SPX 912 would likely indicate that the uptrend has ended. A decline below SPX 876 would nearly assure it.

SHORT TERM

Support for the SPX remains at 935 and then 912, with resistance at 961 and then 990. Short term momentum was extremely overbought at friday's highs and ended below neutral at the close. Our short term count for Intermediate wave 5: wave 1 SPX 912, wave 2 SPX 888, wave 3 SPX 949, wave 4 SPX 924 and wave 5 underway. Upon completion of this Minor wave 5, the market will likely complete Intermediate wave 5, of Major wave C, of Primary wave B. A downtrend would almost certainly follow. We're carrying an alternate count on the DOW charts. This count suggests that upon completion of this uptrend only Major wave A of Primary B would end. Then the downtrend to follow would only be Major wave B, and another uptrend would be required to complete Primary wave B. When the current uptrend ends we will know which count is underway by the structure of the next downtrend. Should it start to impulse, Primary wave B has concluded. If it is choppy and corrective, then only Major wave A has ended. Best to your trading!

FOREIGN MARKETS

The Asian markets had a good week +3.5%. India, Hong Kong and China continue to lead.

The European markets were +1.7% on the week. Both Germany and England are displaying negative divergences.

The Commodity equity markets were +1.1%. The mid-week rally in the USD dampened these markets. Negative divergences here as well.

COMMODITIES

Bonds dropped a huge 3% on the week. In the last six months rates on the 10YR have risen from 2.04% to 3.86% at the close on friday. Since rates appear to be in a 3rd wave up from the March low at 2.46%, 4.00% is likely before this uptrend ends. Rates on bonds, notes and bills are now in bull markets.

Crude (+3.2%) traded above $70 this week for the first time since November. That should be a difficult level to overcome.

Gold (-2.5%) had a volatile end of week. It appears to still be in wave 3 of its uptrend.

The USD (+1.8%) may have bottomed this week at 78.33, with resistance at 82+. The Yen (-3.1%) may be downtrending, and the Euro (-1.3%) may follow.

NEXT WEEK

The economic week starts on tuesday with Wholesales inventories. Wednesday we have the twin deficits Trade/Budget as well as the FED's beige book. Thursday is the weekly Jobless claims, Retail sales and Inventories. Then on friday Import/Export prices and the UoM sentiment poll. The FED gets started on monday with a speech from FED governor Tarullo in Wash, DC. Then on wednesday FED governor Duke gives a speech in Ohio. A relatively quiet week. Best to yours.

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