REVIEW

The market rally slowed down from a week ago, but still a good week. SPX/DOW gained 4.1%, and the NDX/NAZ added 4.7%. Asian markets were +5.0%, European markets gained 4.7%, and the Commodity equity markets were +3.9%. Bonds were flat, Crude gained 5.4%, Gold added 1.5%, and the Euro rose 0.7%. Economic reports were sparce: Leading indicators headed lower +0.7% v +1.3%, and Jobless claims rose to 554K v 524K. Existing home sales rose 4.89M v 4.72M, and Consumer sentiment rose to 66.0% v 64.6%. FED chairman Bernanke was busy this week, before Congress and the Senate, defending monetary policy and FED independence.

LONG TERM: bear market

A few days after the March 6th low at SPX 667 we concluded that a 17 month Primary wave A had ended, taking the form of a detailed zigzag. We then projected that Primary wave B was underway, it should last about 5 months, and the SPX could retrace 50% of the Primary wave A decline from 1576 to 667. We later modified that target to between a 50% rally (SPX 1001) and a 50% retracement (SPX 1122). When the SPX completed a zigzag at 956 on June 11th, we urged caution but kept an alternate count on the DOW charts just in case Primary wave B extended. SPX 956 was quite a bit short of our target in both time and price. The warning proved correct as the market then sold off from 956 to 869 and confirmed a downtrend. When the SPX started to rally off that low we anticipated that it should halt at the 912 pivot. It didn't. On July 15th the SPX gapped up and ran right through the 912 pivot. This indicated that the alternate DOW was gaining in probability. Soon after, the Tech sector confirmed an uptrend and the rest of the market followed. Clearly SPX 956 only ended Major wave A, and SPX 869 Major wave B. Major wave C of Primary wave B was now underway. This week Primary wave B made a new high at SPX 980. This is the highest the market has been since Nov 08, and the SPX has now risen 47% from the March 09 low. Since we are expecting Major wave C to unfold in a zigzag, which would make Primary wave B a double zigzag, (Major wave A was also a zigzag). Major wave C should have some fibonacci relationship to Major wave A. At SPX 979 Major wave C = 0.382A, this was already met this week. Continuing, at SPX 1014 C = 0.50A, at SPX 1047 C = 0.618A, and finally at SPX 1158 C = A. These levels also coincide with OEW pivots: 990, 1018, 1041 and 1136. We currently favor the SPX 1047 level and the 1041 pivot, which was our original lower projection.

MEDIUM TERM: uptrend

When tracking Major wave A we noticed that Intermediate wave A was a sharp rally that traveled 166 points before there was any sizeable pullback. After the 53 point pullback we labeled that Intermediate wave B. Intermediate wave C then unfolded in a detailed five wave pattern which nearly equalled (176 points) wave A. Also the pullbacks during wave C were similar in length to the initial 53 point pullback. Major wave A was quite uniform as it unfolded. We're expecting Major wave C to also unfold in a uniform pattern, however, possibly of a simpler formation. This first wave will probably be the most important. Thus far it looks as though it is in the fifth wave up from the SPX 869 low, and there is resistance just overhead at the 990 pivot. Should it top there, a quick pullback would be in order of about 50 points. Therefore we could envision a 990 OEW pivot top, and then a pullback to the 935 OEW pivot. Right now we continue to have negative divergences on all timeframes from one hour or less, and an overbought condition on all timeframes of daily and more.

SHORT TERM

Support for the SPX remains at 961 and then 935, with resistance at 990 and then 1018. Short term momentum pulled back on friday but is now rising again and displaying a developing negative divergence. We labeled the SPX hourly chart as a 1-2-3-4 from the 869 low and we should now be in the 5th wave, which already looks like five waves. With the DOW just above 9,000 and the SPX approaching 1000, it would appear as a natural place to run into heavy resistance.

FOREIGN MARKETS

The Asian markets rallied 5.0% for the week, China continues to lead, and three of the five indices we follow are in confirmed uptrends.

The European markets rallied 4.7%, Germany's DAX is leading as both indices are in uptrends.

The Commodity equity markets rallied 3.9%, neither of the two indices we follow have confirmed uptrends.

COMMODITIES

Bonds were flat on the week despite the rally in stocks. We still have rates in a downtrend, but they have moved up about 40 bps off the low.

Crude rallied 5.4% on the week. It's still in a downtrend, but moving higher after being quite oversold.

Gold rallied 1.5% this week. It appears to be impulsing higher after the early July low around $905.

The currencies were relatively quiet this week. The USD (-1.0%) continues to drift lower; Euro (+0.7%), Yen (-0.7%) and CDW (+2.6%) higher.

NEXT WEEK

Monday kicks off the week with New home sales at 10:00. On tuesday we have Case-Shiller home prices and Consumer confidence. Wednesday Durable goods orders. Thursday the usual weekly Jobless claims. Then friday Q2 GDP, the employment Cost index, and Chicago PMI. Interesting week. As for the FED, the only thing scheduled so far is the Beige book on wednesday. Best to your week!

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