the ELLIOTT WAVE lives on

SHORT TERM: market opens mixed, closes mixed, DOW -6

Overnight the Asian markets were mixed, but Europe closed +0.90%. US index futures traded slightly higher overnight, when at 8:30 Housing starts were reported to have jumped 8.2% in April. Single family homes fell 1.7%, declining for the 12th straight month, while apartment construction surged 36%. Obviously to house the families losing their houses to foreclosure. The market opened slightly higher, after this odd report, to SPX 1425. A pullback followed, and continued after the UoM reported Consumer sentiment had dropped in May to its lowest level since May 1980. By 11:00 the market touched its low for the day at 1414, and rallied to a slightly higher uptrend high (1426) just before the close. For the day the SPX/DOW were mixed, and the NDX/NAZ were -0.10%. Bonds were flat, Crude made a new high +$.2.25, Gold surged $22.50, and the Euro rallied. Support for the SPX remains at 1410 and then 1383, with resistance at 1438 and then 1462. Short term momentum was slightly overbought entering the close, as were the near term indicators. Best to your weekend!

MEDIUM TERM: uptrend ekes out another high at SPX 1426

LONG TERM: bear market

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

SHORT TERM: market continues recent gains, DOW +94

Overnight the Asian markets were mixed, and Europe closed mixed as well. US index futures traded higher overnight despite the selloff late in the day on wednesday. At 8:30 the Empire State index was reported to have dropped into contraction. Then at 9:15 Industrial production was reported lower, and Capacity utilization dropped below 80% for the first time in three years. At 9:30 FED chairman Bernanke's speech: http://www.federalreserve.gov/newsevents/speech/bernanke20080515a.htm. As a result the market opened mixed making the low for the day at SPX 1407. After some hesitation in the first hour the market turned higher, and continued higher will only small pullbacks right into the close. Just before the close the SPX made a new high for the uptrend at 1424. For the day the SPX/DOW were +0.90%, and the NDX/NAZ were +1.60%. Bonds were over 3/4 points higher, Crude was flat, Gold gained $15.00, and the Euro was flat. Tomorrow April housing starts will be reported at 8:30, and it's options expiration friday. Support for the SPX notches up to 1410 and then 1383, with resistance at 1438 and then 1462. Short term momentum is getting overbought, as well as, the near term indicators. Ever since this uptrend began in mid-March every selloff has been met with buying, as the market has continued to edge its way higher. The next significant resistance is at SPX 1438. This OEW pivot provided support for the market in Sept/Nov/Dec, which is now resistance. Tomorrow's expiration friday, and it could be quite wild. Best to your trading!

MEDIUM TERM: uptrend makes a marginal new high at 1424

LONG TERM: bear market

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

SHORT TERM: market rallies but closes mixed, DOW +66

Overnight the Asian markets were mostly higher with only Hong Kong displaying a slight loss. Europe closed +0.20% after a volatile day. US index futures were slightly lower when at 8:30 the April CPI was reported in line with expectations: +0.2%, while food surged +0.9% for the month. The largest one month gain since 1990. The futures responded positively to the news and rallied into the open. At the open the market gapped up to SPX 1407, and then continued to rise to 1420 by 2:00. Then the Techs, which have led the uptrend, started to selloff. And the market suddenly reversed to close about where it opened, at 1409. Wild finish to a strangely positive day. Bonds lost 4 ticks, Crude dropped $1.95, Gold slipped $5.00, and the Euro was lower. Support for the SPX remains at 1383 and then 1364, with resistance at 1410 and then 1438. Short term momentum was way overbought at the highs, and pulled back to neutral. The near term indicators also were a bit overbought and pulled back as well. Tomorrow Industrial production at 9:15, then the Philly FED at 10:00, and the Home builders index at 1:00. Also a speech by Bernanke at 9:30 from the Chicago FED. For the second time in the past eight trading days, the SPX has tried to eclipse the May 2nd 1423 uptrend high. And for the second time it failed to do so. The DOW has not made a higher high either, but the NDX/NAZ both have. The Techs obviously have been leading. Should they start selling off from here. It appear certain that the general market is more than ready to follow. Best to your trading!

MEDIUM TERM: uptrend top at SPX 1423 still in place

LONG TERM: bear market

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

SHORT TERM: market rallies after holding support, DOW +130

Overnight the Asian markets were all higher, and Europe closed +0.35%. US index futures traded higher overnight, and the market opened near 1392 before pulling back to 1386 at 10:30. Holding the 1383 support pivot again, the market turned higher hitting 1400 by 1:00, and then 1404 going into the close. For the day the SPX/DOW were +1.05%, and the NDX/NAZ were 1.80% higher. Bonds were down a few ticks, Crude lost $2.00, Gold slipped $1.50, and the Euro was higher. Support for the SPX remains at 1383 and then 1364, with resistance at 1410 and then 1438. Short term momentum is rising and overbought. The near term indicators edged up slightly. Tomorrow at 8:20 a speech from FED chairman Bernanke, then at 8:30 retails sales and inventories. This is also options expiration week. The OEW pivot at 1383 continues to be an important support level. Best to your trading!

MEDIUM TERM: uptrend may have topped at 1423

LONG TERM: bear market

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

REVIEW

After posting an uptrend high at SPX 1423 a week ago friday, the market closed lower on the week: SPX/DOW -2.1%, and NDX/NAZ -1.2%. This is the first weekly decline since the second week of April when GE disappointed. In the commodity bull market: Crude soared 8.3%, Gold gained 3.2%, and the CRB added 4.7%. Bonds were +1.0%, and short term rates were relatively flat. The Euro gained 0.3%, the USD -0.7%, and the carry trade Yen rallied 2.4%.

LONG TERM: bear market

Through the centuries and especially in the decades of the 20th century, humanity has progressed socially, economically and politically. The secular trend has been economic growth. As a result investors are generally bullish, as is this investor, and rightfully so. However, economic expansions are cyclical. There is at first a period of expansion, followed by a period of flat or negative growth. The stock market generally follows this cyclical pattern, by raising expectations during expansions, and lowering them during contractions. Up until the early 1980's the correlation between recessions and bear markets were synchronous. After the early 1980's that relationship has become sporadic. In other words, recessions have occurred without bear markets, and bear markets without recessions. Therefore, for an investor, all the media talk about whether or not a recession will occur is now meaningless. The definition of a recession is two consecutive quarters of negative GDP. In calculating the GDP, the government uses a CPI price deflator, subtracting inflation from the actual numbers to get real growth. However, since the CPI deflator is 42% subjective. Neither the CPI, nor the GDP are reliable figures. This could be the reason that recessions and bear markets have lost their direct correlation since the early 1980's. Since the relationship is no longer exact. The stock market has responded to growth expectations, rather than the GDP numbers.

OEW defines bull/bear markets quantitatively. Just like it quantifies the significant waves within those trends. It is precise, and not subjective. Since 1982 OEW has confirmed four bear markets: 1984, 1987, 2000-2002, and 2007---. Neither 1990, nor 1998 were quantified as bear markets. They were only corrections during the 13 year (1987-2000) bull market. Yet, according to the government there have only been two recessions during that period: 1990-1991, and 2001. Prior to 1982, the relationship between OEW bear markets and GDP recessions were nearly perfect. Since OEW is a quantified measurement, and the GDP is subjective, I'll side with the quantitative measurement every time. The only quantitative question that remains, is whether or not the March low was the end of the bear market, or just the first leg down. Since the OEW long term trend is still negative, I prefer to wait for a quantified positive confirmation. However, one can speculate either way, speculate. Until the market generates a quantitative long term uptrend reversal. The projected bear market scenario posted in the photo section still applies.

MEDIUM TERM: uptrend may have topped at 1423.

From the March 2008 low, the market has experienced its best uptrend since the bear market began. It has taken quite a bit longer than the two previous uptrends: December and February, which were two to four weeks. But it has outperformed them in both points gained (166 to 118, 126), and percentage gained (13% to 8%, 10%). Nevertheless, as we have commented throughout the uptrend, it appears corrective and just a rally within an overall bear market. The recent high at SPX 1423 ended helfway between our two OEW pivots 1410 and 1438. This is similar to the February uptrend high at 1396, which also ended halfway between two OEW pivots 1383 and 1410. At the recent high, the daily RSI/MACD and weekly RSI were the highest they have been since the October 2007 bull market top, and have since turned down. Also, the near term RSI is displaying a multi-week negative RSI divergence, just like it did at the October 2007 top. As we have noticed over the past few months. In bear markets, traders can stay irrational much longer than expected. This is why bear markets can unfold in complex EW patterns, making them difficult to predict. Nevertheless, while many of the sectors are in between recent highs and lows, the Housing index which started its bear market in 2005, is already downtrending again. Also of note, while the Techs continue to display relative strength, the DOW is beginning to lead the market lower. The stage appears to be set for the start of the next downtrend.

SHORT TERM: key support SPX 1383

Support for the SPX is at 1383 and then 1364, with resistance at 1410 and then 1438. Short term momentum is around neutral, while the near term indicators continue to erode. This week as the market turned lower, the SPX broke through the rising 55 hma, that had created support for nearly a month. See SPX hourly chart. On friday the SPX tested the 1383 pivot both at the open and in the afternoon, and held support. When it does break through this support pivot, the OEW pivot at 1344 would appear to be the short term objective. A decline from 1423 to 1344 would be about 80 points, which has been typical of the first wave of this bear markets downtrends. With negative divergences short term, and declining technicals near and medium term. The OEW 1344 pivot appears to be the next probable target.

FOREIGN MARKETS:

The Asian markets have all been uptrending, but several had sharp one day selloffs this week. Most will probably follow the western markets, but China should rally.

The European markets have been uptrending, but look to be topping as well.

Brazil continues to follow the commodity markets, while Canada appears caught in between a commodity bull market and general bear market. 

COMMODITIES:

Bonds are displaying a slight positive divergence at the recent lows and could rally from here, within a bear market.

Crude exploded this week to new all time highs as its three month uptrend continues, in its bull market.

Gold rallied off the $846 low and is trying to establish a new uptrend, within its bull market.

In the currencies: the Yen woke up this week after holding support at 95 and is trying to uptrend. The Euro/USD remain in their respective trends.

NEXT WEEK

Retail sales and inventories will be reported tuesday, CPI on wednesday, Industrial production and Home builders index on thursday, and Housing starts on friday. The FED appears to go on tour next week. On tuesday at 8:20 Bernanke's in GA, wednesday at 9:15 Kroszner is in MA, thursday at 9:30 Bernanke's in IL and Mishkin at 7PM in PA. Could be a wild week after little volatility recently. Best to your trading!                                

SHORT TERM: market gaps down, ends lower in strange pattern day, DOW -121

Overnight the Asian markets were mostly lower with only Australia's ASX showing a gain. Europe came in lower and closed -1.0%. US index futures traded lower overnight and gapped down to the OEW support pivot at 1384 at the open. By 11:00 the SPX spiked to 1395, but failed to hold that level and slipped right back down to 1384 by 1:30. After some sideways activity in a tight range, the market again spiked to 1392 by 3:30. And, again this did not hold either. At the close the SPX/DOW were -0.80%, and the NDX/NAZ were -0.30%. Bonds gained 1/4 point, Crude added $2.40 to another new high, Gold gained $4.00, and the Euro was higher. Support for the SPX remains at 1383 and then 1364, with resistance at 1410 and then 1438. Short term momentum closed around neutral, while the near term indicators continued to slide lower. The market held the important 1383 pivot today in a lackluster performance. The daily and weekly indicators continue to erode, and Housing is showing definite signs of another downtrend. Looks like this uptrend has seen its top. Best to your weekend!

MEDIUM TERM: uptrend may have topped at 1423

LONG TERM: bear market

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

SHORT TERM: stocks move higher in quiet trading, DOW +52

Overnight the Asian markets were mixed, and Europe closed mixed as well. US index futures rallied overnight, and at 8:30 the weekly unemployment figures came in slightly less than expected, but the monthly average continued to rise. Stocks opened slightly higher trading to SPX 1399 by 10:00. When wholesale inventories were reported -0.1%, the market headed lower to SPX 1389 by 11:00. That was the low for the day. A rally then followed to 1402 by 2:00, but the market eased back going into the close. For the day the SPX/DOW were +0.40%, and the NDX/NAZ were +0.75%. Bonds gained about 3/4 points, Crude was up 95 cents to another new high, Gold added $13.00, and the Euro was flat. Support for the SPX remains at 1383 and then 1364, with resistance at 1410 and then 1438. Short term momentum closed at neutral, while the near term indicators continue to decline. Considering yesterday's selloff, this market did not respond with its usual bounce back. In fact, the rally today halted right at the 55 hma, (which is rising), and was quickly turned away. The OEW 1383 pivot now becomes an important support. A break below this pivot could be followed with a pullback to the 1344 pivot, which would represent about an 80 point decline. Best to your trading!

MEDIUM TERM: uptrend may have topped at 1423

LONG TERM: bear market

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

Long term trends are driven by mass investor psychology. When this psychology is positive there are bull markets, when not, bear markets. Determining what the long term psychology is, at any point in time, can not be measured by anything but the market itself. Certainly there are technical indicators and surveys that measure market sentiment, but these points of view are only for the medium term. And when the market suddenly changes direction, these opinions change as well.

For an investor to be successful in the markets they need to invest with the long term trend. The most successful traders on Wall Street, first determine the long term trend, and then trade within that trend. Most say that the trend is your friend. Then actually one could say that the long term trend is your banker.

Let's examine the typical investor. They invest in a stock, a market index, or commodity because of this or that reason. At the time of the investment, unknowingly, they are taking two basic risks. The first is timing, and the second is the long term trend of their investment. If they entered the investment, when the major trend is moving in their favor, the timing of the purchase is not that risky. Even if that investment declines at first, it will eventually recover and move higher. However, if the investment is made going against the long term trend, and the investment declines, it is not likely to recover. This is exactly how major losses occur in the markets.

Knowing just two simple facts: invest with the long term trend, and buy during corrections, can keep many investors out of trouble. Just as it helps consistent money managers make money for their clients on a year to year basis. You are probably wondering now, how does one determine this trend. As mentioned earlier, only the market can determine the long term trend. It does not occur at the exact top of a bull market, or at the exact bottom of a bear market. Yet, the market does confirm a long term trend, that will last for several years, shortly after those two events.

Basic Elliott Wave tracks bull and bear markets as they unfold. The better EW analysts work with probabilities, technical indicators and wave structures, to determine the long term trends, and the trends that create them. Yet, even though this sounds quite comprehensive, there is nothing about basic EW that is objective. The better EW analysts, however, move closer and closer to objectivity with experience. OEW also uses this comprehensive array of analysis, but with one major difference. OEW analysts know exactly which markets are in long term trends, and which might be entering transition. In addition to this, they know exactly where every wave began and ended during a bull or bear market. All this knowledge still does not bring on perfection, but it removes a lot of the quesswork. If you are interested in determining for yourself, now and in the future, the exact long term trend of every market. Contact caldaro@msn.com for details about joining our OEW group.        

SHORT TERM: market cascades lower as sellers reappear, DOW -206

Overnight the Asian markets were mostly lower, with only Japan's NIKK displaying a gain. Europe closed their session +0.80%. US index futures traded lower overnight and the market opened slightly to the downside, hitting SPX 1415 by 10:00. This is the time pending home sales were reported better than expected, but still down 1%. By 11:00 the market rallied to 1420 but failed to reach new highs (1423). The market then started to pullback, and when buyers didn't appear, the market continued lower. At 3:00 the government reported March consumer credit increased $15 bn, $6.5 bn was generally expected. By 3:30 the selling eased up as the SPX took out yesterdays lows and hit 1391. At the close the SPX/DOW were 1.70%, and the NDX/NAZ were -1.90%. Bonds gained 13 ticks, Crude made another new high up $1.95, Gold lost $7.00, and the Euro was lower. Support for the SPX again notches down to 1383 and then 1364, with resistance now at 1410 and then 1438. Short term momentum was getting oversold into the close. The near term indicators are heading lower. Tomorrow the weekly jobless claims at 8:30, and wholesale inventories at 10:00. For the first time in several weeks the SPX dropped below the 55 hma and closed there. Each time this has occurred in the recent past, it has led to more downside action short term. Considering that the market was recently the most overbought it has been since the bear market began. It wouldn't be surprising if SPX 1423 was the top of the uptrend. Certainly it's too early to tell, this uptrend has had a tendency to be quite volatile at times. Nevertheless, if the current decline of 32 SPX points, turns into 80+ points in the short term. We can then expect a rally back to the breakdown point, before the serious part of the downtrend begins. Many are impressed with bear market rallies. The chart below is just a reminder of what could follow, after what appears to be a solid uptrend. Best to your trading!

MEDIUM TERM: SPX 1423 may have been the high for the uptrend

LONG TERM: bear market

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

   

SHORT TERM: market opens lower but closes near uptrend highs, DOW +51

Overnight the Asian markets were mixed, and Europe ended their session -0.25%. US index futures traded lower, and the market opened to the downside as the SPX hit 1397 by 10:00. Holding support at the 55 hma, as it has since mid-April, the market turned around and rallied for the rest of the day. At the close the SPX/DOW were +0.60%, and the NDX/NAZ were +0.80%. Bonds declined, Crude made new highs, Gold was up a few dollars, and the Euro was higher. Support for the SPX again notches up to 1410 and then 1383, with resistance at 1438 and then 1462. Short term momentum is again getting overbought, while the near term indicators continue to display negative divergences. Tomorrow, a speech by FED governor Kroszner at 8:45, and pending home sales at 10:00. For the past several weeks the SPX has held the rising 55 hma as support, now at 1401, as it has worked its ways past two important OEW pivots: 1383 and 1410. The next pivot at 1438 should be a level of significant resistance. Not only did it provide interim support in September, November and December of last year. But this pivot is a long term pivot which goes back to the year 2000. Just as the long term pivot at 1383 offered significant resistance  in February. Expecting SPX 1438 to offer significant resistance in May. Best to your trading!

MEDIUM TERM: uptrend closes near it highs

LONG TERM: bear market

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

SHORT TERM: stocks slip lower in quiet trading, DOW -87

Overnight the Asian markets were mixed, and Europe's DAX closed +0.12%. US stocks opened slightly lower and then rallied to 1416 by 10:00, the high for the day. Also at 10:00 ISM services were reported to be expanding, with the current reading at 52. The market pulled back on the news to SPX 1405 by 11:00. After that the SPX stayed in a very narrow five point range for the rest of the day, while touching 1404 at 2:00. At the close the SPX/DOW were -0.55%, and the NDX/NAZ were -0.40%. Bonds were flat, Crude hit $120 gaining $3.70, Gold rallied $17.00, and the Euro was higher. Support for the SPX now notches down to 1383 and then 1364, with resistance at 1410 and then 1438. Short term momentum moved lower all day, closing at neutral. The near term indicators are still displaying negative divergences from fridays highs, and have slipped a bit lower. Marc requested that I post both the potential bullish count, and the preferred bearish count on the SPX, as mentioned over the weekend. The chart is below. Fed chairman Bernanke speaks tonight in NYC at 8:30. After reading friday that the FED is now accepting questionable student loan paper in exchange for treasuries: http://www.bloomberg.com/apps/news?pid=20601109&sid=a1ctn1Xfq5Do&refer=exclusive. Wonder whose next on the Bernanke Bridge loan agenda. These actions will create future problems for the FED in the name of political pressure, as mentioned in that piece. Best to your week!

MEDIUM TERM: uptrend may have topped at 1423, near the 89 wma

LONG TERM: bear market, unless the FED has determined to prevent one in this election year

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

        

REVIEW

After a deluge of economic information during the week: FED lowered fed funds to 2%, Q1 GDP +0.6%, payrolls down only 20,000, PCE +3.2% annualized and ISM manufacturing still contracting at 48.6. The entire SPX range for the week occurred within the last two days: SPX 1383 - 1423. Not that much volatility. For the week the SPX/DOW were +1.25%, and the NDX/NAZ were +2.75%. Bonds were flat, Crude lost 1.9%, Gold dropped 3.6% and the Euro lost 1.2%.

LONG TERM: bear market

From the October 2007 top at SPX 1576 we continue to count the bear market as three Intermediate waves down into the January low completing Major wave A. Then an Intermediate wave A rally into the February high, followed by an irregular wave B into the March low, and Intermediate wave C still underway. Upon completion of this uptrend, from the SPX 1257 low, Major wave B should complete and the bear market should resume. The reason we maintain this view, is that in the entire history of the stock market from the year 1932, no bull market of more than three years has been followed by a bear market of anything less than eight months. That short bear market occurred in the 1950's. Since a 5 month bear market has never followed a 5 year bull market, there is no reason to expect it has occurred this time. However, OEW and EW for that matter, are about probabilities. Even though OEW defines the waves quantitatively, it does not label them. It removes the guess work of where a significant wave began and ended. These actual waves then create the structure of the overall bull/bear market. OEW applies to all market indices, commodities, stocks, etc. When an OEW technician knows exactly what the waves are, it removes a lot of the guess work. Then, the technician has to define what these actual waves are projecting for the future of the market by labeling them. The OEW technician applies a simple labeling scheme, based upon my many years of experience of watching the stock market unfold. It is not perfect, because the projected long term trend can change. Markets, as we know, are influenced by external events. Waves do not unfold because they have been etched in stone. They unfold because of changes in market sentiment as it relates to these external market events. Keeping all of this in mind, let's offer an alternative view, which also has historical validity. The Dow Theory has been around longer than the period we referenced (1932-2008). The theory suggests that when economic cycles change the TRANsports lead the change because they transport the goods that manufacuters make and consumers buy, before they show up in the profits of the Industrials. Therefore when the Transports start to breakdown, and the Industrials follow, it's a signal of an economic slowdown and a looming bear market. Conversely, when the Transports breakout, and the Industrials confirm, it's a signal of a pending economic expansion. Recent examples of this indicator start in November 2007. When the DOW made new highs in October 2007, the TRAN failed to confirm. Then in November 2007 the DOW Theory gave a sell signal, and the market sold off. Recently in March of 2008 the DOW made a lower low, but the TRAN failed to confirm. Then on April 18th the DOW Theory gave a buy signal, and the market has rallied. Naturally, this Theory is not perfect. It gave a sell signal near the lows of the 1998 correction, just before the market stormed to new highs in the dotcom explosion. Since I started posting this blog in August 2005, the DOW Theory (DT) and my labeling of OEW both remained bullish until late 2007. Then the DT gave a sell signal in November at SPX 1420, but my work didn't give a sell signal until early January at SPX 1375. Recently the DT gave a buy signal at SPX 1390, and my analysis is still bearish. I point this out because at the October 2007 highs there was a perfect five waves up from the October 2002 low, but I personally chose to ignore it. My error, not OEW. Recently, at the March 2008 lows there is the potential for an an OEW ABC flat formation. Expecting the bear market to last longer than just five months, as mentioned above, I have chose to ignore it. Maybe I'll be wrong again, and my labeling and interpretation of the wave structure will be wrong again. I'm only human, and markets are not etched in stone. The waves are clearly defined by OEW. The potential error in the interpretation of those waves are the error of the OEW technician, not the waves. We will know with the test of time.

MEDIUM TERM: uptrend makes new highs at SPX 1423

When the market started uptrending in March we projected several possible retracement levels. The first was a 38.2% retracement at SPX 1379. The next was a 50% retracement at SPX 1417. And finally the third, a 61.8% retracement at 1454. As the uptrend unfolded it appeared to be corrective, and still does. Every rally has overlapped the previous high, which is not an impulsive pattern. In early April the market ran into significant resistance at SPX 1387 and sold off. That was a potential top at the 38.2% retracement level. However, the selloff didn't breakdown below 1316, which would have signalled more downside. But held at 1324. Both of these levels coincided with the OEW pivots of 1383 and 1327. Holding support the market has now rallied to new uptrend highs with very little downside action. On thursday the SPX closed right at an OEW resistance pivot 1410, which should have offered significant resistance. On friday the market gapped right over it on the positive jobs report, the Microsoft buyout of Yahoo, and the FED expanding loan facilities yet again. With fridays action, the market hit the 50% retracement level at 1417, and traded around it for most of the day. The range for the day was 1406 to 1423, and the market closed at 1414. Our technical indicators are overbought on the hourly charts, and on the daily and weekly charts as well. This is clearly the strongest uptrend since the bear market began: 166 points verses 118, 126 points. On the near term indicators the market is displaying negative divergences. Yet, since the market has managed to continue to climb over the OEW pivots: 1383 and 1410. It may continue a bit higher to the next pivot at 1438, before turning over. For the reasons mentioned above, I'm certainly not convinced that this uptrend is the start of a new bull market. The short term wave structure looks corrective, and the uptrend has not exceeded any levels that would suggest it is more than just a bear market rally. Every uptrend, no matter how high it goes, is followed by a downtrend. During the next downtrend, which could start at any time, we'll have more information to determine exactly what this uptrend means longer term. Personally I prefer to stay with the long term trend. Until this market proves that the long term trend has changed, I remain bearish. There are other markets in long term bull trends: Gold, Crude, Commodities, and possibly even the USD. Corrections in known bull markets are safer to buy into than chasing rallies in potential long term bear markets.

SHORT TERM:

Support for the SPX is now at 1410 and then 1383, with resistance at 1438 and then 1462. Short term momentum is overbought with a negative RSI divergence, and the MACD is displaying a negative divergence as well. The near term indicators are also displaying the same. The beginning of this uptrend was quite choppy, rallies overlapping other rallies. However, from the recent 1324 low in mid-April, the rally has started to trend with minimal pullbacks. If one were bullish, they could say that the market since the mid-April low is starting to impulse higher. They could even count the entire uptrend as a 1-2, 1-2, 1-2-3 ... However, I prefer to count this uptrend as an ABC, or an (abc-x-abc) with the B (x) at the end of March. If the uptrend continues higher and completes the bullish pattern: 1-2, 1-2, 1-2-3-4-5, 4-5, 4-5. Then we will know to buy this market on the next downtrend correction, and the bear market bottom was in at the March low. If the bearish pattern: ABC (abc-x-abc) completes soon, and the market starts to downtrend. Then we know that this uptrend was nothing more than a bear market rally. Until a bullish pattern unfolds I remain bearish long term on the stock market.

COMMODITIES

Bonds ended flat this week after testing the low of the downtrend. Still see Bonds starting a major bear market.

Crude lost 1.9% this week, as monies moved out of commodities into stocks. Still see Crude uptrending in a major bull market.

Gold lost 3.6% as the downtrend continues, but it is trying to find support at the $850 level and is oversold. Still see Gold in a major bull market.

The Euro lost 1.2% this week as it continues its downtrend from the 160+ all time highs. The Euro may have just started a long term bear market.

FOREIGN MARKETS

The Asian markets are, and have been for the most part, in uptrends. Still bearish on most, but China appears to be resuming its bull market.

The European markets are following the US, as both the FTSE and DAX are currently in uptrends.

The Commodity markets Canada and Brazil are both in uptrends, as Brazil blasted to new highs on an investment grade upgrade.

NEXT WEEK

ISM services on monday, pending home sales on wednesday, weekly unemployment claims on thursday and trade deficit on friday. Also on monday FED chairman Bernanke speaks at the Columbia Business school in NYC at 8:30 in the evening. And FED governor Kroszner gives a speech, also about housing, in Ohio at 8:45 wednesday morning. Best to your week!

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

SHORT TERM: market rallies to yet again to new uptrend highs, DOW +190

Overnight the Asian markets that were open were slightly lower. Europe, or the UK for that matter, was up 0.90%. This morning core PCE was reported tamer than expected +2.1% annualized. The monthly ISM manufacturing index was still contracting, but at the same level +48.6. And, the weekly unemployment claims were higher at 380K. Essentially most of the reports were better than expected. The market opened a bit mixed, precisely testing the OEW pivot at 1383 before 10:00. After that it appeared yesterday's sellers disappeared and the market rallied. By 1:00 the SPX made a new high for the uptrend at 1409. Then at 3:00 it made a slightly higher high at precisely the OEW 1410 pivot. Ending the day right near that level. For the day the SPX/DOW +1.60%, and the NDX/NAZ were +3.05%. Bonds lost about 6 ticks, Crude was $1.35 lower, Gold dropped $11.00, and the Euro was lower. The theme of the day was sell commodities, buy stocks. Support for the SPX remains at 1383 and then 1364, with resistance at 1410 and then 1438. Short term momentum is overbought again, and the near term indicators continue to display negative divergences. Tomorrow, before the open, the monthly jobs report.

Reviewed all the charts before posting tonight. At the beginning of this FED generated uptrend, the BSC bond bailout and the 75 bps rate cut. We projected that the market could rally back to the 1383 OEW pivot, a 38.2% retracement. Or, the OEW 1410 pivot, near the 50% retracement level. Well the market hit that latter level exactly today. This is a normal retracement in bear market rallies. During the 2000 - 2002 bear market, nearly all the counter trend rallies ended between these two parameters. Naturally, these two limits are not the only possible retracement levels. But they are the typical ones. Today's 1410 also coincides with the November low, which also ended at the 1410 pivot. Should this uptrend continue higher, a 61.8% retracement is at the next OEW pivot 1438. Bear market rallies can often give the appearance of new bull markets. Short sellers are forced to become buyers, and bullishness grows as the indices move higher. This is not a function of the economics surrounding the market, as many authorities have warned. But simply a function of the fear of missing the beginning of a new bull market, and chasing higher prices. When major companies write down billions of dollars every quarter, while continuing to raise capital at every opportunity to avoid a potential bankruptcy, and the stock rallies 10% on the news. One has to wonder if this market has lost its senses. Naturally, these types of events can and do occur at significant bottoms during bear markets. But when a 5 year bull market, is followed by only a mere 5 month-20% correction, I seriously doubt we have seen the end of this bear market. Twenty percent corrections often occur in bull markets, bear markets are more severe. And this is a bear market. Nevertheless, as posted yesterday, the market did not break through the support pivot at 1383 to confirm lower prices immediately ahead. But held that level and again moved higher. Weekly RSI/MACD levels are now also entering overbought territory for the first time since the bear market began. The market ended the day at an important resistance pivot. If the job report is positive tomorrow, we may have to wait until a 61.8% retracement occurs, at the next OEW pivot. Best to your trading!

MEDIUM TERM: uptrend holds support and hits 1410

LONG TERM: bear market

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

SHORT TERM: another pre-FOMC trading day, DOW -40

Overnight the Asian markets were all higher, but Europe closed -0.30%. At 9:00 Case-Shiller reported that housing prices continued to decline in all 20 cities monitored for the past six months. And, within the last 12 months have dropped a record 12.7% nationwide. RealtyTrac had reported last night that foreclosures continue to rise, and have doubled in the last year. Nevertheless, the market opened flat, and rose to 1397 in the opening minutes. The high for the day. At 10:00 the Conference board announced their consumer confidence index has dropped to its lowest level in 5 years. By 11:00 the market hit 1387, near the 1383 OEW pivot and at the 55-hma making the low for the day. Another day with a narrow trading range ahead of the FOMC meeting. At the close the SPX/DOW were -0.35%, and the NDX/NAZ were +0.30%, similar to yesterday. Bonds gained 6 ticks, Crude dropped $3.50, Gold lost $23.50, and the Euro was lower. Support for the SPX remains at 1383 and then 1364, with resistance at 1410 and then 1438. Short term momentum is still displaying negative RSI divergences, as are the near term indicators. Tomorrow before the market opens the first guesstimate at Q1 GDP will be announced, and the monthly ADP employment report. Then at 2:15 the FED will announce its determination. It certainly will not be a quiet day tomorrow. The market slipped through that 15min diagonal posted on friday, then rallied back to test the trendline. When the SPX breaks below today's low at 1387 it should start heading lower. Best to your trading!

MEDIUM TERM: uptrend high thus far 1402 with negative divergences

LONG TERM: bear market

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