While some Elliott Wave prognosticators are adjusting with triple zigzag ideas (which of themselves are understandable, I'll say) and then talking about this soon topping the markets before a whopper third wave down (which doesn't make mathematical sense as I've pointed out before) - Tony Caldaro's on the beat with his Objective Elliott Wave; that's why we keep his site always in the list at right. He had outlined rally objectives long ago that included 1122 and 1179. And we appreciate being able to refer to his updates. Especially given the wow! market movements this past week! The title to this post mentions malaise, but the uptrend is not over yet .... Let's see what Tony's thinking now:
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the ELLIOTT WAVE lives on
Market analysis using proprietary Objective Elliott Wave techniques
by Tony Caldaro
December 05
weekend update
REVIEW
The SPX breaks through the long term 1107 OEW pivot and moves higher. The big surprise this week was the monthly Payroll report: -11K v -111K jobs lost, and the Unemployment rate slipped to 10.0% from 10.2%. The weekly jobless claims improved as did the ADP employment index. Also on the positive side were construction spending, pending home sales, factory orders and the Chicago PMI. ISM manufacturing reported as expanding, but at a slower rate, and ISM services were reported contracting. All in all another positive week. The markets, however, were quite volatile, especially on friday. For the week the SPX/DOW gained 1.3% and the NDX/NAZ added 2.1%. Asian markets soared +5.9%, Europe gained 2.3% and the Commodity equity market were +1.5%. Bonds lost 1.6% for the week, Crude was -0.8%, Gold -1.3% and the USD gained +1.1%. This upcoming week is highlighted by the twin deficits on thursday, and retail sales on friday.
LONG TERM: bear market rally
When attempting to cover a massive amount of stock markets, indices, sectors and asset classes. It helps to lump together, for the purposes of labeling the waves, those that are in similar categories. Otherwise the task would be monumental. One of the major advantages of OEW is that it quantitiatively defines the significant waves, whether or not the labeling is correct. This is where the rule of anticipate, observe and adjust comes into play. After most of the world's stock markets generally topped in 2007, they collapsed together into the 2009 lows. OEW identified the topping process and confirmed a bear market in the second week of January 2008. As the bear market unfolded, OEW continued to quantify the significant waves right into the March 2009 low, when a completed zigzag was observed. Then based upon historical analysis of bear market rallies of this degree, we projected a 50% retracement rally. We initially expected most of the world's stock markets would follow this scenario. Which they did. Some even bottomed a bit earlier in late 2008.
As this bear market rally unfolded we noted some very strong foreign stock markets and asset classes. We commented about these from time to time. However, we generally left them with a bear market rally labeling, except for Gold, Silver and most of the Currencies. Over the past few months, as upside impulsive wave structures started to form, we gradually shifted the entire commodity sector to a bull market labeling. While this was occurring Brazil and the US Transports were also upgraded to bull markets. This week, based upon OEW analysis, we are upgrading China and Hong Kong to bull market counts. We are making a special comment about this shift because several other foreign markets are also displaying potential impulse wave structures. This does not imply that these stock markets will go straight up from their current lofty levels. What it does imply is that neither Brazil, China nor Hong Kong will revisit their bear market lows. If, and when, some of the other foreign markets are upgraded to bullish counts, we will make note of it on the blog.
While two of the BRIC nations and HK appear to be in bull markets, the older western nations do not. This is not unusual during a general worldwide bear market. Fast growing economies usually recover more quickly that slow growing economies after downturns. For example, during the last general bear market (2000-2003) Russia remained in a bull market; India bottomed in 2001; Brazil, Canada, Spain and the US bottomed in 2002; and the rest bottomed in 2003. Now to the US indices.
We continue to anticipate a retesting of the Mar 09 lows in 2010, or in 2012 if some extraordinary events unfold. The year 2010 is not only a time period for the very consistent four year cycle low. It is also consistent with the average duration of a US Cycle/Supercycle bear market. From Oct 07 to Mar 09, OEW counted a completed (5-3-5) zigzag. The labeling of this zigzag is on the SPX/DOW weekly charts, (link below). After a completed wave pattern, in this case Primary wave A, the market should enter a counter-trend rally, or Primary wave B. Historically, these types of counter-trend rallies, in Cycle/Supercycle waves, are often quite explosive and often mistaken for new bull markets. At the Mar 09 lows we suggested a 50% retracement (SPX 1122) Primary wave B rally should now be underway. This projection appeared outrageous to most at the time. However since it was based upon historical references to similar wave structure events. It nevertheless unfolded as originally projected. Naturally, not all bear markets are exactly the same. However, all bear market wave structures unfold in three larger wave patterns: an ABC. Now, after a 50% retracement counter-trend rally, in both the SPX and DOW. It again appears outrageous to most that a retest of the Mar 09 lows is in the near future. When Primary wave B completes, that retest should be underway.
MEDIUM TERM: uptrend makes new high
After the Primary wave A zigzag bottomed in Mar 09 at SPX 667, Primary wave B has progressed in three significant waves. If these three waves were a simple 5-3-5 structure, it would have been easy to identify its end. However, right from the first uptrend which was seven short term waves, into the current uptrend which may already be eleven short term waves, it has been a difficult count. What has certainly helped has been the OEW pivots. These pivots have acted as support and resistance throughout this bear market counter-trend rally. This week, after six daily attempts trading over SPX 1110, and over six weeks of market activity, the SPX finally broke through the long term OEW 1107 pivot on wednesday. As we have been noting for several weeks. A penetration through the range of the 1107 long term pivot suggests higher prices medium term. The next short term pivot is at SPX 1133. This is followed by SPX 1168 and then the long term pivot at 1179.
We posted two interesting fibonacci wave relationships, for the DOW, during the week. At DOW 10,495 Major wave C = Major wave A, and at DOW 10,795 Int. C = Int. A. The high for the DOW thus far is 10,517. After reviewing the SPX price action for this week. We have opted to modify the short term count just a bit, aligning it somewhat with the DOW. While the two counts are labeled a bit differently, the intent of this current short term rally is present in both. Two interesting fibonacci wave relationships in the SPX are now also noted. At SPX 1158 Major C = Major A, and at SPX 1162 Int. C = Int. A. These two fibonacci relationships provide a tighter targeting range for the SPX than the DOW, and both are in line with the 1168 OEW pivot. While uptrend momentum has been weak in recent weeks. Several of the US sectors have reversed downtrends, as well as, several foreign indices. This uptrend does not appear to be done yet.
SHORT TERM
Support for the SPX is at 1090 and then 1061, with resistance at 1107 and then 1133. Short term momentum stayed around neutral for most of friday's trading. Breaking the sunday/monday pattern of the past three weeks: USD down sharply sunday night, SPX gaps up sharply on monday. This monday displayed a strong upward move in the Asian markets, but flat to lower in the western markets, with little USD selling. On tuesday, however, the SPX gapped up and also had strong openings on wednesday through friday. When the long term OEW 1107 pivot range was penetrated on wednesday, SPX 1116, the market immediately sold off 1%. On thursday the SPX made a slightly higher high, 1117, and the market immediately sold off 1% again. On friday another early new uptrend high, 1119, was met with immediate selling, but this time the market dropped 2% lower. The market closed the week at SPX 1106. The 1107 OEW pivot continues to be a difficult area to exceed, as it has been since mid-October. Once cleared we could expect another 80 point rally from the recent Minute wave b 1084 low. The last three rallies have been just over 80 points. This would suggest this rally would end around SPX 1164. This aligns perfectly with the fibonacci ratios noted earlier, (at SPX 1158 Major C = Major A, and at SPX 1162 Int. C = Int. A), and the OEW 1168 pivot. Quite a cluster of numbers between SPX 1158 and 1168.
On the downside, the OEW 1090 pivot remains support, as it has for over a month. A break below this pivot would suggest caution short term. A break below the 1061 pivot would suggest caution medium term. And, a break below the 1041 pivot would suggest that Primary wave B has likely ended. Best to your trading!
FOREIGN MARKETS
Asian markets soared this week +5.9%. The biggest gainers were Japan (+10.4%), China (+7.1%) and Hong Kong (+6.5%). India remains in a marginal downtrend.
European markets rose 2.3% this week. The indices were fairly even, and only the STOX 50 remains in a marginal downtrend.
Commodity equity markets gained 1.3% on the week. The big gainer was Russia (+3.4%). All indices are in uptrends.
COMMODITIES
Bonds weakened considerably this week -1.6%, dropping four days in a row. The 1YR jumped 10 basis points, and the 10YR 25 basis points to 3.48%.
Crude weakened this week an additional -0.8% in its downtrend. It looks like it should start moving higher soon.
Gold made new all time highs at $1226, but due to friday's selloff it ended -1.3% on the week. The uptrends, in both Gold and Silver, may have ended on thursday as both approached their fibonacci price targets for this multi-month uptrend. Once confirmed, support appears at the previous fourth wave. This would represent another good buying opportunity in this eight year bull market.
The USD had its best week since the end of October +1.1%. The EUR (-0.7%) and the JPY (-4.2%) lost ground verses the USD. Trend reversals may be underway.
NEXT WEEK
A quieter economic week ahead. Monday we have the Consumer credit report at 3:00. Then tuesday the NFIB small business index, and wednesday Wholesale inventories. Thursday, the weekly Jobless claims and twin deficits Budget/Trade. Then on friday, Retail sales, Import prices, business Inventories and Consumer sentiment. The FED reports in with several speeches this week. On monday FED chairman Bernanke speaks in Wash. DC at 12:45. Then FED governor Duke speaks in MD on wednesday morning, and in IL on thursday afternoon. It appears this market may be ready to exit its trading range (1090 pivot to 1107 pivot) of the past month. Best to your trading!
CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987
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