Elliott Wave is a useful technique for teasing out market price probabilities. If course it helps to use it with indicators too, which Tony Caldaro does with his "the ELLIOTT WAVE lives on" analysis. We apreciate referring to his updates from his http://caldaroew.spaces.live.com/ site to get his objective insight into the markets' path. So let's see what he's seeing this weekend:
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the ELLIOTT WAVE lives on
Market analysis using proprietary Objective Elliott Wave techniques
by Tony Caldaro
by Tony Caldaro
December 12
weekend update
REVIEW
Most markets, worldwide, remained in their multi-week consolidation pattern this past week. US economic reports were mixed. There were reported improvements in wholesale/business inventories, the trade/budget deficits, retail sales, and consumer sentiment. Weekly jobless claims rose, however, along with import prices. Plus consumer credit continues to contract, as did the NFIB small business index. For the week the SPX/DOW were +0.4% and the NDX/NAZ were -0.1%. The Asian markets were mixed -1.1%, European markets were all lower -1.8%, and the Commodity equity markets were mostly lower -1.1%. Bonds were -0.2%, Crude was -4.7%, Gold was -4.1% and the USD rose 1.0%. The FOMC meeting highlights the upcoming week, along with the PPI, CPI and leading indicators.
LONG TERM: bear market rally
During the 2002-2007 bull market we observed patiently as the OEW waves unfolded. Entering 2004, and later, some expected the stock market to head back to the 2002 lows. We did not, because the advance from 2002-2004 was clearly an impulsively rising pattern. We counted Major waves 1, 2 and 3 into early 2004. Then after Major wave 4 concluded we expected an extended, subdividing, Major wave 5. In 2007 the SPX and the DOW made all time new highs. In October 2007 the bull market ended at SPX 1576 and the bear market began.
As the decline unfolded OEW continued to quantify the waves, while we locked into the wave count. After the market lost 50% of its value it confirmed that this was a bear market of cycle/supercycle degree. This type of bear market has only occurred three times in the past 80 years: 1929-1932, 1937-1942 and 1973-1974. The typical supercycle/cycle bear market lasts about three years, losses 50% or more of its value, and unfolds in three Primary waves: ABC. When the bear market hit SPX 667 in Mar 09 we counted a completed detailed zigzag and labeled it Primary wave A. Since Primary B waves typically retrace 50% of Primary wave A. We projected a multi-month rally which would near SPX 1122 in the coming months. The high, thus far, for Primary wave B is SPX 1119 on Dec 4th. Primary wave B has met expectations. The next objective is to best determine the end of Primary wave B, and to prepare for the likely retest of the Primary wave A lows during the upcoming Primary wave C.
This week, in our review of the SPX weekly chart, we observed some additional wave information. We posted the chart below with the observed notations. During the 2002-2007 bull market, Major wave 1 ended at SPX 954, Major wave 2's first low was at SPX 869, and Major wave 3 ended at SPX 1163. During this Primary wave B advance, Major wave A ended at SPX 956, Major wave B ended at 869, and Major wave C has thus far reached SPX 1119. Observe the wave relationships. Primary wave B of this bear market is broadly tracking, in price, the early stages of the last bull market. This suggests that Primary wave B could rally into the SPX 1160's area before completing.
Next observe the Primary wave A decline from Oct 07 to Mar 09. Major wave A was approximately 300 points, (1576-1257), and Major wave C was approximately 800 points, (SPX 1440-667). As you are aware the numbers 3 and 8 are basic fibonacci numbers, with only the number 5 in between them in the fibonacci sequence: 1-2-3-5-8, etc. Should the market continue this uptrend into the SPX 1160's area, as noted above, this would represent an approximate 500 point advance from the Mar 09 SPX 667 low. Taking this one step further. Should Primary wave B end in the SPX 1160's area and then decline to SPX 667 to retest the Primary wave A low. This decline would naturally represent approximately 500 points as well.
In summary, we observe Primary wave B broadly tracking the early stages of the last bull market: SPX 956, SPX 869 and SPX 1163. Plus we observe the current bear market broadly unfolding in a series of fibonacci price related waves: Primary A/Major A 300 points, Primary A/Major C 800 points, Primary B 500 points and then Primary C 500 points. This represents the market roadmap for now.
MEDIUM TERM: uptrend
The current uptrend, Major wave C of Primary wave B, has been rising since the Major wave B low at SPX 869 in July. Typically trends last about 2 to 3 months. This one is already five months long with the potential to enter a six month. When reviewing Primary wave A we observe that the detailed Major wave A was five months in duration, (Oct 07-Mar 08), and the detailed Major wave C was 10 months, (May 08-Mar 09). A two to one time relationship. Now observe during this Primary wave B the simple Major wave A was 3 months in duration, (Mar 09-Jun 09), and the simple Major wave C will be 6 months long in January, (Jly 09-Jan 10). This would represent another two to one time relationship.
Last week we reviewed the internals of Primary wave B in detail. This week we'll only cover the broader wave relationships. We discussed that Major wave A, SPX 667-956, was a corrective, not impulsive, uptrend. Major wave B was a simple abc downtrend, SPX 956-869. The current Major wave C, SPX 869-1119 thus far, has been corrective as well but quite complex. We offered two short term counts: one on the SPX hourly/daily charts and the other on the DOW hourly/daily charts. Both of these counts suggest the potential for one more rally from the recent SPX 1084/DOW 10,232 low. We also observed that the last three SPX rallies have been about 80 points. This would suggest a potential rally to SPX 1164. We also noted that fibonacci relationships suggest the following: for Primary wave B, Major C = Major A at SPX 1158; for Major wave C, Intermediate C = Intermediate A at SPX 1162. These three wave relationships suggest Primary B should conclude between SPX 1158 and 1164. We also noted there is an OEW pivot at SPX 1168, and these upper numbers would be within its natural +/- 7 point range.
In summary of all the information offered we present the following. All the wave structures observed, from 2002-2009, suggest that Primary wave B should conclude around the SPX 1160's between now and January 2010.
SHORT TERM
Support for the SPX remains at 1090 and then 1061, with resistance at 1107 and then 1133. Short term momentum was overbought on friday but eased back to neutral during the day. This market has remained in a trading range since the last FOMC meeting: generally between the OEW 1090 and 1107 pivots. Since 1107 is a long term pivot this is not that surprising. We expected it to offer significant resistance, and it has. The next series of upside pivots are at 1133, 1168 and 1179. The market should again run into significant resistance starting at the 1168 pivot and into the 1179 pivot. Both can be considered long term pivots. The downside pivots are noted on the charts: 1090, 1061, 1041 and 1018. A break below the OEW 1041 would likely confirm a downtrend, and the end of Primary wave B. Expecting the market to be quite volatile this week with the FOMC meeting. Best to your trading!
FOREIGN MARKETS
Asian markets were mixed with an average loss of 1.1%. The NIK had the biggest gain for the week +0.9%, and all fives indices are in confirmed uptrends.
European markets were all lower with an average loss of 1.8%. The IBEX was the worse performer -3.5%, and all but the STOX50 are in confirmed uptrends.
Commodity equity markets were mostly lower with an average loss of 1.1%. The RTSI was the worse performer -5.0%, but all remain in uptrends.
COMMODITIES
Bonds shed 0.2% on the week and their price uptrend is weakening. 10YR rates have been rising and are close to a confirmed uptrend.
Crude was -4.7% on the week as the downtrend continues. Yet it's quite oversold on the daily chart and nearly so on the weekly chart.
Gold was -4.1% on the week, and has lost about $115 in just seven trading days. Expecting a tradeable low by midweek.
The uptrending USD was +1.0% on the week which nearly equals last week's gain. The EURUSD (-1.6%) is downtrending, along with the CAD, CHF, GBP and ZAR, all versus the USD. The JPYUSD gained 1.6% this week.
NEXT WEEK
Economic reports for the week begin on tuesday with the PPI, the Empire index, Industrial production and the Home builders index. Wednesday we have the CPI, Housing starts and the Current accounts deficit. Then thursday the weekly Jobless claims, Leading indicators and the Philly FED. Friday, btw, is December options/futures expiration. The FED starts its FOMC meeting on tuesday and concludes with their statement wednesday afternoon. This week appears to be the last important trading week of the year. Year end holidays have already started. Best to your week!
CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987
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