The Elliott Wave count of the equities markets, typically on the S&P 500 index, is always interesting to puzzle out, and always much appreciated when it's tracked and updated objectively. Of course I'm thinking of Tony Caldaro and his Objective Elliott Wave (and his site is always in the list at right). Here's this weekend's update from Tony's Elliott Wave Lives On site:
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the Elliott Wave Lives On
by Tony Caldaro
February 13, 2010
weekend update
REVIEW
The roller coaster ride of the second week of Feb 10 ended on the plus side. Day traders were chalking up big profits, while investors were left scratching their heads. On the economic front, retail sales improved, and there were declines in jobless claims and wholesale/business inventories. On the downside, consumer confidence declined and the trade deficit increased. For the week the SPX/DOW gained 0.9%, and the NDX/NAZ gained 2.0%. Asian markets were +1.9%, European markets +1.6%, and the Commodity equity markets +1.2%. US Bonds were down 0.7%, Crude gained 4.7%, Gold added 2.6%, and the USD was flat. Next week's economic reports will be highlighted by housing, PPI/CPI and Leading indicators.
LONG TERM: bear market
This stock market has become quite a bit more interesting than anyone expected at the start of 2008, or the start of 2009 for that matter. After a seventeen month zigzag decline from the Supercycle SPX 1576 high in Oct 07 to the anticipated Primary wave A SPX 667 low in Mar 09. The market has rallied in three waves to SPX 1150 in Jan 10. During this entire period of time OEW had turned long term bearish in early Jan 08, and then medium term bullish in early Mar 09 anticipating a five month Primary wave B rally into the SPX 1120 area. The rally unfolded, but it took ten months instead of five, and it reached SPX 1150 instead of 1120+. Nevertheless, OEW turned long term bearish near the recent highs anticipating a retest of the Mar 09 SPX 667 low by year end. While the initial seventeen month decline was unfolding we expected the bear market to unfold in three Primary waves. We anticipated that the market would bottom with a completed pattern, rally about 50%, and then turn lower to either retest the lows, (a flat), or break the lows, (a zigzag). As the ten month rally started to extend past five and six months it appeared more likely that only a retest of the lows would occur after it completed. The market had evolved from an all out total zigzag collapse scenario, like 1929-1932, to a more manageable flat scenario like 1937-1942.
Then in early 2010 OEW confirmed a long term uptrend. At first we noted that during 1937-1942 a long term uptrend was also triggered about halfway through that bear market. In fact, right after it was confirmed the market headed lower. Historically, however, only 30% of these signals occur during lengthy bear markets. The other 70% of the time they signal new bull markets. With all these factors in mind we determined that the next downtrend, which has been underway since Jan 19th, would have to be impulsive in structure. This fits the structure of the entire bear market, as all of the downtrends during the Oct 07 to Mar 09 decline were also impulsive.
MEDIUM TERM: downtrend
As this downtrend unfolded the hourly charts certainly looked impulsive. We could observe five waves down from SPX 1150 to 1072 and we labeled that Intermediate wave one. A rally to SPX 1105 was labeled Intermediate wave two. Then another five wave decline to SPX 1045 appeared smaller than an Intermediate wave three, and we labeled it Minor wave 1 of Int. wave three. Since then the market has rallied to SPX 1080 in quite a complex pattern. And it has taken much longer, (five days), than the previous rally, (two days), of a higher degree. This alone has some important implications. During this entire decline, however, we were not watching just the hourly charts, but some other charts as well. These charts, one in particular, clearly displayed that the patterns on the way down from SPX 1150 to 1045 were not that impulsive. This occurred at the start of two previous downtrends during the decline from Oct 07 - Mar 09. So far, then, there is no reason to change the count. However, if the market does not start impulsing to the downside soon. This type of choppy activity could turn into an ABC (5-3-5) from SPX 1150 to 1045, and the current rally an X wave separating it from the next ABC to follow. This is one of the reasons why we noted in the last weekend update that the market had reached an inflection point. Unfortunately, this week did little to resolve the situation, with the exception of the additional time noted earlier. With monday a holiday in the US, and this an options expiration week. This will lilely force this decision process to conclude.
SHORT TERM
Support for the SPX remains at 1061 and then 1041, with resistance at 1090 and then 1107. Short term momentum spent most of the week vacillating around neutral, and then was overbought at thursday's SPX 1080 high, and slightly oversold at friday's 1063 low. The entire week was spent bouncing off the OEW 1061 pivot, every day, and in the upper 1070's area. As noted earlier it did little to resolve the inflection point. Since the market has had a difficult time getting through the SPX 1080 level. It hit it on thursday and came close to it on tuesday and friday. It could turn over from friday's close, SPX 1076, and head lower before reaching the OEW 1090 pivot. Should it break through SPX 1080 that pivot will likely offer significant resistance. Prior to the decline from SPX 1105 to 1045, the OEW 1090 pivot acted as a fulcrum point until the market finally broke. To clear up the current market indecision. The SPX needs to start impulsing to the downside and break through the SPX 1045 low, and then DOW 9430. This would help to confirm that this downtrend is impulsing lower. A rally above SPX 1105 would help to confirm that the decline from SPX 1150 to 1045 was actually a zigzag in a corrective downtrend. This would imply that the market will likely make a higher high than SPX 1150 when the downtrend concludes. Lots of variables! We'll continue to monitor day by day to determine what this market decides. Bear markets can be a bear!
FOREIGN MARKETS
All of the Asian markets we follow were higher on the week for an average gain of 1.9%. Every one of the five remain in downtrends.
All of the European markets we follow we also higher on the week, average gain 1.6%. All five are in downtrends as well.
The three Commodity equity markets we follow were mixed, but gained 1.2% overall. Russia's RTSI lost 3.4% and all are in downtrends.
COMMODITIES
Bonds lost 0.7% on the week and look a bit toppy in their uptrend.
Crude gained 4.7% on the week, responding to that daily positive divergence in both Crude and the GTX.
Gold also responded to its daily positive divergence and gained 2.6% on the week. A continuation of this rally and we could get something going on the upside medium term. The recent low at $1045 is around the price where India bought all that gold from the IMF.
The USD continues to look toppy in its three month uptrend. It was flat on the week. The EUR was -0.7% and the JPY was -0.8% against the USD.
NEXT WEEK
Monday starts to week with a holiday. Good trading to our overseas friends. On tuesday, the Home builders index will be released at 1:00. Wednesday we have Housing starts, Import prices and Industrial production. Thursday, the weekly Jobless claims, the PPI, then Philly FED and Leading indicators. Then on friday, the CPI and possibly the Budget deficit. As for the FED. The FOMC minutes will be released on wednesday afternoon, and then there's a speech by FED governor Duke thursday evening. Best to your extended weekend, and trading week. We're doing some work on the Grand Super Cycle theory and plan to release a report on this blog soon.
CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987
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