The S&P 500, Dow Jones Industrial Average, and other market indices moved much higher than most expected this week. Personally I suspect that the fact the Russell 2000 (and a few other indices) made new highs is forcing most Elliott Wave analysts to recalculate their counts. But Tony Caldaro with his Objective Ellitt Wave warned us weeks ago of potentially bullish alternatives coming to the fore. Fortunately that fits with our Year 2010 overall plan anyway! Therefore we appreciate being able to share below, Tony's weekend update from his Elliott Wave Lives On site (you can always find his site and feed in the site list at right). So here's his weekend update:
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the Elliott Wave Lives On
by Tony Caldaro
March 6, 2010
weekend update
REVIEW
After a mixed to somewhat lower end of february, march started off like a lion. New uptrends were confirmed in twelve of the fourteen country stock indices we follow. In the USA economic reports came in mixed, in line with the results of the FED's beige book. On the downside ISM manufacturing, construction spending and auto sales were lower, along with continuing job losses in the ADP and Payrolls reports. On a positive note personal income/spending/credit were on the plus side, along with ISM services, factory orders and the weekly jobless claims improved. For the week the SPX/DOW were +2.70%, and the NDX/NAZ were +3.85%. Bonds were -0.3%, Crude gained 2.7%, Gold added 1.5% and the USD was +0.1%. Asian markets gained 1.7%, Europe gained 4.7% and the Commodity group gained 5.0%. Next week's economic reports revolve around the twin deficits and retail sales.
LONG TERM: the battle at the bear/bull inflection point continues
From the early part of Jan 08 we had remained long term bearish on this market because of either a Cycle wave completion, or a Supercycle wave completion from 1932-2007. We tracked the waves during the bear market from Oct 07 SPX 1576 to Mar 09 SPX 667. At that point, and within days of the low, we recognized a completed 5-3-5 zigzag pattern and projected a 50% bear market retracement rally from SPX 667 to over SPX 1100. In early Dec 09 we had noted a confluence of technical indicators all signalling an important Jan 10 top in the SPX 1160's area. The rally reached SPX 1150 in Jan 10 and then entered a downtrend.
While that medium term uptrend was concluding OEW triggered a quantitative long term uptrend. These types of uptrends usually indicate that a bull market is underway. Historically, however, about 30% of the time they occur during large bear market rallies. Despite the fact that this market had done just about everything we expected over the past two years. This OEW long term uptrend forced a general review, of all documented historical market activity and some preconceived notions of the larger cycles going back a few centuries. While this review was underway, we suggested that the downtrend that started in Jan 10 should be impulsive to confirm the continuation of the bear market scenario. As the downtrend unfolded we tracked the waves. They did look impulsive on the hourly charts, but did not look impulsive on the OEW charts. We also noted that when the SPX/DOW were making the february lows they had both lost about 9% of their market value. During the previous bull market, between 2003 and 2007 the DOW never lost more than 10% of its value during corrections. And, the Jun-July 09 correction was less than 10% as well. I was alerted that term used to describe this type of activity is dirigisme, i.e. a managed market for a managed economy.
The market then held that Feb 5th low at SPX 1045 and started to move higher. When the SPX fully retraced the second decline 1105 to 1045, the only wave pattern that appeared obvious from the SPX 1150 top to the 1045 low was a zigzag. We offered some less obvious bearish SPX counts to complement the bullish zigzag scenario which we posted on the DOW charts. While we maintained the bear market count of the SPX, we also maintained bullish counts on the DOW, NDX, NAZ, plus numerous other indices. This monday we updated the SPX, DOW, NDX and NAZ charts to display four potential counts. On tuesday we detailed the reasons for the different counts, and noted we favored the bullish counts on the DOW/NDX.
Our lengthy review of the Supercycle and Grand Supercycle, posted on the blog, resulted in a much more bullish long term view than anticipated. When new uptrends were confirmed after identical corrections in both Jun-July and Jan-Feb. This market started to look a lot more bullish than bearish. The SPX/DOW still need to make new Mar 09 highs in the days and weeks ahead to help confirm a bull market. Yet, the Nasdaq NAZ already accomplished this on friday. It has five waves up from the Mar 09 low with alternation between the uptrends. This is a classic bull market pattern.
MEDIUM TERM: uptrend high SPX 1139
As we enter the second week of March several OEW parameters are certain. The market is in a long term uptrend. Twelve of the fourteen country indices we follow are in uptrends, Japan and Spain are the exceptions. The US markets have completed four waves from the Mar 09 low, and are now in the fifth. Should the SPX/DOW make new highs, SPX only 11 points away and DOW about 160 points, we'll have five waves up from the Mar 09 low. This is certainly not a bear market pattern. Bear markets, and bear market rallies, always unfold in three waves. When we observe that the NAZ and R2K have already made new Mar 09 highs. Indicating this uptrend is broadbased, these are large indices. Probabilities favor that this bear/bull inflection point will resolve with a bullish outcome.
The recent downtrend, SPX 1150-1045, lasted only thirteen trading days and was clearly corrective. This uptrend is already nineteen days old, it looks impulsive, and the market appears to be in just the first wave up. While we did not observe the thrust up of the first two uptrends. Yet, this rally has made steady progress from the SPX 1045 low. The count posted on the DOW charts displays the preferred bullish count. The DOW hourly chart displays the preferred short term count. It would appear this uptrend has a lot more to go on the upside before it concludes.
In the year 1932, the stock market launched a reflation bull market advance while the economy was in a lingering depression. In technical terms, that bull market placed the low of the GSC in 1932. The economy, for most, continued to be depressionary until WW II. It would appear, at this point, that another reflationary cycle has begun from the Mar 09 SC low. For most, the economy has not improved this time either. Stock markets, historically, recover a lot faster than economies.
SHORT TERM
Support for the SPX notches up to 1133 and then 1107, with resistance at 1168 and then 1179. Short term momentum is quite overbought. Our short term DOW count suggests that this rally should be getting close to completing Minor wave 3. The entire rally from the february low appears to be only in Intermediate wave one of Major wave 3. However, we continue to stress that the OEW 1133 pivot remains key to the bear/bull scenario. A break through on the upside suggests new highs ahead. The next pivot is at 1168. A break through the 1107 pivot on the downside would suggest downside momentum has resumed. Best to your trading!
FOREIGN MARKETS
The Asian markets were up 1.7% on the week. China and Hong Kong lagged, and Japan has yet to confirm an uptrend.
The European markets were up 4.7% on the week. Only Switzerland lagged, and Spain has yet to confirm an uptrend.
The Commodity equity markets were up 5.0% on the week. Russia stormed ahead +8.5%, and all are in confirmed uptrends.
COMMODITIES
Bonds were quiet for most of the week, and selling on friday ended the week -0.3%.
Crude confirmed an uptrend this week and gained 2.7%.
Gold confirmed an uptrend this week gaining 1.5%. Silver continues to lead +5.4%.
The USD has been a non-factor on the equity/commodity markets recently. It gained 0.1% on the week, while the EUR lost 0.1% and the JPY lost 1.5%.
NEXT WEEK
Economically it appears to be a quiet week. There is nothing scheduled until wednesday when Wholesale inventories and the Budget deficit will be reported. On thursday, the weekly Jobless claims and the Trade deficit. Then on friday, Retail sales, Consumer sentiment and Business inventories. The FED issues a Flow of funds statement on thursday and that is it. Quiet weeks usually lead to technical markets. Best to you and yours!
CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987
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