The Objective Elliott Wave concepts of Tony Caldaro help measure out the market's movements, trend, and probabilities. We appreciate being able to feature Tony's weekend updates. They're full of insightful analysis, which is also why we keep his site and daily updates feed at the right side of the page (thanks again Tony!). Let's find out what he's seeing and saying today:
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the Elliott Wave Lives On
by Tony Caldaro
April 17, 2010
weekend update
REVIEW
This anticipated busy week met all expectations and then some. The US stock market gained ground every day, making new uptrends highs nearly every day, before giving most of it back on friday's options expiration. The highlight of the week was not the expected retails sales report, the twin deficits, nor the beige book. It was the charges filed on friday by the SEC against the behemoth investment house/bank holding company Goldman Sachs relating to the marketing and sale of subprime CDO's. Alliance Bernstein estimates the potential fine could be slightly over $700 mln. The timing of the announcement certainly makes one wonder. Economic reports for the week were mostly upbeat. The Federal budget deficit improved; retail sales, the CPI, and business inventories all rose. Industrial production remained positive, the Empire index and Philly FED displayed expansion, and housing starts/builders index rose. Also our public sentiment reading dropped to 34.5% bullish, and our leading economic indicators continue to display economic expansion with an above neutral 62.6% reading. On the downside the trade deficit widened, import prices and jobless claims rose, and consumer sentiment declined. For the week the SPX/DOW were flat, and the NDX/NAZ rose 1.0%. Asian markets lost 0.8%, European markets lost 0.5%, and the Commodity equity group lost 1.2%. Bonds were +1.0%, Crude lost 0.5%, Gold was -2.1%, and the USD lost 0.2%. Next week we'll see how the GS story line plays out while economic reports like the leading indicators, the PPI and some housing data are released.
LONG TERM: bull market
We continue to count the Mar09 low at SPX 667 as the bear market low. We have observed five quantified waves since that low and have labeled them as follows: Primary wave I at SPX 956 Jun09, Primary wave II at SPX 869 July09, Major wave 1 at SPX 1150 Jan10, Major wave 2 at SPX 1045 Feb10, Major wave 3 currently underway. When reviewing the weekly charts we find RSI momentum has reached the most overbought it has been since the last bull market, and market breadth is also displaying the strongest upside momentum since the last bull market as well. This helps to confirm that this uptrend is a Major third wave and not a fifth, (c, x or wyz) wave as many suspect. This uptrend has risen 16% and 169 SPX points in just two months. The DOW has risen over 11,000 for the first time in 18 months, and the NDX has risen over 2,000 for the first time in two years. These types of recoveries and this kind of momentum rarely, if at all, occur in bear market rallies. Especially when there is a quantitative five waves up off the low with the economy growing. All the ingredients of a bull market are present and the market is rising.
MEDIUM TERM: uptrend high at SPX 1214
In review of the three uptrends during this bull market this one has to qualify as the most relentless. During the first (Mar09-Jun09) and second (July09-Jan10)uptrends the longest time period between short term OEW wave signals was about five weeks. This uptrend is over two months old and despite the thursday/friday pullback we have yet to observe a short term OEW wave signal. These signals assist us in determining the important waves within trends. Thus far this uptrend has made nine noticeable pullbacks ranging between 10 and 27 SPX points with the largest pullbacks only 2.2% and 2.3%. During the first two uptrends the important pullbacks ranged between 2.7% and 6.5%, with the majority in the 5% range. We have yet to observe that kind of volatility during this uptrend.
We have been monitoring two target levels for this uptrend. They are posted on the SPX daily chart. Since the first two uptrends were relatively equal: 280+ SPX points, and we labeled the second uptrend Major wave 1. We applied two fibonacci relationships to Major wave 1, (0.618 and 1.0), and arrived at the targets of SPX 1219 and SPX 1326. On thursday the SPX came within 5 points of the lower target when it hit SPX 1214. We had estimated that this would be the minimum upside target for the uptrend, with the mostly likely around the 1326 area. We had also projected, based upon the action thus far in this bull market, the uptrend would take between three months and six months to unfold. Thus far it is about two months old. Nothing has occurred thus far to alter these projections.
SHORT TERM
Support for the SPX remains at 1187 and then 1176, with resistance at 1222 and then 1240. Short term momentum ended the week extremely oversold and rising. On thursday we observed short term negative divergences on the hourly chart and lesser timeframes. We expected some sort of pullback. Friday's SEC/GS news took the SPX all the way back to the 1187 pivot and it held support. On the very short term charts the SPX/NDX are now the most oversold they have been since the downtrend low in February. Quite an options expiration! As long as the SPX holds the OEW 1187 pivot range we expect the market to recover next week and make higher uptrend highs. Once it gets back over SPX 1200 it should gather upside momentum to reach the next OEW pivot at 1222. After that we'll review the charts to see if one of those larger percentage pullbacks would be next. Extremely oversold conditions are often good buying opportunities in bull markets as long as the market holds support levels. When support levels fail better buying opportunities often occur only days later. Monday/tuesday could prove to be quite interesting. Best to your trading!
FOREIGN MARKETS
Asian markets were mostly lower for a 0.8% loss. Australia's ASX (+0.7%) led and India's BSE (-1.9%) lagged.
European markets were mixed for a 0.5% loss. Spain's IBEX (+1.3%) led and the STOX index (-1.5%) lagged.
Commodity equity markets were mixed for a 1.2% loss. Russia's RTSI (+0.0%) led and Brazil's BVSP (-2.7%) lagged.
All foreign markets remain in uptrends.
COMMODITIES
Bonds gained 1.0% on the week and are starting to get overbought short term. Bonds remain in a downtrend and we continue to expect lower prices in the months and years ahead as long term bond yields rise. Still bearish.
Crude lost 0.5% on the week after making new uptrend highs on thursday at $87.00/bbl. This market has been working its way higher since the late 2008 low at $35/bbl. Still expecting Crude to either retest the $148/bbl high or go higher in the months ahead. Still bullish.
Gold dropped 2.1% on the week after making a new uptrend high on monday at $1,170/oz. This uptrend is taking its time unfolding and looks similar to the last uptrend from July-Dec. Both Gold and Silver are nearly sufficiently oversold short term and should resume their uptrends in the next few days. Still bullish.
The USD lost 0.2% on the week and benefitted from the pullback in the stock market on friday. The four month uptrend from 74 DXY to 82 was stronger than expected and displays a negative divergence at the highs. Expecting the DXY to confirm a correction soon and then we'll review the long term picture. Still bearish.
NEXT WEEK
A light week on the economic calendar. On monday Leading indicators will be released at 10:00. Then nothing until thursday when the weekly Jobless claims, the PPI, and Existing home sales will be reported. Then on friday the reports on Durable goods and New home sales. As for the FED. On monday a speech from FED governor Duke in Va. at 4PM. On tuesday FED chairman Bernanke gives Congressional testimony regarding the Lehman failure. Then on wednesday Bernanke is back with a speech at the Treasury department. It appears the market will trade on technicals and the action in two of its leaders next week: GS and GOOG. Best to you and yours this weekend and next week!
CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987
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