Saturday, August 7, 2010

weekend update

The stock market has once again raised hopes that the bull is back, with the SPX back over Tony Caldaro's 1090 pivot - here's some info on that possibility. My dear readers, I'm still a little busy with a move of residence plus travel this weekend. But we can still chart the markets! - and continue to benefit from those who allow us to share their analytical insights, such as Tony Caldaro. Tony Caldaro with his Objective Elliott Wave discusses his views including levels to watch for either resistance turns or breakthroughs. Recent volatility helps remind traders of the importance of pivot levels for understanding support and resistance. 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 in this weekend's update:

the Elliott Wave Lives On
by Tony Caldaro
August 7, 2010

weekend update


Market gaps up on monday to new uptrend highs. Then spends the rest of the week trading between the OEW 1107 and 1136 pivots. On the economic front reports were mostly to the downside. Personal income/spending were flat; ISM manufacturing, pending home sales and factory orders declined; weekly jobless claims rose and monthly joblessness increased; and consumer credit continued to contract. On a positive note; construction spending, ISM services, the ADP index, the WLEI increased; and the unemployment rate remained unchanged. The market ended the week positive; SPX/DOW were +1.8%, and the NDX/NAZ were +1.8%. Asian markets gained 1.7%, European markets gained 2.0%, and the Commodity equity group gained 1.1%. Bonds gained 0.6%, Crude gained 2.4%, Gold gained 2.1%, and the USD lost 1.5%. Next week's highlights include the FOMC meeting, Retail sales and the Twin deficits.
LONG TERM: bull market
Last weekend we posted a weekly chart of the DOW because we were awaiting the uptrend confirmation in the SPX. The SPX uptrend confirmation arrived this week, as expected, and now all nine SPX sectors are in confirmed uptrends, along with twelve of the thirteen foreign indices we track. With the SPX uptrend confirmation we shifted the SPX 1011 low from a tentative green II to the actual Primary wave II blue. In basic Elliott Wave terms we have five waves up from the Mar09 SPX 667 low to complete Primary wave I, and those five waves were corrected by Primary wave II. We should now be starting the next five waves up for Primary wave III.
When reviewing the characteristics of the 2002-2007 bull market, you will notice that the MACD stayed above zero for nearly the entire bull market and the RSI was constantly reaching overbought. This is exactly what is occurring now. During the 2007-2009 bear market, the MACD stayed below zero and the RSI never got overbought. Opposite long term trends create opposite characteristics. Solidifying the bull market scenario is the five wave rise from the Mar09 SPX 667 low, which unfolded as follows: Major wave 1 SPX 956 Jun09, Major wave 2 SPX 869 Jly09, Major wave 3 SPX 1150 Jan10, Major wave 4 SPX 1045 Feb10, Major wave 5 SPX 1220 Apr10 and the end of Primary wave I. Then a three month correction retracing 38.2% of the entire advance, notice Major waves 2 and 4 were only one month, and bottoming at SPX 1011 in Jly10. Now the market should be in Major wave 1 of the next Primary wave, wave III.
MEDIUM TERM: uptrend
Now that we have all the major US indices in confirmed uptrends, and nearly all the foreign markets as well, the market should continue to rise into Oct10. This bull market, thus far, has displayed a three month rising/uptrend cycle. If the market continues to remain in its current time/price pattern, we would expect this uptrend to end at new bull market highs near the OEW 1291 pivot. If the economic indicators we have been tracking, the Weekly Leading Economic Indicator (WLEI) and Adjusted Monetary Base (AMB), do not display marked improvement by month's end this uptrend could abort near the OEW 1187 pivot. Thus far, we have had a slight uptick in the WLEI and no update in the AMB. Something to keep in mind as the month unfolds.
The uptrend strarted off quite well, rallying 88 points from SPX 1011 to 1099 in a couple of weeks. We labeled that rally Intermediate wave one of Major wave 1. A pullback followed to SPX 1057 on July 20th. We labeled that Intermediate wave two. Since then, however, the rallies have been shorter and the market has been a bit choppy. Nevertheless, the current move up from SPX 1057 should be all part of Intermediate wave three. The first area of technical resistance is at SPX 1131, which we ran into this week, and then SPX 1174.
Support for the SPX remains at 1107 and then 1090, with resistance at 1136 and then 1146. Short term momentum was rising at the close on friday. From the SPX 1057 low we now have two possible short term counts. The first is a continuation of the nested 1-2's: Minor 1 SPX 1089, Minute one SPX 1121 and Micro 1 SPX 1129. The second is to count the entire advance from SPX 1057 to 1129 as Minor wave 1. We'll await additional market data before determining which count is the most probable. The short term OEW charts flipped from positive to negative friday morning, then flopped back to positive in the afternoon. Volatile day. Short term momentum was the most oversold it had been since the July 20th SPX 1057 low when the market retested the OEW 1107 pivot friday morning. This suggests the market either made the low for this pullback, or will retest that low before heading higher. Since the FED meets on tuesday we should expect some volatility early in the week. Best to your trading!
Asian markets were all higher on the week +1.7%. All indices are in confirmed uptrends except Japan's NIKK.
European markets were all higher on the week as well +2.0%. All indices are in confirmed uptrends.
The Commodity equity sectors all gained on the week +1.1%. All indices are in confirmed uptrends here as well.
Bonds gained 0.6% on the week as the uptrend continues. The yield on the 10YR dropped to 2.82% its lowest since Apr09. The yield on the 1YR dropped to 0.25% its lowest in recent history. This suggests the FED will not only keep rates low into the foreseeable future, but may start targeting rates further out the yield curve.
Crude gained 2.4% on the week as its uptrend continues. Longer term its pattern continues to look corrective.
Gold gained 2.1% on the week and has risen eight days in a row. This Major wave 4 correction could be more complex than originally expected. After some of the two year peaks, (2004, 2006 and 2008), we see some complex corrections. Still expecting the weekly MACD to come back to neutral before Gold is ready to resume its bull market.
The USD continues to downtrend losing 1.5% on the week. It should be getting close to a low soon around the DXY upper 70's. The EUR was +1.9% and the JPY +1.2%.
Another busy economic week ahead. On tuesday, Wholesale inventories and the FED's FOMC meeting. On wednesday the Twin deficits, then on thursday the weekly jobless claims and import/export prices. On friday, Retail sales, the CPI, Business inventories and Consumer sentiment. Nothing on the FED calendar except the FOMC meeting. Best to you and yours this weekend and week.


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