Bull market or bear market? As I've pointed out, the stock market is very close to a make-or-break of the bull versus bear market views. I know this just from the Fibonacci retracement levels. And if you haven't already read Tony Caldaro's analyses last weekend, go to his website (link below and at right in the sites list) to catch up. Fortunately, in this weekend's update (below), Tony also discusses his analysis and views including how he expects the market to rise and fall over the coming years, even decades; plus levels to watch for either resistance turns or breakthroughs. Recent strong movement 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:
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the Elliott Wave Lives On
by Tony Caldaro
October 9, 2010
weekend update
REVIEW
After a somewhat weak start to the week the market ended at a new uptrend high. Economic reports were mixed. Factory orders and wholesale inventories declined; while Payrolls, the ADP and consumer credit all weakened. On a positive note, pending homes sales, ISM services and the WLEI improved; while weekly claims fell and the unemployment rate remained unchanged. For the week the SPX/DOW gained 1.80%, and the NDX/NAZ added 1.45%. Asian markets gained 1.8%, European market added 1.7%, and the Commodity equity group rose 1.5%. Bonds were up 1.0%, Crude added 1.5%, Gold gained 2.1%, and the USD continued its decline -1.1%. Next week will be highlighted by the FOMC minutes, the PPI/CPI and Retail sales.
LONG TERM: bull market
As the bull market enters its 20th month, and even after an 83% gain and the largest correction only 17%, there are still many bears in the EW camp. This is as it should be. If everyone was bullish and fully invested we would be looking for an upcoming top, rather than a continuation of this bull market into 2012. Bull markets climb a wall of worry. And, there is certainly lots to be concerned about. The markets, however, are suggesting that for the time being things will improve and market valuations will rise. When one invests in the markets, fundamentals take a backseat to wave patterns and price. They are just another indicator. Gradually, in a bull market, the negativity wanes as prices rise. Then when everyone starts to justify the bull market we are nearing the end of its rise. This is the way markets unfold. Extreme pessimism ends bear markets and extreme optimism ends bull markets.
At OEW we just follow what the market is projecting long term by the waves it creates. Since the waves are quantified by OEW we never question where to label a wave or what constitutes a completed wave pattern. The waves are the waves, past, present and future. They never change. As long as the long term trend is up, and the wave patterns the market creates are bullish, we remain in a bull market. When that changes we enter a bear market. We also use technical and fundamental indicators to monitor the progress of the markets and the economy. These indicators help us to anticipate long term and medium term trends before they are confirmed by OEW. We anticipate, monitor, and adjust when necessary. This is not astro physics, it’s only a market of stocks and other assets.
MEDIUM TERM: uptrend new high at SPX 1168
Since the bull market began in Mar09 at SPX 667 the market has risen in five Major waves completing its first Primary wave of a five Primary wave bull market. The long term trend is up and the five waves up from the low is a bullish pattern. No reason, in EW terms, to be bearish. After Primary wave I completed in Apr10 at SPX 1220 the market corrected 17% over three months ending Primary wave II in early July at SPX 1011. From that low the market entered another Major wave uptrend. This friday the uptrend hit its highest level, thus far, at SPX 1168. We are anticipating, (anticipate, monitor, adjust), that this uptrend will last until Jan11 when the SPX nears the OEW 1313 pivot. Before the market can reach those heights it has some work to do at lower levels. First there is a cluster of OEW pivots straight ahead at 1168, 1176 and 1187. These need to be cleared before the SPX can make a run at the current bull market high of SPX 1220. We noted on friday that the SPX is still about 5% under this bull market high. However, the DOW/NDX are only about 2% under their bull market highs. After our weekly review of the charts we now observe that three of the nine SPX sectors have already made new bull market highs: the XLB, XLP and XLU. And, the NYAD (market breadth) has again made all time new highs. Many of our other indicators like RSI and MACD, on various timeframes, suggest this uptrend will continue as well.
Since we are counting this uptrend as Major wave 1 of Primary wave III it should unfold in five Intermediate waves. Intermediate wave one topped in early August at SPX 1129 after completing five Minor waves. Then we had a three Minor wave pullback to SPX 1040 by the end of August for Intermediate wave two. Notice the bullish pattern of five Minor waves up and three Minor wave down. From the August low Intermediate wave three appears to have completed on Minor waves 1 and 2 and Minor wave 3 is now underway. Minor wave 1 ended at SPX 1149 in mid-September, and Minor wave 2 a couple of days later at SPX 1123. If, in a few weeks, Minor wave 3 equals Minor wave 1 it should reach SPX 1232, which is near the next higher OEW pivot at 1240. In the meantime we’ll continue to monitor Minor wave 3 of Intermediate wave three as it unfolds.
SHORT TERM
Support for the SPX remains at 1146 and then 1136, with resistance at 1168 and then 1176. Short term momentum ended the week at barely overbought. After Minor wave 2 completed at SPX 1123 the market rallied, and then became a bit choppy. The first rally off that low we labeled Minute wave one at SPX 1149. Then the SPX dipped to 1132, rallied to 1157, and returned to 1132 to complete a Minute wave two irregular flat. Minute wave three began at that time and has already made new uptrend highs three of the past four trading days. Our short term OEW charts suggest this rally, including thursday’s 13 point pullback (1164-1151) are all part of the same wave: Minute wave three. Since this uptrend began, pullbacks of 10 to 15 SPX points have been quite normal. They do create waves, but of such a small degree that we only monitor them in relation their the larger wave, which we label on the hourly chart. All our charts, including wave counts, can be found using the link and the end of this post. Best to your trading!
FOREIGN MARKETS
Asian markets were mostly higher on the week for an average gain of 1.8%. All five indices are in uptrends and only India’s BSE had a down week.
European markets were all higher on the week for an average gain of 1.7%. Only the FTSE is in a confirmed uptrend and the other four are close.
The Commodity equity group were all higher on the for an average gain of 1.5%. All three indices are in uptrends.
The DOW Jones world index gained 2.0% on the week and is in a confirmed uptrend.
COMMODITIES
Bonds were +1.0% on the week at their uptrend continues. The 1YR made an all time low this week at an incredible 0.21% yield.
Crude gained 1.5% on the week as its uptrend continues. This market has been quite choppy but it now has the chance to move higher.
Gold knocked out another all time high this week at $1,365/oz. It gained 2.1% on the week as its uptrend continues.
The USD continued its slide losing 1.1% on the week as its downtrend continues. The EUR gained 1.1% and the JPY made new multi-year highs +1.5%.
NEXT WEEK
Tuesday starts the week, economically, with the FOMC minutes. Wednesday, we have Import/Export prices and the Budget deficit. Thursday, the weekly Jobless claims, the PPI and the Trade deficit. Then on friday, the CPI, Retail sales, the NY FED, UofM consumer sentiment and Business inventories. The FED starts the week with a speech by FED vice chairman Yellen on monday in CO. at 2:45. Then on friday FED chairman Bernanke gives a speech at the FED in MA. at 8:15. Best to your weekend and week.
CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987
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