We've arrived at a confluence of significant levels in equities, gold and currencies - now where do we go from here?

So many asset classes moved to significant levels today, that it truly looks like an important confluence has been reached. Significant directional questions are open now for equities, gold, the dollar and currencies (and yes bonds, although I haven't included the bond chart again in this lineup), that I'd like to review many of these together. Not that I feel I've got all the "answers" yet. What I'll do is review and point out what I see as significant in these asset classes. The first being the S&P 500 index of course. With significant downside contribution from banking which was scarily low again yesterday, the SPX moved into our targeted area which borrowed from the concepts of Elliott Wave, Fibonacci and T Theory, as discussed quite a bit over the last week.

I like to look for Elliott Wave possibilities that might be off the beaten path, because sometimes (not always, but sometimes) they work. For many weeks now, most Elliott Wave analysts were looking for a B or X wave up, and were taken off guard when equities moved to lower levels over the past nine days. This move down fits nicely with my "wish" for a larger-picture C-wave flat completing at a level such as 640 or, better, under 600 or even under 500. But wait - could something else be in the works? At the risk of being wrong (not to mention running contrary to Elliotticians that I respect), let me trot out just a concept here .... what if the B or X wave up that so many were looking for, just takes a different shape? What if' it forms as an Elliott Wave flat of its own (similar to what I see as a flat in early 2008)?

Now - I grant you that the principle of alternation of corrective waves might argue against a flat forming here, as it did in early 2008. But, just in case the idea might have merit, here's how it would go: We would have bottomed its "B" wave either yesterday, or perhaps Monday .... and the fact it's a flat would "explain" why the B-wave low is at different levels in the different indices. A C-wave that measures in the SPX to 1.382 of the length of the B-wave would extend upward to ~1016, and we might get there in time to have that level converging with the "highest" downtrending channel line on my weekly SPX chart (the second of the two SPX charts below).

Another interesting point about this idea is that it might "work" with the Armstrong or Bradley cycle charts - which I'm not married to at all, just as I'm not married to this C-up flat idea either. But I do think it should be considered as an alternative from here. It is one of the reasons why I don't think investors or traders should get complacent about the move down continuing to lower levels from here. This idea of considering possible moves in either direction fits in with the confluence of significant levels in gold, the dollar, the yen, and other markets (including the transports discussed below). So - I'm feeling neutral right now about direction ... here are the daily and weekly SPX charts:





How about the Dow Transportation Average?! The transports dropped low enough to either reach, or come very close to reaching, the triangle target I described a while ago. So a big question now becomes, was I really right about that triangle and if so, what does the apparently 5th wave completion represent? Can it be the bottom of a large A or wave 1 down, with a large B or wave 2 pullback up to come? Could it even finish a large correction down, with something more bullish to come? Depending on the big-picture pattern, the Fibonacci retrace marked on the monthly chart (the third of these four charts of the Dow Jones Transportation Average, below) could actually even dig down to .81 and still retain bullish potential. But having got to the .786 retrace, I'm delighted to keep a close eye on it for clues from here. You can see that there is RSI positive divergence on the daily chart. But it's also obvious from that monthly chart that any move up will have to contend with the 200-month moving average:







Certainly, looking at this bigger picture monthly chart of the Dow Transports shows that, if it loses the 2003 lows, there may be seriously lower levels it may get to. So even if we see a decent rally up, whether it's a pullback or something more, we'll need to keep this bigger picture in mind:



Gold has reached the "minimum" projection we had for a C=A when counting the A wave beginning at a more conservative level (i.e., deeming the 681 level to be the start of a triangle that led to the A wave beginning at a slightly higher level). Looking at the weekly chart, you can see the steeper trendline embedded within the larger, shallower fork lines. You can also see that yesterday, gold finally touched up to the middle of that larger fork on the weekly chart:

On the daily chart, you can see my first reference to a C=A projection to 1024. That might still happen, but I decided to be more conservative and TMAR when I saw gold get to 1000 which is my more conservative C=A projection:



Looking at the bigger picture monthly chart, I'm still trying to double-check my premises about whether getting to 1033.90 was the completion of a large 1.382 Fibonacci extension and that's all we get on the move up ... or does it still want to get to 1198 which was a large 1.618 extension? or for that matter, even if it still wants higher, does it want to correct downward first in a large "C" wave? Or - yuck - might it want to go into a diagonal mode and we've only seen wave 1 of a large diagonal up .... then we get wave 2 down, then wave 3 up, basically zigzagging up to a level about 1200? It's this type of question that had me doing TMAR yesterday. Here's the big picture monthly chart:



And before we leave the topic of whither gold, let's look at the GLD hourly chart. You can see that, having seen a 5-wave movement up that could be a perfect C-wave completing any of the possibilities discussed above, the hourly chart printed what could become a little reversal pattern - be it a head & shoulders, or a trap door, or even a 1-2-3 trend reversal - too soon to say, of course! Still, it is prudent to think that having seen what looks like 5 waves up, there "should" be some amount of pullback (or consolidation) as gold decides what to do:



Okay, one more chart, the daily chart of GLD which - interestingly and unlike the $GOLD continuous contract chart - printed one of those doji candlesticks that represents indecision. Of course it's the way the hourly chart discussed just above, ends up displaying on the GLD daily chart:



The yen has "given me trouble" and I bet it is because I interpreted the large consolidation on the big picture chart as a triangle. It might not be a triangle after all! If not, it leaves a couple of possibilities. One is a "B" wave up (comparable to a bearish Gartley pattern) that will roll over to a "C" wave down. If so, look out! could be quite a drop. But another is that it still continues up, either as an impulse or with a diagonal structure that would overlap the prior swing high on this daily chart. You can see that I've made markings and some discussion of this, in this daily chart:



Here's the big picture $XJY chart and I've marked my misgivings about the large triangle idea onto it:



Well, the dollar - will it get to my 91 target, or not?! Sure didn't look the past couple of days, as if it wants to get there. Didn't violate trendline support (yet) ... good grief, does it want to do a small diagonal of its own on this chart?! Naturally, it's going to see resistance at the moving averages on the longer term chart, so let's just see .... maybe the dollar is weakening off and will drop to new lows. But I'm not confident of that, either way just yet. The indicators still look strong on the big picture chart .... yet continued weakness on the daily chart could of course change that:





The euro still gives me the impression that it's got a new low ahead of it. It seems to be the inverse of the dollar chart right now. There have also been fundamental analysis discussions of reasons to expect continued weakness in the euro. But does that imply continued strength in the dollar (or for that matter, in the yen)? This definitely IS an interesting confluence of significant levels in the currencies:



We'll continue to read the tea leaves and try to make sense of how things will sort out, where these equities, gold, and currencies are heading. Later this weekend, we'll look forward to the weekly cycle forecasts for equities and gold from ChartsEdge, as well as Tony Caldaro's update on the Elliott Wave picture in equities and Andre Gratian's trend analysis and commentaries for equities.