Review of the S&P 500 market with commentary including gold, euro, dollar and bonds, with Objective Elliott Wave by Tony Caldaro

the ELLIOTT WAVE lives on
Market analysis using proprietary Objective Elliott Wave techniques
Tony Caldaro
March 21
weekend update

REVIEW
On wednesday the FED rattled the markets with their announcement of a plan to monetize $1.25 trln in debt. Stocks, Bonds, Crude and Gold soared, while the USD sold off. On thursday and friday the markets stabilized. In the past twelve months the FED has guaranteed debt, then swapped debt for T-bills, and now is going to buy debt by issuing non-interest bearing debt currency, US dollars. The re-inflate phase of the economic bailout has now gone into overdrive. The equity markets gained for the second week in a row for the first time since May 08. The SPX/DOW were +1.2%, and the NDX/NAZ were +1.7%. Bonds gained 2.1%, Crude soared 10.7%, Gold added 2.4% and the Euro soared 5.0%. Asia gained 4.1%, Europe added 2.7% and the Commodity equity markets gained 2.8%. Leading indicators were reported -0.4%, the PPI/CPI were still modestly positive, and unemployment claims eased a bit.

LONG TERM: bear market
After completing what appears to be the recent Jan-Mar downtrend the market rallied 20% in about eight trading days. This downtrend would complete a five wave structure from the May 08 high, which is the second five wave structure from the Oct 07 bull market high. Remaining in the corrective wave bear market camp, we're counting this entire structure as an ABC consisting of three Major waves. These three Major waves should have completed Primary wave A of a larger three-wave bear market structure. Typically a Cyclical bear market unfolds in three Primary waves. Primary wave A makes the initial low, then Primary wave B usually retraces about 50% of the decline, and finally Primary wave C makes the final low and ends the bear market.

With Primary wave A displaying a decline from SPX 1576 to 667, or 909 points, a 50% retracement Primary wave B rally would push the SPX to 1122. Therefore our OEW 1107 pivot is still in play for Primary B. Since Primary wave B should be corrective, we are expecting it to take the form of a double zigzag: abc-x-abc, with each of the rising waves (a's and c's) forming five-wave advances. This first rally from the SPX 667 low does look like a five-wave advance from 667 to 803, and is now pulling back in a potential wave b. Naturally we are assuming the market is in an uptrend, although OEW has not yet confirmed the uptrend.

MEDIUM TERM: downtrend, but market rally underway
On March 9th the SPX closed at 677. The next morning March 10th, before the open, FED chairman Bernanke spoke before the Council on Foreign Relations (CFR), the market surged 6.3% that day. Then at the end of the FOMC meeting on March 18th the FED announced their $1.25 trillion monetization program, and the market hit SPX 803, +18.6% from the close on March 9th. On April 2nd the G-20 will meet in Europe to discuss the world's economy. This will likely be an historical event. Every major market move needs a catalyst. The rally from the SPX 667 low has broken through five pivots: 696, 717, 734, 768 and 789. The rally probably weakened at the recent high of 803 because it did not have enough upside momentum left to make it to the next pivot at 848. On thursday the SPX pulled back to the 789 pivot and held support. Then on friday it continued to hold that support until the afternoon when it broke through on the downside to the next support. The SPX closed on friday at 769 after touching 768.

During rallies pivots act as resistance until they are exceeded, then they act as support. If we consider the first rally over, fibonacci support levels appear at the 0.236 (SPX 771), 0.382 (SPX 751), 0.50 (SPX 735) and worse case 0.618 (SPX 719) retracements. Notice nearly all these levels fit with the OEW pivots noted earlier. Typically during a rally the daily RSI will get overbought, then on the pullbacks it will drop below neutral or lower. See pg.1 second chart in the link below.

SHORT TERM
Support for the SPX remains at 768 and then 734, with resistance at 789 and then 848. Short term momentum was overbought at the highs and is now fairly oversold. The rally from SPX 667 appears to be a five wave structure as labeled on the SPX hourly chart. Expecting the market to find support between the 734 and 768 pivots over the next few days, and then rally into the G-20 meeting.


FOREIGN MARKETS
The Asian markets gained 4.1% this week, and only China's SSEC is in a confirmed uptrend. The European markets added only 2.7%, still no confirmed uptrends here. The Commodity Equity markets rallied 2.8%, no confirmed uptrends yet, but most of the Commodities are in uptrends.

COMMODITIES
Bonds soared on wednesday with the FED announcement and are now uptrending.
Crude continues its uptrend moving above the $50 level, not seeing any weakness yet.
Gold had another spike up rally day and was up 2.4% on the week. The recent weakness did not confirm a downtrend.
The Currencies also spiked wednesday. Trends reversed: EUR up, and USD down.

NEXT WEEK
Another interesting week ahead. On monday Existing homes sales. Then wednesday New homes sales and Durables goods orders. Thursday we have the weekly Jobless claims and the almost final revision for Q4 GDP. Then friday Personal income, Consumer spending, PCE and a Consumer sentiment reading. On tuesday FED chairman Bernanke testifies before Congress on AIG, and friday the FED reports on Industrial production. Best to your week!

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987

=============
Folks, you can always catch Tony's Elliott Wave Lives On website in the "other sites of interest" listed at the right side of the page here. He developed his Objective Elliott Wave techniques with somewhat different counting from the "classic" method I apply from the Elliott Wave Principle book, but that's certainly no hindrance to my appreciation for his work.