Market analysis using proprietary Objective Elliott Wave techniques
April 18
weekend update
REVIEW
Economic reports for the week displayed a lessening decline than in the most recent months. The weekly Jobless claims remained over 600K, Industrial production -1.5%, Inventories -1.3%, and Retail sales -1.1%. In the deflation/inflation debate, the CPI was -0.1% turning negative on a year over year basis for the first time since the 1950's, and the PPI was -1.2% reaching a rate of decline not seen since the late 1930's. FED charts below. Despite the negative news the market rallied for the sixth straight week. The SPX (S&P 500)/DOW (Dow Jones Industrial Average) were +1.1%, and the NDX/NAZ (Nasdaq markets) were also +1.1%. Bonds were flat, Crude lost 4.1%, Gold dropped 1.1%, and the Euro fell 1.0%.
LONG TERM: bear market
The bear market of Oct 2007 is now experiencing its best rally to date, and probably the best rally it will have until the bear market concludes. After two sets of five wave declines, labeled as Major waves ABC, ended in Mar 2009. Primary wave A concluded at SPX 667 and Primary wave B began. Our target for Primary wave B remains SPX 1107. Thus far the SPX has rallied 209 points (31%), its best uptrend of the bear market in both points and percentage terms. Despite this stellar performance in just six weeks, the SPX/DOW and FTSE/DAX for that matter, are only at two month highs. Australia is currently at five month highs; Brazil, Hong Kong and India are at six month highs; and China is at eight month highs. The West is seriously lagging the East. Nevertheless, should history repeat itself as it often does, this uptrend should last several more months. As you know, we had been anticipating a multi-month 50% bear market retracement rally once Primary wave A ended. It certainly appears that Primary wave B is underway.
MEDIUM TERM: uptrend
As noted above Primary wave A took the form of a zigzag consisting of three Major waves. Primary wave B should also take the form of a zigzag, but with a far less complex structure, and a much, much shorter time duration. Just like bull market corrections are sharp and swift. Bear market rallies, of this nature, usually display the same characteristics. We're anticipating that the internal structure of Primary wave B will consist of three Major waves, with each Major wave subdividing into three Intermediate waves of its own. In Elliott Wave terms this would be considered a double zigzag: abc-x-abc. Thus far the SPX has rallied from the March 6th low at 667 to a March 26th high at 833 completing Intermediate wave A. Then a pullback to SPX 780 on March 30th completed Intermediate wave B. Now the rally from SPX 780 is forming Intermediate wave C, which upon conclusion will complete Major wave A. After Major wave A ends the uptrend should experience its largest pullback to date to complete Major wave B. The largest pullback thus far has been the 53 point Intermediate wave B. Then Major wave C should also unfold in three Intermediate waves to conclude Primary wave B. In Elliott Wave terms Primary wave B is currently in the first "c" of the abc-x-abc. The chart link below displays all the charts.
SHORT TERM
Support for the SPX remains at 848 and then 789, with resistance at 912 and then 935. Short term momentum hit overbought on Friday and then eased back some into the close. When the uptrend started the market was impulsing until it hit SPX 803 on March 19th. After that a rising diagonal triangle formed to complete Intermediate wave A at SPX 833. A sharp pullback followed to end Intermediate wave B at SPX 780. When Intermediate wave C started it impulsed to SPX 846 on April 2nd, but then started to get a bit choppy just like it did at the end of Intermediate wave A. As a result the entire rally from SPX 780 to Friday's high at 876, currently, appears to be taking the form of a diagonal triangle. There's a rising upper trendline and a rising lower trendline forming a wedge. In order to break out of this potential rally ending pattern the SPX needs to break substantially above the upper trendline this week. Should this occur then the market will re-enter the impulse mode. However, a break below the lower trendline, currently near the Objective Elliott Wave (OEW) 848 pivot, would suggest that Major wave A ended and Major wave B is underway.
FOREIGN MARKETS
The Asian markets rallied 2.3% on the week, but the daily charts are displaying some negative divergences and some weekly charts are getting overbought.
The European markets rose 3.4% for the week with some negative divergences here as well.
The Commodity equity markets rose 1.7% for the week and again some negative divergences.
COMMODITIES
Bonds ended flat on the week after a rally and they are still in the downtrend mode.
Crude dropped 4.1% this week, it's displaying a negative short term divergence after trading near $55. Still in an uptrend.
Gold lost 1.1% this week as its two month downtrend appears to nearing conclusion. Support remains between $800-$840.
This week the Currencies resulted in the downtrending USD (+0.4%) and YEN (+1.1%), while the uptrending Euro was -1.0%.
NEXT WEEK
Leading indicators on Monday, then the government FHFA housing prices on Wednesday. Thursday the weekly Jobless claims and Existing homes sales. Then on Friday Durable goods orders and New home sales. As for the FED, a quiet week, only one speech on Monday night by FED vice chairman Kohn. They must be busy making more videos. Best to your week!
CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987
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Tony Caldaro's Objective Elliott Wave website is always included in the "other sites" listed at the right side of the page here, where you can find his daily updates and other services, along with his charts link to his public charts for numerous markets including equities, bonds, precious metals, oil, agricultural commodities, numerous individual company stocks, and technical indicators. I like to speculate on alternative Elliott Wave counts from time to time, but I give a lot of credit and respect to Tony's work with all these markets! His charts are very helpful too, even if you don't necessarily follow Elliott Wave you can pick up on where they indicate bullish divergence, bearish divergence, etc.
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