Sizing up the S&P 500 equity markets' trend and rallies with Objective Elliott Wave by Tony Caldaro

Readers know that I appreciate the Elliott Wave analysis of Tony Caldaro with this Objective Elliott Wave (OEW) techniques. While his counting methods may be a little different from the traditional, and sometimes we try to come up with Elliott Wave ideas of our own, we find good points to consider in Tony's work. One of those recently is his emphasis that the S&P 500 did not complete a full 5 waves down in the move from October 2007 to March 2009 - this is noteworthy for any EW analysts who might be (as I am) assessing the EW counting put forward by others. If we do see a full 5 waves down (meaning, if the trend down still needs to dig down to new lows again) then it could be either a larger wave 1 (as some are touting) or C-wave (as I'm thinking may be possible). But if the market treats the March 2009 lows as "the low" for the first big move down, then I tend to agree with Tony that it should be counted as one large A-wave. (What I personally don't feel strongly about is whether or not the lows of last month, were "the low" for the first big move down. Probably consistent with Merriman's weekly comments, posted earlier here this morning.) So - if an A-wave did complete as Tony outlines, then his B-wave ideas should be kept in mind.*
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the ELLIOTT WAVE lives on
Tony Caldaro's Market analysis using proprietary Objective Elliott Wave techniques

April 10
weekend update

REVIEW
Few reports on the economic front this week. Consumer credit declined, Jobless claims eased a bit, Import prices rose, the Trade deficit improved, but the Budget deficit soared to nearly $1 trillion in just six months. The market stretched its weekly close winning streak to five for the first time since the bull market top in October 2007. For the week the SPX/DOW gained 1.3% and the NDX/NAZ were +1.9%. Europe finished mixed, Asia gained 1.8% and the Commodity equity markets added 2.1%. Overall equities pulled back until Wednesday morning, and then rallied to new uptrend highs at the close on Thursday.

LONG TERM: bear market
In review of the bear market thus far, we count five waves down into the March 2008 low at SPX 1257, a rally into the May 2008 high at SPX 1440, and then five waves down into the recent March 2009 low at SPX 667. All these important waves were confirmed by OEW, and the recent rally has also been confirmed by OEW. While some may count this entire decline from the October 2007 bull market top as five waves, we can assure you it is not. As an alternate count we will mention that the Major waves (Mar08-May08-Mar09) could be counted as a 1-2-3. This would make the current uptrend wave 4, with another five important waves (trends) down to follow after its conclusion for wave 5. Under this alternate scenario wave 4 should take the form of a flat as wave 2 (Mar08-May08) was a zigzag.

Our main scenario is that the two sets of five waves down formed a large zigzag and completed Primary wave A of an even larger three-wave bear market. For those who have been following our posts since the bear market began: You will recall that we have been expecting a bear market consisting of three Primary waves: ABC. Once Primary wave A ended, we have been expecting a 50% retracement rally for Primary wave B, then Primary wave C would either retest the lows or go lower to end the bear market. Thus far it certainly appears that Primary wave A ended at SPX 667 and Primary wave B is currently underway. From the SPX 667 low the market has rallied 28.4%. This is the highest percentage gain of the entire bear market.

MEDIUM TERM: uptrend
When the SPX hit 667 on Friday March 6th, there were positive divergences on every timefame except the monthly charts. The monthly's were the most oversold they had been in decades. From that low the market started to impulse higher for the first time since the bear market began. All the previous uptrends were quite choppy, except for the first uptrend from November 2007-December 2007. The impulsive move continued until the SPX hit 823, and then it started to get choppy. What appeared to form after that was a diagonal triangle to end Intermediate wave A at SPX 833. The market sold off rapidly after that hitting SPX 780 in a couple of the days. This was the largest pullback during the uptrend and appeared to end Intermediate wave B. From that low the market started impulsing again, pulled back and then moving higher into Fridays close at SPX 857. This appears to be Minor waves 1 and 2 with wave 3 underway. All of this is labeled on the SPX hourly chart, first chart in the link below.

SHORT TERM
Support for the SPX is now at 848 and then 789, with resistance at 912 and then 935. Short term momentum was overbought at the close on Thursday. In an attempt to look ahead, Intermediate wave C should have some Fibonacci relationship to Int. wave A: at SPX 863 C = 0.50A, at SPX 882 C = 0.618A, at SPX 897 = 0.707A, SPX 912 = 0.786A, SPX 927 = 0.887A and at SPX 946 C = A. Since the next OEW pivot is at 912, and this is a 0.786A Fibonacci relationship, it is a good target for Intermediate wave C.

However, we need to follow this wave as it unfolds as it should be another five wave structure. Once Intermediate wave C concludes, this will end Major wave A. Then the market should experience the biggest setback of this uptrend for Major wave B. After Major wave B concludes another series of Intermediate waves should carry the SPX to our uptrend target of 1107 in the next few months.

FOREIGN MARKETS
The Asian markets are all in uptrends and gained 1.8% for the week. China and India continue to lead.
The European markets are in uptrends but finished mixed on the week. Germany continues to lead.
The Commoditiy equity markets are in uptrends as well and gained 2.1% on the week. Brazil continues to lead.

COMMODITIES
Bond prices are in a downtrend but were +0.3% on the week. Expecting Bonds to hold support near current levels and start a new uptrend.
Crude continues to uptrend gaining 4.2% on the week. Expecting Crude to approach $60 before this uptrend ends.
Gold remains in a downtrend losing 1.6% for the week. Expecting Gold to bottom soon in the $800 - $840 area.
The Currencies remain USD/YEN downtrending and Euro uptrending. The USD was +1.8% on the week and the Euro -2.3%.

NEXT WEEK
This week there will be an overabundance of economic reports. Tuesday kicks off the week with the PPI, Retail sales and Inventories. The CPI is reported on Wednesday, with the Empire index, Industrial production and the Home builders index. Thursday the weekly Jobless claims, Housing starts and the Philly FED. Then Friday a Consumer sentiment reading, and Options expiration. The FED gets started on Tuesday as well with a speech by FED chairman Bernanke in GA. Then Wednesday the Beige book will be released at 2:00. On Friday FED the chairman gives a speech at the FED in Wash, DC. Then on Saturday FED vice chairman Kohn gives a speech in TN. Busy week with lots of data which often leads to volatility. Best to your week!

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

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Tony's charts and the link above, can always be located at his OEW website included in the "other sites of interest" at the right side of the page here.

* One of the thoughts I've been having that would auger in favor of the A-wave down idea, is a reference that Raymond Merriman made recently to an astrological event during these times that's very rare, and most recently happened in 1843. It looks like that year (as depicted in the long-wave charts in the Elliott Wave Principle book) bottomed a Kondratieff wave and also bottomed the A-wave of a large Elliott Wave flat - hmmmm. Then of course there's a potential divergence of the count for the Dow Jones Industrial Average and the S&P 500, which I showed in one aspect for potential predictions, at my UBTNB3 blogspot last weekend.