Remaining objective on the equity markets helps you see where the market's heading next: Objective Elliott Wave update by Tony Caldaro

Folks, a few quick comments of my own before we look at Tony's update -- Earlier today as I mused on the idea of the S&P 500 NOT working out a peak in this area, I mentioned that I didn't have an Elliott Wave count for having a mild pullback followed by a quick move to a new high in mid-July to complete this rally. I've considered it some more and the best I could come up with is the idea that instead of the last few days being a final fifth wave movement, it would have be the first of a fifth wave movement. But that has two problems: One, an extended fifth wave doesn't really "look right" in my opinion. The other is that it would not permit much of a drop by or into opex Friday or later (such as the Bradley model's June 26 - interestingly close to the FOMC June 24), and then a higher move up like that. But - all that's a theoretical discussion, and a reaction to the Bradley model which I don't necessarily take as an absolute for tracking the markets! It does seem quite interesting - but even the Bradley model doesn't say that a date like the important mid-July turn date must be a new high.

Personally, although my Elliott Wave counting is more the traditional style and I've not (at least not yet) learned the OEW style, I've learned to appreciate Tony Caldaro's OEW methods. Here's what Tony's saying this weekend (always accessible at his Elliott Wave Lives On site in the list at the right side of the page here). And I've included a couple of his charts at the bottom (from his public charts link at his site) so you can more readily see the primary and alternative OEW counts he's talking about. The one on the SPX shows the Primary Wave B (or "Primary b" very close to completion (if not already completed), implying that wave C down is next, presumably challenging the March lows. The alternative count on Tony's Dow Industrials chart shows the rally that's completing as being a Major wave "a" (composed of intermediate waves a-b-c) that calls for a pullback to occur as Major "b", later to be followed by a Major wave "c" up to complete the Primary Wave B much later in time and significantly higher in price.

Without further ado, Tony's update:
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the ELLIOTT WAVE lives on
Market analysis using proprietary Objective Elliott Wave techniques

June 13
weekend update

REVIEW
A relatively quiet week and the index results clearly display that: SPX/DOW +0.55%, and the NDX/NAZ were mixed. Economic reports were light. The twin Deficits (budget/trade) continued to worsen, wholesale/business Inventories continued to decline, and weekly Jobless claims remained over 600K. Monthly retail sales turned positive, but so did Import prices. The 10YR bond rate moved over 4.0% for the first time since October, and ended the week at 3.79%. The 10YR was at 2.04% just six months ago. The 30YR bond hit 5.0% this week before closing at 4.63%. Crude soared 6.3% this week, Gold was -1.6% and the Euro was +0.3%. In foreign markets, Asia was +1.6%, Europe was mixed, and the Commodity equity markets were +0.6%.

LONG TERM: bear market
All Supercycle/Cycle bear markets unfold in three Primary waves: ABC. The first wave down, Primary wave A, usually consists of a zigzag or complex three wave pattern. The market typically loses about 50% of its value, completes this first wave, and then a very strong counter-trend Primary wave B unfolds. This wave gives all the appearances of a new bull market. From extremely oversold levels this wave soars either 50%, or retraces 50% of the entire bear market, but also takes the form of a three wave structure. When Primary wave B concludes the negative part of the investor psychology cycle resumes, and the next leg down, Primary wave C gets underway. This is exactly what occurred between 1929-1932, 1937-1942, and to a lesser extent 1973-1974.

At the March 2009 low, SPX 667, we counted a completed zigzag from the bull market October 2007 high, SPX 1576. The three Major waves that formed the zigzag were: wave A Mar08 SPX 1257, wave B May08 SPX 1440, and wave C Mar09 SPX 667. Observe that the length of wave C (~800 pts.) was about 2.618 times the length of wave A (~300 pts.). Major waves A and C subdivided into five Intermediate waves [each]. Please review the weekly SPX chart in the link below. Two days after the SPX 667 low, we noticed that the market started to impulse higher, and that Primary wave B was likely underway. That was three months ago. Since then the SPX has rallied 43% and the DOW 37%. When applying the historical 50% rally/50% retracement scenario to the SPX, we arrived at an upside targeted range of SPX 1001 and SPX 1122. Thus far the SPX has rallied to 956, and it's still about 5% below the 50% rally level. The current wave structure for this uptrend, however, gives us reason for concern, as described below.

MEDIUM TERM: uptrend, but cautious
This uptrend, from SPX 667, has been quite unique in Elliott wave terms. All three significant pullbacks have been symmetrical, between 49 and 53 points. All four rallies have unfolded in different types of impulsive patterns. The first rally from SPX 667-833, ended in a fifth wave diagonal triangle. The second rally from SPX 780-876 was a diagonal triangle. The third, from SPX 827-930 was a simple five wave structure. And the current fourth rally, from SPX 879-956, displays a triangular 4th wave. These rallies are all different forms of impulse waves. You might want to print an hourly chart for future reference. Since the first rally was the strongest, (166 points), and a five wave structure, we labeled it Major wave A. The following pullback to SPX 780 we labeled Major wave B. Major wave C has clearly rallied in another five waves, but much more detailed and complex than Major wave A: wave 1 SPX 876, wave 2 SPX 827, wave 3 SPX 930, wave 4 SPX 879 and wave 5 underway. Also of note, Wave 3 (103 points) is longer than wave 1 (96 points), and wave 4 (a flat) alternates with wave 2 (a zigzag). The total length of Major wave C is currently 176 points (956-780), which compares favorably with the 166 (833-667) point rally of Major wave A. Also you will note that wave 5 (77points) is getting close to the length of wave 1 (96 points) and wave 3 (106 points). With all this symmetry aligning, we are also noticing significant negative RSI divergences on all timeframes. This is the reason for concern. Fortunately, this symmetry has setup some nice parameters on the upside as well as the downside, as described below.

SHORT TERM
Support for the SPX remains at 935 and then 912, with resistance at 961 and then 990. Short term momentum was slightly oversold at Friday's SPX 936 low and rising at the close. The support and resistance pivots just noted, align exactly with the short term wave structure. The SPX challenged the 961 pivot on Thursday and was immediately turned away. On Friday the pullback bottomed at the 935 pivot and then rallied into the close. Should the SPX break through the 961 pivot it should be on its way to the 50% rally level at 1001. When the SPX drops below the 935 pivot, downside momentum should take hold. Then when the SPX drops below the 912 pivot, it will be a good signal that the Mar-Jun uptrend may have ended. With a 40% gain in hand, and a potential 5% further gain ahead, the risk/reward ratio favors a cautious position. Best to your trading!

FOREIGN MARKETS: The Asian markets gained 1.6% this week, but the leaders China (-0.4%), India (+0.9%) and Hong Kong (+1.3%) lagged.
The European markets were mixed with the leader Germany (-0.2%) lagging.
The Commodity equity markets rose 0.6%, and again the leader Brazil (+0.5%) lagged.

COMMODITIES: Bond prices gained 0.8% on the week despite the 10YR hitting 4%, and the 30YR hitting 5% yield. Yield uptrend getting close to ending.
Crude surged 6.3% as it hit nearly $74/bbl. This uptrend has negative divergences in place.
Gold lost 1.6% on the week and has been under a lot of selling pressure since the USD has rallied off its lows. $990 might have been it for the uptrend.
The USD (-0.6%) is displaying some strength after hitting 78.33 on the index. The downtrend may be over for now. The Euro (+0.3%) may have topped at 143.31, and the Yen (+0.4%) continues its consolidation.

NEXT WEEK: Monday kicks off an interesting week with the Empire State index. On Tuesday Housing starts, Building permits, the PPI and Industrial production. Wednesday we have the CPI and Current accounts deficit. Thursday the weekly Jobless claims, Leading indicators and Philly FED. Then on Friday Options expiration. The FED is also active this week. Two speeches on Monday: FED governor Tarullo in NC in the morning, and FED governor DUKE in DC in the evening. On Tuesday a speech from FED governor Warsh in NYC, and on Wednesday a speech from FED chairman Bernanke at project HOPE in DC. Next week, June 23rd and 24th is the FOMC meeting. Best to you and yours.

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