Now readers - here's Tony Caldaro's weekend update with the "real deal" on the Objective Elliott Wave analysis! His updates are always posted at his site, Elliott Wave Lives On (his charts are available from the charts links he provides there, and his site is always included in the "other sites of interest" at the right side of the page here).
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the ELLIOTT WAVE lives on
Market analysis using proprietary Objective Elliott Wave techniques
August 15
weekend update
REVIEW
For the first time in five weeks, since the uptrend began, the market failed to make a new uptrend high. The FED announced, after their scheduled FOMC meeting, that they would let the bond buyback programs expire this fall. Economic reports were generally weak. Productivity and labor costs improved, as well as, import prices and the CPI. Yet, the twin deficits (budget and trade) worsened, wholesale and retail inventories declined, along with retail sales and consumer sentiment, while jobless claims increased. For the week the SPX/DOW were -0.55%, and the NDX/NAZ were -0.60%. Bonds were +2.0%, Crude -1.9%, Gold -0.7% and the Euro was +0.1%. Asian markets gained 0.6% despite the 6.6% decline in China. Europe was off 1.6%, and the Commodity equity markets were mixed.
LONG TERM: bear market
The general bear market scenario mapped out in the beginning of 2008 continues to unfold. Then, as now, we expected the bear market to unfold in three Primary waves. The first wave down, Primary A, would confirm the bear market. Then a strong counter-trend rally, Primary wave B, would give many hope that the worse was over. Finally another wave down, Primary wave C, would end the bear market. In Mar09 the SPX hit 667 ending Primary wave A. During this first wave down the SPX lost 58% of its value. The DOW, NDX and NAZ also lost similar amounts. A few days after the low we projected the Primary wave B counter-trend rally would likely retrace 50% of Primary wave A. A few weeks later we modified that projection to either a 50% rally or a 50% retracement. During the past five months the SPX Primary wave B has taken the form of a zigzag and has rallied 52%, for a 39% retracement. Our minimum projection has been reached. When Primary wave B does conclude we expect Primary wave C to either retest the SPX 667 low, or, make new lows in the 400 area. In these types of bear markets, Cycle and Supercycle, swings in percentage terms are usually more important than points. Since Primary wave A was a 58% decline, under the worse case scenario, Primary wave C may also be a 58% decline. As a result we remain very cautious on this market.
MEDIUM TERM: uptrend
Primary wave A unfolded as a detailed zigzag. The three Major waves were: wave A Mar08 (SPX 1257), wave B May 2008 (SPX 1440), and wave C March 2009 (SPX 667). Primary wave B is unfolding as a simple zigzag. Its three Major waves are: wave A, July 2009 (SPX 956); wave B, July 2009 (SPX 869); and wave C currently underway.
Our Primary wave B projection called for a top between a 50% rally (SPX 1002) and a 50% retracement (SPX 1122). The high thus far is SPX 1018. Major wave C should have some Fibonacci relationship to Major wave A (289 points). At SPX 1014 Major wave C = 0.50 A, and at SPX 1047 C = 0.62A. These two levels are right at the two OEW pivots of 1018 and 1041. The first pivot was hit over a week ago and the market stalled. The next pivot should mark the top of Primary wave B.
Also, when we review the internal structure of Major wave A we find that it unfolded in a zigzag with the A and C waves nearly equal. When we mark the recent SPX 1018 high as Intermediate wave A, we observe that it traveled 149 points (1018-869). Therefore, after Intermediate wave B concludes Intermediate wave C should have a Fibonacci relationship to wave A as well. This will give us a better idea of the potential Primary wave B high.
SHORT TERM
Support for the SPX remains at 990 and then 961, with resistance at 1018 and then 1041. Short term momentum was slightly oversold Friday and rose past neutral heading into the close. As noted above, we marked the SPX 1018 high as the end of Intermediate wave A.
We're expecting this uptrend, from the SPX 869 low, to unfold in three Intermediate waves. Support for Intermediate wave B is at the 990 and 961 pivots. Should the SPX drop to the 961 pivot, a rally to the 1041 pivot for Intermediate wave C, would result in the Fibonacci relationship of C = 0.50A. This would also set up some negative RSI divergences medium term, and extreme overbought conditions long term.
Lastly, when I started this blog four years ago it forced me to follow the economic reports on a day to day basis, the FED, and other special meetings. It has been interesting to observe how market turns often align with these events. For example, in early March FED chairman Bernanke and Treasury secretary Geithner both gave speeches at the CFR. Bernanke's speech was on March 10th. The market rallied 8% that day and kicked off Primary wave B. This coming Friday, options expiration day, FED chairman Bernanke will give a speech at FED Economic Symposium in Jackson Hole, Wyoming.
FOREIGN MARKETS
The Asian markets were mostly higher this week with China's 6.6% drop the exception. The ASX and NIK made new uptrend highs, yet the SSEC is close to confirming a downtrend, its first since March. China bottomed in November 2008 and has been leading the worlds markets higher. Definitely worth watching.
The European markets lost about 1.6% on the week, yet the FTSE made a new uptrend high.
The Commodity equity markets were mixed with the TSX lagging and the BSVP making a new uptrend high.
COMMODITIES
Bonds rallied 2.0% on the week with most of the gain occurring after the FOMC meeting, still downtrending.
Crude dropped 1.7% with most of the drop occurring on Friday, still uptrending.
Gold had a choppy week (-0.7%), both it and Silver are still uptrending.
The Euro (+0.1%) was relatively flat, as was the USD (-0.2%), but the Yen (+2.7%) rallied and the Cad (-1.7%) declined. Trends remain unchanged.
NEXT WEEK
Monday kicks off Options expiration week with the Empire State index at 8:30, and the Home builders index at 1:00. On Tuesday the PPI and Housing starts at 8:30. Then on Thursday the weekly Jobless claims at 8:30, then the Philly FED and Leading indicators at 10:00. On options expiration Friday we have Existing home sales at 10:00. The FED will be at Jackson Hole, with speeches on Friday, from chairman Bernanke at 10:00, and then director Madigan at 12:45. This sets up to be an interesting week. Best to your weekend and week!
CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987
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