Higher S&P 500 levels still on radar in Objective Elliott Wave count: Tony Caldaro's weekend update

Tony Caldaro has issued his weekend update - which you can always find along with his daily updates and other services, at his Elliott Wave Lives On site (included in the links at right). I'm sobered by the idea that the SPX goes above its monthly Bollinger Band midline that just provided resistance last week. But I see the advance/decline volumes and McClellan Summation Index still look strong, and the QQQQ's exceeded their 50% retrace ($39.82) and look able to get to their 61.8% retrace ($43.33). It's possible that the higher numbers Tony talks about may correspond with the higher QQQQ retrace and a visit with the SPX's higher Fibonacci retraces on its charts. From a cycles perspective, if the rally lasts past October 6, that's 7 months so obviously past 6 months which has meaning in terms of the seasonal cycle. Not everyone agrees with Ray Merriman that March was the 4-year cycle low, but obviously it was a major one. Also, I found out that Chris Carolan is generating the European and Asian markets updates now for EWI (you can read his work this weekend as part of EWI's Free Week), and he marks many - though not all - markets as close to completing a wave 3 of "c" up. For EWI it means they're also looking for wave 3 up to finish soon (but Tony's SPX chart below implies that wave 3 has farther to go still, with only iii of 3 about done); then 4 down and 5 up. After that, a substantial downward wave, though deeper and with different subsequent significance than what Tony's methods imply. You know, there are others out there looking at "head and shoulders" patterns forming in various stock markets around the globe - interesting, and conceptually same results as what Tony's showing. By the way, Russell 2000 ($RUT) followers: 643 looks like resistance in that index. Well, that's all by way of backdrop and intro - so without more, here's Tony's update commentary:
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the ELLIOTT WAVE lives on
Market analysis using proprietary Objective Elliott Wave techniques
by Tony Caldaro

September 19
weekend update

Markets continued to move higher this week as their uptrends extended. The SPX/DOW gained 2.35%, and the NDX/NAZ gained 2.45%. Europe rose 2.30%, Asia was mixed but still averaged a 1.10% gain, and Brazil/Canada gained 2.60%. Bonds were -0.9%, Crude gained 4.0%, Gold rose 0.1% after making a new closing high, and the Euro was +1.0%. On the economic front nearly all reports came in positive. Retail sales turned positive, month over month, as did the PPI and CPI. The Empire state index and Philly FED continued to expand, as did Industrial production and Housing starts. Inventories, however, continued to contract and the weekly Jobless claims remained over 500K. The question remains, is the economy in the recovery phase or is this just a bounce after the free fall in Q1 and Q2. Economists and investors are quite bullish, as bullish as they were in Jan 2004. Yet only six months ago their bearishness was at record levels. Certainly a 61% rally in the SPX is a major contributing factor, along with less worse economic numbers. Yet, many who called this downturn in 2007, are still expecting another leg down in the economy and stock market.

LONG TERM: bear market
After a five year OEW bull market between Oct 02 and Oct 07, when the SPX rose from 769 to 1576, (a 105% gain), OEW turned bearish in early Jan 08. Soon after we projected that the bear market would unfold in three Primary waves, an ABC. From the Oct 07 top the major trend remained down for 17 months into the SPX 667 low in Mar 09. As this decline was underway, we tracked the waves, and identified a completed detailed zigzag at the low. This, we projected, completed Primary wave A of the bear market, and Primary wave B was now underway. In early March, near the lows, we projected that Primary wave B could retrace as much as 50% of the entire decline, i.e. SPX 1122. At the time this projection was considered somewhat outrageous, as most investors were extremely bearish. Since then we have been tracking the waves upward during Primary wave B. At SPX 956 we observed a potential top, even though the market was still below the projection, and cautioned investors. The market did correct, in a confirmed downtrend down to SPX 869. But this only ended Major waves A and B of Primary wave B. Then the market reversed into another confirmed uptrend and Major wave C. At SPX 1039 we cautioned again, remaining in a defensive mode. This time the market only pulled back to SPX 992 and resumed the uptrend. Now, with the SPX hitting 1075 this week, we observe a complete mirror reflection of what had occurred nearing the Mar 09 lows. A significant downtrend about to end with extreme bearishness then, and a significant uptrend about to end with extreme bullishness now. OEW quantitatively tracks the waves created by the stock market. These waves reflect mass psychology, and all the data that contribute to that psychology. While nothing is perfect, after all we (the analysts) are all imperfect beings. Analyzing markets with OEW offers one the highest probability outcome.

MEDIUM TERM: uptrend hits new high SPX 1075
Primary wave B began at SPX 667 in early March 09. While Primary wave A took the form of a detailed zigzag, Primary B is taking the form of a simpler zigzag. From the low Major wave A rallied to SPX 956 (289 points), Major B then corrected to SPX 869, Major wave C has been underway since that low. When reviewing the internal structure of Major wave A we find that it was also a zigzag, with Intermediate C (176 points) nearly equal to Intermediate A (166 points), and Int. C was a detailed five waves while Int. A was simple. In tracking the current uptrend, Major wave C, we find that Intermediate wave A was again a simple five wave structure (149 points), and Intermediate wave C is unfolding as another detailed structure. Currently Major C appears to be a repeat of Major wave A. Should this scenario continue the current Intermediate wave C should unfold in a detailed five waves, and should approximately equal the recent Intermediate wave A. Fibonacci relationships suggest at SPX 1141 Int. C = Int. A, and at SPX 1158 Major C = Major A. These levels are slightly above the SPX 1122 50% bear market retracement level, however, quite acceptable since Primary wave B has extended in time. One alternate scenario would suggest that the current Intermediate wave C could unfold in a diagonal triangle. In order for this potential outcome the SPX would have to drop below 1039 in the near future, and then rally to a new high to complete the formation. A review of the SPX charts in the link below display everything noted in this report.

SHORT TERM: Support for the SPX remains at 1061 and then 1041, with resistance at 1090 and then 1107. Short term momentum is currently around neutral after getting extremely overbought at the recent high. The short term count suggests that Intermediate wave C is unfolding in a detailed five waves. From the Int. B low at SPX 979 Minor wave 1 rallied to SPX 1039, and Minor wave 2 ended at SPX 992. Minor wave 3 hit SPX 1075 on thursday, but still appears incomplete. Expecting the market to approach the 1090 pivot before Minor wave 3 ends. Then depending upon the downdraft of Minor wave 4 we'll have a better idea of how Intermediate wave C, and therefore Major wave C and Primary wave B will conclude. Best to your trading!

FOREIGN MARKETS: The Asian markets were mixed this week but still averaged a 1.10% gain. China (-0.9%) and Japan (-0.7%) remain in downtrends; while Australia (+2.1%), Hong Kong (+2.1%) and India (+2.9%) made new highs.
The European markets gained 2.3% and both England and Germany remain in uptrends and made new highs.
The Commodity markets, Brazil and Canada, averaged a 2.6% gain as both made new highs.

COMMODITIES: Bonds lost 0.9% on the week as yields began to rise. While still in a bond price uptrend, it's interesting to note that the recent low in yields equalled the July low and have started to edge higher. Should the 10YR get much above the 3.50% level a trend reversal may be underway.
Crude gained 4.0% on the week, remains in a downtrend, but has yet to display any significant weakness.
Gold eked out a 0.1% gain on the week after closing at all time new highs on two of the days. After some weakness early in the week Gold/Silver should resume their uptrends.
The USD (-0.3%) continues to downtrend while the EUR (+1.0%) and JPY (-0.6%) remain in uptrends. Both the USD and EUR are getting close to our fibo targets.

NEXT WEEK: The FED meets this week for their regularly scheduled FOMC meeting. The results of the discussions will be released with a statement on wednesday at 2:15. On the economic front Leading indicators will be reported on monday at 10:00. Tuesday, FHFA home prices will be reported at 10:00. Then on thursday the weekly Jobless claims at 8:30 and Existing home sales at 10:00. Friday we have Durable goods orders at 8:30, then New home sales and the Consumer sentiment reading at 10:00. One FED speech this week by FED governor Warsh, on friday at the FRB in Chicago at 1:15. Best to your week.

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

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