Tony Caldaro has issued his weekend update - you can always find his updates and charts at his OEW "Elliott Wave Lives On" site, with the sites list and feed at the right side of the page here. So, here's his update for this weekend:
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the ELLIOTT WAVE lives on
Market analysis using proprietary Objective Elliott Wave techniques
by Tony Caldaro
weekend update
The biggest event of the week was the Asian selloff on monday, China -6.7%. After hitting an uptrend high at SPX 1039 the previous trading day, US markets responded with their biggest pullback since the uptrend began in early July (47 points). Then after reaching SPX 992 on wednesday the market rallied into friday's close. For the week the SPX/DOW were -1.2% and the NDX/NAZ were -0.4%. Asian markets were mixed but averaged a 1.0% loss. Europe was -1.8%, and the Commodity equity markets were mixed for a 0.7% loss. Bonds gained 0.3%, Crude tumbled 6.5%, Gold rose 4.1% and Euro/Yen/Cad gained against the USD. The economic reports remained relatively positive. ISM manufacturing and the Chicago PMI are positive; vehicle sales, factory orders and productivity gained. Yet, ISM services is still contracting; construction spending, ADP, jobless claims and the payrolls report remained negative. US gov't unemployment statistics was reported at 9.7%, highest in 26 years.
LONG TERM: bear market
The typical US bear market of this degree, cycle/supercycle, lasts anywhere from 23 to 60 months top to bottom. They also unfold in three Primary waves, an ABC. After the bull market topped in Oct 2007 at SPX 1576 it declined in a detailed zigzag pattern to 667 in Mar 2009. This 58% decline, labeled Primary wave A, took seventeen months, (see SPX weekly chart link below). The market then rallied to SPX 1039 in Aug 2009, a 56% advance in five months, taking the form of another zigzag. This is quite typical of Primary wave B rallies during bear markets of this degree. Despite all the rhetoric in the media and noise in government statistics, this bear market is unfolding as it usually does including the extremes in pessimism nearing the lows and optimism nearing the highs. Despite the recent five month rally the SPX is still 34% below its bull market high. The three historical bear markets that many are referencing are: 1929-1932, 1937-1942 and 1973-1974. The market lost over 50% of its value in all three bear markets, but they all ended differently. In 1973-1974 the bear market ended in 23 months, without an intervening 50% rally, and then struggled higher for the next several years. In 1937-1942 the bear market lost 50% of its value, rallied more than 50%, then retested its low three years later, (60 months overall). In 1929-1932 the bear market lost 50% of its value, rallied more than 50%, and then broke to much lower lows for an 89% total loss in 34 months. Take your pick! In every case, however, the bear market lasted longer than 17 months top to bottom. Therefore, we continue to maintain our original expectation of an ABC Primary wave bear market. With Primary wave A ending at SPX 667, and Primary wave B potentially having ended at SPX 1039. When Primary wave C is confirmed, we expect a retest or break to lower lows depending upon the wave structure. The equity markets continue to remain very risky.
MEDIUM TERM: uptrend may have topped at SPX 1039
Nearing the SPX 667 Primary wave A low we projected that the Primary B wave would rally 50% or even retrace 50% of the decline. Two days after the low, in early March, we projected that Primary wave B was underway. Now, six months later, and after a 56% rally we're projecting that Primary wave B has likely ended. The rally from the SPX 667 low has taken the form of a zigzag: Major wave A ended at SPX 956, Major wave B at SPX 869, and Major wave C potentially at SPX 1039. At this recent high Major C = 0.618 Major A in fibonacci terms. Also Primary wave B is only slightly more than a 38.2% retracement of Primary A, and Intermediate wave C = 0.382 Int. A. Lots of fibonacci relationships are current levels. The long term OEW pivots have been very useful too. Each uptrend high has stopped at one of these OEW pivots, with the current one SPX 1041 being no exception. In addition, there were negative momentum divergences at the recent high in all daily index charts, and the weekly NDX/NAZ charts. In other markets, much of Asia (HSI/NIK/SEC) is in confirmed downtrends, as well as, most of the Commodity markets. Lots of evidence, despite all the optimism, to lower prices ahead.
SHORT TERM: Support for the SPX remain at 990 and then 961, with resistance at 1018 and then 1041. Short term momentum is extremely overbought. At the recent SPX 1039 high we could count a completed zigzag from the uptrend low at SPX 869, i.e. Intermediate wave C = 0.382 Int. A. From that high the market sold off for three days into wednesdays low at SPX 992. This decline represents the largest drop of the uptrend. After the market retested the low on thursday it rallied to SPX 1016 on friday for a 50% retracement of the decline. With monday being a holiday in the US, traders will be watching Asia and Europe on monday/tuesday. With the SPX holding the critical uptrend support 990 pivot on wed/thurs and rallying back to the 1018 pivot on friday we have a good opportunity to set up some parameters. A 50% retracement is quite normal for the first decline in a new downtrend. A rally that continues much beyond that level can be troublesome for the Primary wave B top scenario. Should the SPX break above the 1018 pivot (1026 print) this uptrend may be in the process of extending. As long as the 1018 pivot holds the next leg down of the downtrend should follow. Our very short term model has tracked the decline fairly well, and it suggests a gap down on tuesday to lower lows. Best to your trading!
FOREIGN MARKETS: The Asian markets finished mixed (-1.0%) on the week with China, Hong Kong and Japan all in confirmed downtrends.
The European markets were -1.8% for the week with negative RSI divergences on both daily charts and the weekly DAX.
The Commodity equity markets were mixed (-0.7%), both Canada and Brazil display negative RSI divergences on daily and weekly charts.
COMMODITIES: Bonds gained 0.3% on the week and bond prices are uptrending.
Crude lost 6.5% this week in its confirmed downtrend.
Gold rallied 4.1% on the week as its uptrend continues, Silver gained 10.3%.
The downtrending USD (-0.2%) declined against the uptrending Euro (flat), Yen (+0.6%) and Cad (+0.4%).
NEXT WEEK: On tuesday Consumer credit will be reported at 3:00. Wednesday we have the Beige book, and on thursday the weekly Jobless claims along with the Trade deficit. Then on friday, Wholesale inventories, Consumer sentiment and the Budget deficit. Only one scheduled activity for the FED this week. On thursday vice chairman Kohn will discuss US monetary policy at the Brookings Institute after the market closes. Best to your weekend and week!
CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987
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