Read this update by Tony Caldaro closely - he's making some important statements! His Objective Elliott Wave has been invaluable every step of the way. And it's great that he's objective - unlike other EW(I) sources who'll try to peddle the same theory of the next crash down, fascinating you away from the objective facts that can warn you when a rally like this, is turning into something less bearish (and maybe even bullish, at least during this year). So we want to see what he's saying in his updates. Always good but extra important this time:
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the ELLIOTT WAVE lives on
Market analysis using proprietary Objective Elliott Wave techniques
by Tony Caldaro
January 09, 2010
weekend update
REVIEW
The markets started off the year with a decent rally. Economic reports, however, were mixed. ISM manufacturing/services displayed an expanding economy, Auto sales rose, Factory orders rose, and Wholesale inventories rose as well. On the downside, Construction spending and Pending home sales declined, the ADP employment index and the Payrolls report displayed increases in job losses, and Consumer credit continued to contract. For the week the SPX/DOW were +2.4%, and the NDX/NAZ were +1.9%. The Asian markets were +0.7%, European markets were +1.7%, and the Commodity equity markets were +2.1%. Bonds were +0.5%, Crude +4.5%, Gold was +3.7%, and the USD was -0.5%.
LONG TERM: bear market rally
Way back in Mar 09, after the SPX had declined from 1576 to 667, we identified a completed detailed zigzag at the lows. We labeled the low as Primary wave A of a three Primary wave bear market. At the lows we projected the potential for a 50% bear market retracement rally. We anticipated this rally would take the SPX to around the 1122 level, between the long term OEW 1107 and 1179 pivots. We also expected the advance to take about five months. Now in Jan 09, 10 months later, the market is trading within that projected upside range. When this Primary wave B bear market rally concludes we expect a Primary wave C decline to retest the Mar 09 lows.
Recently, we have been commenting about a confluence of technicals suggesting that the Primary wave B high will be around SPX 1160 in Jan 2010. For a detailed explanation please review the recent weekend updates. The following are the highlights.
Around the SPX 1160 level we have Major C equalling Major A for Primary B, and Int. C equalling Int. A during Major wave C. In addition we will have a two to one time relationship for both Major waves, just as we had for the two Major waves of Primary wave A. There are long term OEW pivots at SPX 1168 and 1179. These types of pivots have ended every uptrend during this entire bear market. In regard to momentum, around the SPX 1160 level we are likely to witness negative RSI divergences on most charts, and the most overbought condition since late 2007 on the monthly charts. The last observation was that the SPX is currently following the early stages of the 2002-2007 bull market. All of these technicals suggest a January top in the SPX around the 1160 level.
MEDIUM TERM: uptrend makes new high at SPX 1145
This uptrend, Major wave C, has been underway since July at SPX 869. This six month uptrend is quite long compared to most uptrends. Significant waves do not usually take this long to unfold. Often the longer they take the more complex, internally, they become. This one, as you are well aware, has not been the exception. Currently we are monitoring two short term counts, SPX and DOW, within the uptrend. Yet, despite the slight variances in counts, both are suggesting an upcoming Primary wave B top. Please review the charts with the link below. Notice the fibonacci relationships between SPX 1158 and 1162, and the fibonacci relationships between DOW 10,495 and 10,795. With the SPX closing at 1145 on friday and the DOW at 10,618, these indices are very close to meeting these objectives.
SHORT TERM
Support for the SPX remains at 1133 and then 1107, with resistance at 1168 and then 1179. Short term momentum ended the week with the most overbought reading we have had since the SPX 1115 low on the last day of 2009. This would suggest that the SPX is currently in the third wave up from that low. This also suggests that this market is getting very close to ending the fifth wave up from the mid-Dec low at SPX 1086. When this rally does complete, it should complete the uptrend from July 09, and the Primary B wave rally from Mar 09. We also made note of a rising trendline for both the SPX and DOW. This is a level to observe should the market start selling off at any point in the coming weeks. On the upside, we expect the SPX to get within the range of the OEW 1168 long term pivot. On the downside, the OEW 1107 pivot is now very important because it would take a trendline break to reach it. Then, a further decline to the OEW 1090 pivot would likely confirm a downtrend reversal.
OEW
We need to make note of the fact that OEW confirmed a long term uptrend this week. This confirms that the Mar 09 low was the end of an important wave. Historically, 70% of the time long term OEW uptrends confirm new bull markets. The other 30% of the time they confirm B wave rallies within ongoing bear markets. Therefore, the probabilities are in favor of a new bull market. However, since this market has stayed within the boundaries of the Primary wave B rally we anticipated back in Mar 09. We're staying with the present count until this market provides further evidence that it is in a bull market, or the bear market ends as discussed above. Remember, anticipate, monitor and then adjust. At this juncture, however, we need to be aware of both potential scenarios. When the market enters the next correction, downtrend, we'll get additional information. Should the correction be five waves down we can assume the bear market continues. If it is an ABC, then it is probably only a fourth wave from the Mar 09 low with a fifth wave to new highs to follow. The next correction will be quite important.
FOREIGN MARKETS
The Asian markets (+0.7%) were mostly higher this week. Japan (+2.4%) was the biggest gainer, and China (-2.5%) the biggest loser. Hong Kong and China remain in downtrends.
The European markets (+1.7%) were all higher on the week. They all gained between 1.1% and 2.2%, and all remain in uptrends.
The Commodity equity markets (+2.1%) were higher on the week. Only Russia's RTSI remains in a downtrend.
COMMODITIES
Bonds lost 0.5% on the week as the downtrend continues. Yields on the 10YR remained below the recent 3.92% high.
Crude gained 4.5% on the week reaching $83.50 its highest level since late 2008. The current rally of this uptrend is quite overbought.
Gold gained 3.7% on the week, as the rally from mid Dec continues. Still expect a retest of the recent low in the coming weeks.
The uptrending USD lost 0.5% on the week for its first set back in 6 weeks. The downtrending EUR (+0.6%) and JPY (+0.3%) gained versus the USD.
NEXT WEEK
This weeks economic calendar begins on tuesday with the Trade deficit. Then wednesday is the Budget deficit and the Beige book. On thursday weekly Jobless claims, Retail sales, Import prices and Business inventories. Then on friday the CPI, Industrial production and Consumer sentiment. No FED activity this week. Best to your week and 2010!
CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987
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