Elliott Wave analysis by a technician who's connected to reality, including the trading realities that we actually face in the markets. And with honesty, objectivity and an absence of arrogance ... Ah, we're fortunate to have the Objective Elliott Wave updates by Tony Caldaro, at his the ELLIOTT WAVE lives on site! "The other guys" make big errors and change their counts but don't tell you until it's too late. I'm an avid student of Elliott Wave theory myself, so haven't graduated to Tony's OEW techniques on my own. But I understand what he presents. And know that my readers appreciate his work too. His site is always in the list at right, and his updates feed is there too. You can see he addresses other markets besides the SPX; chech his extensive public charts for any markets or individual stocks you may be trading.
Let me add a personal comment of my own. As I understand Tony's statement of a possible new bull market, I don't think he means necessarily on the way to a large wave V up. But more likely, to the "B" wave rally lasting longer and going higher. As I explained in a prior post, a classic Elliott Wave "flat B wave" could easily stretch up to SPX 1485 (yes, you read that right). I can't speak for Tony's OEW techniques, but that's what classic EW would allow; and there are some other technical approaches saying it's possible (as described in various posts here in the past few weeks).
Tony's comments of the market's decision point coming up deserve to be understood. So we want to see what he's saying in his updates. Much appreciated, Tony:
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the ELLIOTT WAVE lives on
Market analysis using proprietary Objective Elliott Wave techniques
by Tony Caldaro
January 16, 2010
weekend update
REVIEW
The second week of the new year was not as impressive as the first. The US market made a new uptrend high at the open on monday, traded below it until thursday when it retested that level, and then closed lower on the week. Economic reports were mostly negative early in the week but improved on thursday/friday. The twin trade/budget deficits continued to expand. Jobless claims, import prices, and the CPI continued to rise, while retail sales turned lower. On the positive side, industrial production remained positive, along with business inventories and consumer sentiment. For the week the SPX/DOW were -0.45%, and the NDX/NAZ were -1.4%. The Asian markets were mixed (-0.1%), European markets were all lower (-2.0%), and the Commodity equity markets were mixed (+1.3%). Bonds were +1.1%, Crude dropped 5.3%, Gold slid 0.6%, and the USD was lower by 0.3%. This week US markets are closed on monday.
LONG TERM: bear market rally
We continue to maintain the view that the entire rally from Mar 09 is a counter-trend rally in an overall bear market. Certainly the majority of investors are bullish. Also, after the recent upward shift in the OEW long term trend there are even an increasing number bulls in the OEW camp. What this all means is that the market, and mass psychology which drives the market, has reached a point of decision. In all bull and bear markets there is a point in time and price when the determination of whether or not a bull or bear market remains in progress is decided. At this point of decision either the existing trend resumes or a new trend is confirmed. Recent developments in the market indices suggest that point of decision is underway.
Ever since the bear market was confirmed with an OEW long term downtrend we have been tracking each wave as it has unfolded. From Oct 07 at SPX 1576 to Mar 09 at SPX 667 this market declined in three waves: a 5-3-5 zigzag. The count for these waves is posted on the SPX weekly chart. The overall market loss of 58% suggests that this bear market is of at least Cyclical degree. There have only been two other occassions, since 1932, that the market lost about 50% of its value: 1937-1942 and 1973-1974. These were both Cycle wave bear markets.
When we count the entire Supercycle from 1932-2007, this suggests that the bear market is of Supercycle degree. The last Supercycle bear market was between 1929-1932, when the market lost 89% of its value in a huge 5-3-5 zigzag. Since corrective waves of similar degree alternate in pattern, typically a zigzag and flat. We are not expecting a repeat of the 1929-1932 bear market. We are however expecting a flat pattern, a double bottom bear market, to alternate with the previous Supercycle bear market. This pattern suggests that the OCT 07 to Mar 09 decline was only wave A of a larger ongoing bear market.
At the lows in Mar 09 at SPX 667 we identified the completed zigzag pattern. We then suggested a significant wave B rally would unfold over the next five months retracing 50% of the entire decline. This 50% retracement took a lot longer than expected. The SPX reached the projected SPX 1122 level in late Dec 09 more than nine months later. Since then it has moved up a few percentage points higher, which is quite normal historically. Overall this market has met the expectations of a Primary wave A down, (SPX 1576-667), followed by a Primary wave B up (SPX 667-1150). During this rally the advance has divided into three waves. This too is still a corrective, counter-trend, type of zigzag pattern. Therefore, from a purely objective wave configuration, nothing has changed in the expectation of a long term Supercycle bear market, taking the form of a flat.
The recent OEW long term uptrend confirmation, however, now allows the market to make a decision. Either the bear market resumes, or this market can now morph into a bull market. During the 1937-1942 Cycle wave bear market, it's Primary B wave also was accompanied by a long term OEW uptrend. This is quite normal in these types of flat pattern bear markets. Long term OEW uptrends do not occur in the large zigzag style bear markets like 1929-1932 and 1973-1974.
During the decline from Oct 07 to Mar 09 every downtrend was a five wave structure. Some were a little sloppy at times, but five waves down. This is what normally occurs during the main trend of a bear markets. The only downtrend during the Mar 09 to Jan 10 rally has been a three wave structure. This is quite normal for a counter-trend rally. Three wave downtrends, however, is what also occurs in bull markets. The main trend in bull markets is up. So the uptrends should be five wave structures. Thus far we have been unable to count five wave structures in the two uptrends since the Mar 09 low. They have been quite choppy. Nevertheless, the next downtrend will be quite important. This is where the point of decision will occur.
Should the next downtrend be a five wave structure, then the bear market has resumed and the expected Primary wave C is underway. Should the next downtrend be a three wave structure, then this bear market may have morphed into a bull market. We're expecting the downtrend will be five waves, and the bear market to resume. The next downtrend will be the determining factor.
MEDIUM TERM: uptrend hit SPX 1150
This uptrend started in July 09 at SPX 869. It has been quite choppy and difficult to count short term. We currently have different short term counts posted on the SPX and DOW charts. While this uptrend is now into its six month it will equal the length of the Mar-Jun uptrend at SPX 1158 despite taking twice as long to unfold. Also the subdivisions, Intermediate waves A and C, will equal each other at SPX 1162. Therefore, we have a fibonacci cluster, in time and price, around the 1160 level. Also of note is the OEW long term pivot at 1168. These long term pivots have terminated every uptrend since Oct 07. Finally, this rally has been following the wave formation of the early stages of the 2002-2007 bull market. The first two major rallies then, ended at SPX 954 and 1163. The first rally from the Mar 09 low ended at SPX 956 and this one, thus far, has reached SPX 1150. Lots of technicals pointing to an uptrend high in January around the SPX 1160 level.
SHORT TERM
Support for the SPX remains at 1133 and then 1107, with resistance at 1168 and then 1179. Short term momentum was quite oversold on friday and started to rise during the end of the day. Using both the SPX and DOW short term wave counts we expected one last five wave rally from the mid-Dec SPX 1086 low. This rally started off quite well and we counted five waves into the recent high at SPX 1150. See SPX hourly chart. However, we posted on friday that the recent options expiration pullback could also be counted as a 4th wave, with a 5th yet to come. This would fit into the fibonacci time/price cluster mentioned above. Either way the market should be quite close to ending the current uptrend. Should the market hold the OEW 1133 pivot it should rally near the next pivot at 1168. Should the market fail to hold this pivot and break lower. We have likely seen the highs for this uptrend.
FOREIGN MARKETS
Asian markets (-0.1%) were mixed on the week. All indices remain in uptrends but China and Hong Kong.
European markets (-2.0%) were all lower on the week. yet all remain in uptrends.
Commodity equity markets (+1.3%) were mixed on the week, all remain in uptrends here as well.
COMMODITIES
Bonds rallied 1.1% this week in their ongoing downtrend. 10YR rates pulled back to 3.68% after hitting 3.92% at year's end.
Crude dropped 5.3% on the week from that extremely overbought level at $84 on monday. Uptrend remains underway.
Gold slipped 0.6% on the week after hitting $1162 on monday. Still expecting a retest of $1075 to end this correction.
The USD slipped 0.3% on the week and remains in an uptrend. The downtrending EUR (-0.3%) also slipped, but the JPY rallied 2.1%.
NEXT WEEK
This week starts off with a monday holiday. Tuesday the Homebuilders index will be announced at 1:00. On wednesday Housing starts and the PPI will be reported. Then on thursday the usual weekly Jobless claims, along with the Philly FED and Leading indicators. Currently the FED has nothing scheduled. Best to your week!
CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987
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