Gold alert - breaking support, now what?! Technical charts review

Gold has moved down enough to break support at the $1560 level identified in my most recent review of gold. You can see this on the P&F chart to the right, which also now shows a bearish target initially to $1460. When you look at my daily chart below (and please forgive the older chart markings on it), one of the features is a shallow sloping downtrend line at the bottom. Interestingly, it could lead gold toward $1517, which also happens to be a Fibonacci 38.2% retracement level on my monthly chart. Gold has dipped close to that, but never quite touched it in all the time of the current correction.

If gold does touch or go below $1517, which now does seem rather likely, then it could make for a defined entry, so long as it initiates a pattern reversal upward after tagging or going below $1517. Conversely, if it goes below that - and either fails to reverse upward, or initially goes back up/above but then turns around to go lower again - the next lower target is at $1392 (the 50% retrace I marked on the monthly). Honestly, I think gold could get support at either level.

At first I thought gold really might need $1392. And that remains possible. But now I'm wondering if the mostly sideways nature of this correction implies that it only needs to tag at or somewhat under $1517, before initiating an upward reversal again. Keep an eye on gold to keep track of which scenario proves out.

Fundamentally, the problem seems to be the related combination of deflationary forces and the strengthening U.S. dollar. Gold charted in other currencies may look somewhat different. Again, keep an eye on these levels. If gold gets support at one of these levels, it could have another good move up ahead. I don't want to make predictions yet, but upwards of $2000 seems fair based on the charts, once the correction completes and demonstrates a trend reversal back up.

Have U.S Treasury bonds, and the U.S. dollar, topped? Chart levels to watch

Two significant developments that occurred this past week were in the U.S. Treasury bonds, and the U.S. dollar. It is possible that both of these made significant highs and will correct from them. We'll look at each in turn. First, it's interesting that the yield on 10-year bonds hit a low at 1.44 (14.40 on the $TNX chart), because that happens to be a classic Fibonacci number!

Now, here are daily and monthly charts of the long bond, $USB (traded in futures markets as /ZB). We were on alert for a significant high around $150 because that would trigger a bearish "butterfly) Fibonacci pattern, and it also puts it at the top of a very long-term trendline. Sure, it could go higher theoretically, and if it got to $160 that would be another bearish butterfly level. But there are reasons to consider this may be "the top" unless something about the world economic situation really goes to pieces - who knows! Then again, if the financial situation fell apart, it's also quite possible that investors would not want US bonds either because there might be concerns about ability to repay in full ... so consider that ...! Meantime, for trading purposes, we are looking to $146 initially, and depending on what kind of bounce or more might occur from there, it could drop further to test $144 (another Fibonacci level), then 138, even 136.

While it's likely to bounce on the expected way down, the type of downtrend that may set in should create its own channel and we will look for how it reacts according to the markings I placed on these charts. (Notice I also drew a horizontal oval where there's an interesting gap that might get filled, further down and still above the most recent swing lows ... depending on if and when that gap is filled, it might even correspond to a new higher-low level for the big uptrending channel to test.

Eventually, the long-term uptrend channel is likely to give way, but that seems unlikely to happen this year.

Next are daily and monthly charts of the US dollar. You'll notice that among my markings are a .618 Fibonacci retrace on the monthly chart, which contained its rally and sent it back down again this past week. I consider this retrace level to be very significant, because it could send the dollar index back down around 61 - yes, significantly lower lows ... No guarantee of course, but don't discount the possibility. I base the potential projection to 61 partly on Fibonacci extension analysis, and partly on my understanding of the possible Elliott Wave context that may have the dollar consolidating before another wave down. Yes, so far it's just a consolidation - and could break higher OR lower. Maybe policymakers will have a hand in that. We'll just keep an eye on the charts. Since the level just tested is so close by, it's reasonable to look for it to descend further - and only if it breaks above that level, to change positions accordingly.

Investors and traders need to keep an eye on the dollar and use the levels marked on my charts as places to watch for support levels that are likely to be tested. If these support levels give way after being tested, then it's a matter of considering whether it indeed will weaken that far down. Again, it doesn't seem likely to happen this year, but we do need to observe how it moves from here - especially if it does move down quickly.

It's ok, Bill Gross - safe to look at shorting US long bonds now! Chart analysis

Too bad Bill Gross of PIMCO shorted the US long bond last year - way too soon! I posted often in past months about the $150 target is the US Treasury long bond ($USB or in futures, /ZB), and it finally got there the past two days! Andre Gratian with his Market Turning Points also stated that TLT, the corresponding ETF, had a projection to $129 which happened yesterday. Now it's reached target, it's safe to look for a trend reversal sending bond prices lower and the yields higher.

NOTE - we still must be on the safe side, and look for a pattern reversal before being aggressive on this. Otherwise, it remains within the realm of possibility that if there is a stockmarket meltdown, US bonds could remain afloat indefinitely as investors seek their safety.

It's quite possible that shorter-term notes like the 1-year, 2-year and perhaps 10-year may hold up relatively better. I'm guessing the longer-dated 20- or 30-year bonds may fall relatively more. By the way, others are taking note including the great folks at MrTopStep.com (tweeting at MrTopStep) as well as a very nice three-decade look at the price resistance by Tom McClellan at http://www.mcoscillator.com/learning_center/weekly_chart/full-on_panic_into_t-bonds/. Since I've already hammered on the topic of waiting until $150 was met before shorting, I'll now start talking about what pullback levels to expect. First, a look at the daily chart of $USB shows that there's support initially about $147, then stronger support around $144 to look for (and isn't 144 such a nice Fibonacci number anyway!). Then around $136 is another retrace/support area; then of course $120 eventually. After price starts dropping under $150, we should start looking for around $144, then look at how it's shaping up. Here's the daily, then there are more charts below.

Below is the monthly chart. Once you start looking at it, you can see that $150 was presaged not only by a Fibonacci "butterfly" after the breakout and point-&-figure (P&F) charting, but also a long-term inverse head-&-shoulders and a symmetrical C=A type of wave structure. The latter gives a Fibonacci "shark attack" pattern pullback target at least to the same $144 level that the bearish butterfly targets. So we must first look for a trend reversal pattern (selling volumes and embarking on lower lows as it moves). This is critical because theoretically it could also go to a higher projection at $160 although that's much less likely. Then on a reversal, we should start to be able to see if it's going into a bigger-picture long-term trend reversal, and what targets come into focus.

Finally, below are daily and monthly P&F charts. Once $USB starts breaking support levels - $136 in particular, and eventually $120 after likely back-and-forth waves and over time - we can calculate more targets for downtrending prices. The trendlines on the P&F charts also suggest support areas. If those hold, then it remains possible to see $160 in $USB. If that happens, then it's still a bearish butterfly setup for a pullback if not a trend reversal.

Bond bubble alive & well - what to get ready for in US Treasuries

Got TLT? It's okay if you do because the US Treasury bonds bubble is alive and well! Recently it's launched a run toward new highs, probably squeezing a lot of shorts by now. I don't know if the JP Morgan situation is directly related but maybe indirectly. For a long time now, I've been pointing out that Fibonacci projections based on the monthly chart pattern point to at least $150 in both $USB (long bonds) and $UST (10-year notes). So I've discouraged my readers from shorting them. I'm glad I got it right! Wait until $150 is tagged in either or both $USB and $UST, and after that, make sure you see a discernible reversal pattern to be confident that the trend indeed reverses from bullish to bearish.

My own charts are below, but first look at today's free chart analysis by Tom McClellan, "Is JPM "The Burning LOH"? - Free Weekly Technical Analysis Chart - McClellan Financial" at http://www.mcoscillator.com/learning_center/weekly_chart/is_jpm_the_burning_loh/. Tom McClellan had said a few weeks ago that US bonds would rally again. He was right on that, and now he's suggesting we may be getting near a peak. I don't think he has a specific price target, however. Read his article to understand what he's saying about his chart:

He points out that bonds often peak at crisis times. So it might not be just the Federal Reserve purchases and "Operation Twist". Yet it's interesting that the Fed currently plans to discontinue that level of purchases. Another reason why US bond prices could correct AFTER hitting peak price targets. (So after there's a trend reversal confirmed, KI$$ investors can sell TLT and buy TBT if that looks appropriate for their strategies.)

Can I guarantee the $150 Fibonacci and P&F price target? Of course not a guarantee - but the rally has strength. It's even possible the price may overshoot $150, so that's why investors and traders should look for a reversal pattern in any event.

The Fibonacci projection to $150 is also supported by point & figure projections, and by the indicators which continue to be supportive. As I mentioned, I'm glad to see Tom McClellan addressed this because it dovetails with the bullish projection I've been pointing out for weeks (even months). Here are my basic charts (from Stockcharts.com) for $USB the US long-term bonds. First the daily, then the monthly. Notice there's just a hint of negative divergence that will be important if it persists as $USB pikes new highs. But the monthly StochRSI did a bullish midline retest as price pulled back - that supports the likelihood that the US long-term Treasury bonds should continue to new highs and meet the $150 projection.

And finally here's the default point & figure chart for $USB from Stockcharts.com. Notice that it never did break support and still sports a bullish projection to $150:

Is this the week of a multi-year high? Randall Ashbourne's "Eye of Ra" report for 3/12/12 week

Is this upcoming week destined to be a multi-year high? That's what Randall Ashbourne is looking at this weekend, in his commentary and charts analysis at his website, http://www.theidiotandthemoon.com/eyeofra.html
Maybe "RA" only is an acronym for Randall Ashbourne, although I suspect it's at least a pun and more. Apparently he's been targeting the upcoming week to be a significant time for a potential multi-year high, for quite some time. His article at the link above this weekend discusses the following chart, among others:

Mr. Ashbourne has also written an article with charts about the Jupiter cycle and how it affects Wall Street, which you can read at http://www.theidiotandthemoon.com/articles.html. Like the forecasts of Raymond Merriman (whose public updates we feature), Mr. Ashbourne's article on the Jupiter cycle shows how the astrological cycle has a likelihood of peaking now; although in a couple of cases - like 1929 - it did go an extra round upward before the devastating crash. At the least, it's a warning not to be complacent.

I do enjoy looking at the Gann angles and Fibonacci work. It's interesting that the area of 1370 to 1375 represents $SPX Fibonacci extension levels measuring from the late-2011 volatility - but I can't guarantee that this area produces a major high, just a good potential for correction or consolidation retracing perhaps to 1300 or even 1260.

As for Elliott Wave - it's something Randall Ashbourne is clearly studying and trying to apply. But EW offers so many potential alternatives that I can't recommend it as a standalone basis to predict markets (that's why I primarily refer to Tony Caldaro for his Objective Elliott Wave, as I posted here earlier today).

Here's an interesting Fibonacci chart that Randall Ashbourne discussed in his update last weekend, at http://www.theidiotandthemoon.com/march5.html:

And here's an interesting Gann angles chart that he included in his February 6, 2012 update of his "The Eye of Ra stock market report", at http://www.theidiotandthemoon.com/february6.html:

What's it all signify? Well, it's true we're already looking for some interesting market moves this month; even though we tilt to the view that the market's in bull mode and heading higher into next year. But don't let that stop you from considering his work. And even he acknowledges that next week may be just a turn date rather than a multi-year high. If you're interested in Gann angles, astrology, Fibonacci and technical analysis blended with skepticism, a side of sarcasm and a chaser of whimsical humor - then Randall Ashbourne's site is one you might want to put on your list. Meantime, we're as curious as any to see whether the coming week turns out to be a momentous one for the stock markets!

Bears may take bite out of Apple soon: $AAPL chart views

The stock of Apple ($AAPL) has been very bullish, but is moving closer to a level where it can start a real consolidation or correction. Many traders can sense it, so I've checked the Objective Elliott Wave count charts of Tony Caldaro (see below). There's a warning that it's reaching a top of some level, maybe quite significant. We'll look at that, and at potential targets for a pullback.

First though, take a quick look at the overall bullish P&F chart. Longer-term, after it corrects, it'll get bullish again. Price moved past the $464 target on this P&F version, which was based on the reversal method. Maybe that's why some started feeling bearish on it. However, there's a more "standard" version normally used by Stockcharts.com as their default, which is the "breakout" version. Actually, for Apple the P&F breakout method now sports a projection to $819! So keep that in mind, at least for the much longer term outlook. Meantime, if a correction soon is strong enough, it may show up as a reversal for an interim bearish target. That'll happen if the price goes under $530, i.e., perhaps more than 10%.

Below are the daily and weekly charts of $AAPL provided by Tony Caldaro in his public charts. You can always find them at his charts page link in his posts, at his OEW website http://caldaro.wordpress.com/. These are marked as showing a major wave count in progress. Once major wave 5 is complete, it would also complete primary wave 5. That suggests the pullback may be more significant.

Tony's weekly chart shows three Fibonacci-based projections for major 5. The first one being around the $480's/$490's - that level indeed produced a "bobble" which fooled many traders into thinking that was the top. Well, that plus the parabolic acceleration in price. But neither Apple NPR the markets were ready. The next two projections lie in the area $557-$564, and $565. We're almost there. Price could tag that early next week, along with the overall stock market turn window we've been looking for. Look at Tony's charts:

I won't profess to be an expert on Tony's Objective Elliott Wave methods; I'm more schooled in original Elliott Wave, although I think Tony's methods are probably better. At any rate, it's evident he's looking for a major wave 5 to complete, probably soon since Apple's stock price is already close to $550. Judging by the wave count markings, it seems he's also thinking the major wave 5 would cap off a primary wave 5. That's even more significant. That could have price retest the major wave 4 lows, which would also fill a price gap (see Tony's daily chart above).

Given the strong price action, howver, price actually doesn't need to drop that far. It could find support around the $480's (wait for a break of $530 to confirm first), or possible that $464 level. Another level would be $440, but that wouldn't fill the price gap. In general, it's clear there's also good support in the $420's.

Apple is due to make major announcements next week about an expected iPad 3 launch. Might that be the sentiment catalyst if good news is already baked into the Apple price? Perhaps, unless that's also the news that pops the stock up into the $557-565 area. Either way, be on the lookout for a trading reversal. Personally, I think it's also interesting that price may hit a topping target in the $550's, because "55" is a common Fibonacci numeral that's used in cycles timing for short and long cycles.

If there's an alternative wave count, then perhaps it might be still working on a major 3, with major 5 (and primary V) up around the $819 area (also a Fibonacci number around 80/90). But I can't second-guess Tony's wave count. So I must tilt to the idea of price working toward such levels after the correction from the primary fifth wave.

And for Apple bulls, once the anticipated correction is complete, it should provide another great buying opportunity.

Stocks on edge, gold's count confirmed, & other markets updated: Tony Caldaro's 3/3/12 OEW update

Did you benefit from Tony Caldaro's warning of $100 downside risk in gold, last week? See what he's warning now for stocks, and updating for other markets too, in his weekend update (thanks again Tony!). He details the stock market, and reviews global stock markets, bonds, the U.S. dollar and other currencies, gold and precious metals, crude oil and other commodities, use his charts link at the bottom to view his charts for those. You can also find his daily market updates via his tweets as @OEWtony on Twitter, linking to his OEW website http://caldaro.wordpress.com/, or right here in the OEW feed at lower right side of the page.
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the ELLIOTT WAVE lives on

March 3, 2012
weekend update

by Tony Caldaro

REVIEW

A consolidation week for the major US indices, as the SPX traded in another narrow range: 1355-1378, but made another new uptrend high. For the week the SPX/DOW were mixed, but the NDX/NAZ were +0.7%. Asian markets gained 0.6%, European markets gained 0.7%, but the DJ World index was -0.1%. Economic reports for the week were mixed: 6 Up and 6 Down. On the downtick: durable goods orders, Case-Shiller, personal income, ISM manufacturing, construction spending and investor sentiment. On the uptick: pending home sales, consumer confidence, Q4 GDP, the Chicago PMI, personal spending, and the WLEI. Overall it was a fairly quiet trendless week after wednesday's open. Next week: the monthly Payrolls report, Consumer credit and ISM services.

LONG TERM: bull market

While economic indicators dropped to a potential recession in the summer of 2011. Consumer sentiment hit a 30 year low, and the Public allocation of funds was quite bearish. Some six months later, economic indicators have improved, consumer sentiment has turned higher, the public is now less bearish, but all three indicators remain below a neutral 50%. Meanwhile the stock market has risen 28% since the October 2011 low, and remains in a bull market since March 2009.

Our weekly chart displays our OEW count and a couple of our technical indicators. Notice the RSI displays our current uptrend is quite overbought, and the MACD is solidly over neutral and rising. These are signs of a bull market unfolding. Our OEW count suggests the market is in Cycle wave [1] of multi-generational Supercycle wave 3. Primary waves I and II have completed, of the five Primary wave bull market, and Primary wave III has been underway since the October 2011 low. With all four US major indices at new bull market highs the bull market scenario continues to be confirmed. Currently we expect this bull market to top out around the October 2007 highs, or higher, by the second half of 2013.

MEDIUM TERM: uptrend high SPX 1378

The current uptrend made a new high this week, SPX 1378, as this market continues to rise from the downtrend low at SPX 1159 in late November. While we expected this uptrend to top some time in February, it has had ample opportunity during the past couple of weeks, but it continues to grind higher. This reminds us of two lengthy uptrends during this bull market: Jly09-Jan10 and Jly10-Feb11. Both of those uptrends had plenty of opportunities to correct after three months, but they continued to grind higher, pulled back some, and then extended. This uptrend is beginning to look like the most recent lengthy uptrend: Jly10-Feb11. Then, that uptrend rallied for one month, pulled back, rallied for another three months, pulled back, and then completed its uptrend months later. We will have to consider this an alternate count for now and it will be posted on the DOW charts.

In the meantime we maintain our original count, which suggests the SPX has been in Minor wave 5, of this five wave uptrend, since the 1300 Minor wave 4 low at the end of January. Fibonacci relationships suggest the next level of resistance is at SPX 1381, (Minor 5 = 0.618 Minor 3). Then resistance appears at SPX 1408, (Minor 5 = Minor 1), and SPX 1432, (Minor 5 = Minor 3). Our OEW pivot cluster at 1363, 1372 and 1386 has held this market in check for the last couple of weeks. Should the market exceed the 1386 pivot, (SPX 1394), there is no pivot resisitance until 1440. And, we would be likely looking at a Major wave 3 uptrend then, instead of our current Intermediate wave i uptrend. The DOW charts displays this possibility.

SHORT TERM

Support for the SPX is at the 1363 pivot, then SPX 1355 and 1341. Overhead resistance is at the 1372, 1386 pivots and then SPX 1408. Short term momentum nearly hit oversold on friday then bounced higher. The OEW short term charts remain positive since around SPX 1310.

We have been counting this uptrend as Intermediate wave i of Major wave 3 since its beginning. Minor wave 1 was labeled at SPX 1267, Minor 2 at SPX 1202, Minor 3 at SPX 1333, Minor 4 at SPX 1300, and Minor wave 5 underway since then. Since Minor wave 3 was longer than Minor 1, (131 vs 108 points), Minor wave 5 can end at any length. It is currently 78 points, (1300-1378). The wave count within Minor 5 started off quite clean, but after the SPX 1354 high it has become quite choppy.

While the OEW pivot cluster has contained this market for the past couple of weeks. There is also a rising trendline which as contained this uptrend since its beginning. This is posted on the hourly chart. Should the market break through this trendline, and clear the OEW 1386 pivot, an uptrend extension to the OEW 1440 pivot is likely underway. Should the market trade below SPX 1355 a potential dowtrend is underway. Best to your trading!

FOREIGN MARKETS

The Asian markets were mostly higher on the week for a net gain of 0.6%. Only one downtrend confirmed: Indonesia.

The European markets were mostly higher on the week for a net gain of 0.7%. All indices we track remain in uptrends.

The Commodity equity group was mostly higher on the week for a net gain of 0.8%. All indices uptrending here as well.

The DJ World index remains in an uptrend but lost 0.1% on the week.

COMMODITIES

Bonds are currently downtrending but gained 0.1% on the week. 10 YR yields are uptrending but remains range bound between 1.8% and 2.1%.

Crude had a volatile week losing 2.5% after posting a new uptrend high at $110.55.

Gold made a new uptrend high on tuesday at $1793, then dropped to $1688 the following day. For the week it had a 3.5% loss. It certainly appears to be downtrending now with support between $1640 and $1680.

The USD started to rally around mid-week, is close to confirming a new uptrend, and gained 1.3% on the week. The EUR lost 1.9%, and the JPY lost 0.9%.

NEXT WEEK

Monday kicks off another busy week with Factory orders and ISM services at 10:00. On wednesday we have the ADP index and Consumer credit. Then on thursday weekly Jobless claims. On friday the monthly Payrolls report, the Trade deficit and Wholesale inventories. The FED has nothing scheduled ahead of the FOMC meeting on March 13th. The ECB, however, meets this thursday on March 8th. Best to your weekend and week.

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

Gold bull trap within Fibonacci cluster zone marks opportunity: charts view

Great KI$$ opportunities are appearing now, and one of the best is in $GOLD (or use GLD or other ETFs, or some may be trading GC_F futures). Gold is perched with a bull trap AND Fibonacci cluster zone which clearly demark a trading range it will move well away from for an extended swing-trade period of time - at least a couple of weeks and maybe more.

The P&F chart (above/right) shows the double-bottom breakdown with a preliminary target to $1660. But there's more. Break below (or above) this trading range I'm describing, and price will move much farther without looking back. Whether or not price dallies further within this range, it's a great move to trade with once it gets going.

The "bull trap" (means, bulls got trapped and must unwind, selling prices down lower) you can see on my weekly $GOLD chart below. It occurred after price hit up to $1923.70, then dropped on strong volume, then recovered to $1804.40. This got bulls going again, but then dropped again. Again on the latest rise, it got bulls going again. But bulls are trapped now that price dropped again under resistance - the sell trigger has occurred now. So long as price remains under $1800, it's vulnerable to dropping further with a price target below $1500 and likely around $1400. Price already triggered a trading "sell/short" by its recent drop - as you can even see on the P&F. And even the P&F chart will revise the price target objective lower once $1660 is violated.

Price rose on its most recent swing, up into a Fibonacci cluster called a "Triple Crown Zone" - the name given by Derrik S. Hobbs in his excellent 2003 book, "Fibonacci for the Active Trader" (publ., TradingMarkets(tm) Publishing Group). This trading pattern is one of his favorites, and it's become one of mine too, for its robustness. I don't want to give away his formulas, so I'll just say that in this particular Fibonacci cluster in gold right now, the swing trader positions short with a stop loss out at either $1771 in $GOLD or the equivalent $171 GLD (although one quick day's poke above this level can be permitted so long as it returns back under). Or, the bull-trap trader will be short with stop loss out at either $1766, $1771 or $1804. The bottom of the current zone is about $1724 in $GOLD, and $167 in GLD. Assuming gold continues to drop below this range, it's highly likely to drop much more.

The price target from the Triple Crown Zone short trade in this instance is initially to wait for $1458.07, then cover 50% of the position on a price that's above the prior day's high. Cover the remaining 50% either at break-even if price comes back up to the $1700's, or if price goes lower again to where your profits are significantly more.

We're aided in this situation because there's a price channel - marked in black on my weekly $GOLD chart, below - the midline of which $GOLD hasn't been able to move above. The lower boundary of that channel will droop and likely start providing support in the $1400's .... Or, much better, there's a Fibonacci retracement level at $1391 which I suspect price will test. $GOLD could touch that, or fall under it and then move back above. Assuming $GOLD does test $1391, then if it can make that support, it can move on to new highs such as $2500 and higher.

(click image to see it as a larger image)

BUT DON'T FORGET: if gold decides to go bullish instead, and pushes upward, above the zone I've described plus $1804 (about $176 in GLD), then switch KI$$ stances to be bullish in gold. Because that would signify it's regaining momentum sooner, and major buying will drive it to new highs. In my experience, whenever price busts above a zone like this, it becomes very bullish.

It's true that the technical indicators have regained some strength. But a drop especially under $1734 in $GOLD ($166.50 in GLD) will cause weakness to return. So the real key will be to look for positive divergence to appear as price tests the lower price objectives. That will also be a great clue on when to ride another wave or cycle to much higher levels.

$NDX (QQQ) "dog caught car" met target - now what?

Today the QQQ (ETF tracking the Nasdaq 100 ($NDX)) practically hit the $63 level that's a measured move out of the late 2011 consolidation, if it was an Elliott Wave triangle.

It's potentially a situation where the dog chasing a car suddenly catches the car - so, now what?! Well, it's true that the triangle/target idea isn't shared by all Elliott Wave analysts; but I think it may be valid. You can even see it in the pattern traced in the P&F chart here. The consolidation during the second half of 2011 can meet the requirements of a standard contracting triangle that ended in late December. The move up since then does fit with the standard fifth-wave "thrust", and the measured move for that thrust targets almost exactly to $63 for the QQQ.

Candidly I'm sorry I didn't cover this scenario sooner for my readers, because it would have been a much clearer roadmap. At this point, however, we can assess what should happen next if the triangle & thrust is correct. It would mean a drop to retest the triangle apex area, about $56. Interestingly, the $56 area would also retest QQQ's 38.2% retrace level to its all-time high. Only after that would it then bounce, and then either vault higher again ($67 and $78 come into focus, actually); or roll over again, so losing and going under $56 would point to more bearish lower levels (perhaps the mid-line of that large uptrend channel on my monthly chart; or even the bottom trendline since the pattern from late 2008/March 2009 may be a leading diagonal that corrects with a deeply-retracing second wave).

But is it ready to sell? Sure, it's possible price wants one last push up. But we can consider selling rallies with a backstop agains today's high. We have indications from other work, like John Hampson of Amalgamator that geocosmics signal a significant drop here. There are also other indications this index has hit a target level from which it can correct. One is that the $NDX did meet the default Point-and-Figure (P&F) target featured at Stockcharts.com - see the P&F chart above/right. Also look at my monthly $NDX chart below. The index is grazing up against its 50% retrace to its all-time high, IF you calculate the all-time high based on closing monthly-bar levels (and not intra-month spikes). The comparable level for QQQ is about $62/$63, reinforcing the potential for a return to retrace the 38.2% level about $56/$57. It's also pretty close to the upper trendline of a parallel uptrending channel. And the indicators are showing some negative divergence:

And below is the bullish percent chart ($BPNDX) showing the percentage of Nasdaq 100 stocks sporting bullish P&F targets of their own. Not only is it starting to falter above the 80% mark (technically it must fall under 80% to be a sell signal). Its StochRSI has just fallen down - that's one of my favorite indications that the index is in trouble and turning. It doesn't say the turn is immediate. So let's watch (or go into sell mode, all things considered), looking for a reversal trigger close lower. The reversal pattern will then generate its own stop-loss level based on the high bar of the expected daily-chart reversal pattern.

Gold testing underneath resistance - believe it or not: chart views

Gold should be in a bullish pattern due to cycles and fundamentals. However, it's actually still under important resistance right now, so the KI$$ way to play it is to pare off longs and/or add hedges/protection, or maybe even cash out if feasible. Then wait to see if it can get above resistance. Let's take a look:

The daily chart of $GOLD I've annotated to show that it pushed over an important trendline - yaay! But is both backtesting a prior support uptrend line it had broken under, and also is just under the lows of the most recent monthly highs from late 2011. This means both trendline and price resistance.

The indicators are strong, so that's good. But be aware that some traders may try selling or shorting from this resistance area. There may even be some who are fundamentally bullish, but think it's ready for a wave-2 pullback, or even deeper correction or consolidation before heading higher again.

On my weekly chart, below, you can see that price almost touched a Fibonacci .382 retracement level back to prior swing lows. Maybe price needs to actually touch that (or perhaps even work on a 50% retracement level), as marked on my chart - perhaps $1512, or even down to the $1400's. Personally, I think it might only provide a consolidating pullback to a higher low before resuming its path upward. But it will be prudent to watch this resistance area very carefully for clues.

One final note: if gold indeed does drop again, whether to a higher or lower low, it is possible that it might trace a "Larusso" or "Wolfe" wave pattern. I'm more familiar with Elliott Wave, in which case the pattern might be deemed an ABC flat (completed), a zigzag X (completed), and then perhaps another zigzag down to complete the correction. First we'll have to see what occurs from this resistance area, i.e., underneath the $1760's.

U.S. dollar and VIX testing support levels (which may be temporary): chart views

Both the U.S. dollar ($USD or the ETF, UUP) and the volatility index ($VIX or the etf, VXX) moved lower today. Let's take a look, however, especially since the dollar pushed upward this afternoon after poking that low. On the $USD chart below, I've marked several batches of Fibonacci levels, and some preliminary channel lines. While the UUP tested a 50% retrace to its most recent swing low, the $USD dollar index only tested the 38.2% retrace to its comparable swing low. If it were to go to its 50% retracement, that would put it at about 77.60.

Here's the chart, which I'll discuss more, below:


There's a band between 77.60 and, lower down, 76.50, and depending on how fast $USD might descend, it could hit anywhere in the band and still get support from the lower uptrending line I marked as a parallel channel line. Furthermore, based on Fibonacci setups, there's a potential "triple crown zone" Fibonacci cluster if $USD were to fall into that band, which could support another strong rebound and move to higher highs by the dollar index.

If that happened, then of course it would have to go lower than it went today. That could happen if the stock market is only going to go a pullback before testing to higher levels, along with the euro. I do have a theory that the euro could test as high as $135, or alternatively test down to 125 then rebound to 135 (and then drop to 115) - we'll see! Main thing here is, we need to see whether or not the dollar index can sustain a move higher than today's low and Fibonacci test (corresponding to about 21.96 in UUP). If it falls under these levels, then it may well test much lower before getting support from that Fibonacci cluster and uptrending channnel.

Also notice that there had been some real negative divergence in $USD before it peaked and rolled over. That's another reason it may need further consolidation and eventually a lower test, before turning upward again.

There is another interesting point about the $USD chart. Notice that the low today backtested to a descending trendline that it previously had broken above. This is one reason why the dollar index may not necessarily go lower; or if it does, it could actually do so by sliding down that shallow descending line. However, I'm not so convinced it would do the latter, i.e., by remaining above but sliding down that line. Normally once there is a backtest, either price uses it to rebound, or it would just break back under that line - that's why I think if $USD rolled over downward again, it would be more likely to go to 77.60 and test that Fibonacci cluster zone and uptrending green trendline.

As for the volatility index, there is a very small potential reverse head and shoulders on the $VIX which is better seen on the hourly chart. Maybe that could support a VIX move up before another test down. Yet you can also see on my daily VIX chart below that it's testing an area with a lot of potential support.

Also remember that before a significant stock market top, we will expect to see VIX make a higher low. That doesn't really seem happening here. So on the one hand we might see VIX rebound just because of the channel and support levels. But in the weeks ahead, we will also want to see if the stock market makes higher highs, and if so, whether it does that along with a higher VIX low.

McClellan stock market warnings as S&P 500 retests Fibonacci-doubling 1333

The S&P 500 index ($SPX) retested 1333 this week which is a Fibonacci doubling of the 666.79-ish low it touched in early March 2009. Meanwhile, early warning indicators are signaling to be on watch for a correction in the stock market. The upcoming week may not start a big reversal, but we could see movement that sets up a reversal that will have more effect the following week. The market can move either higher or in a choppy fashion. I've got an old Fibonacci target of $62 for the QQQ so I don't rule out that we'll see it, sooner or later. But both the Dow Industrials and the SPX are having trouble bettering their 2011 highs, and this divergence goes along the the warning that the outlook isn't as rosy as many think.

My annotated chart of the SPX shows the stochastics have curled down, and the 1333 test on Thursday also encompassed a test of 1327 which is a potentially significant Fibonacci price extension. Similarly, 1307 is the Fibonacci .78.6% retrace to SPX's 1370 high of last year, making 1307 a level to watch as well.

Here's the McClellan chart I've configured (at Stockcharts.com) with my markings. The McClellan Oscillator continues to struggle showing negative divergence, and the Summation Index (while high which is generally positive) is now in overbought territory:

And here's the Oscillator chart McClellan shows at their own website, at http://www.mcoscillator.com/market_breadth_data/:

Now, here's a quote from McClellan's January 27 "Traders Like QQQ A Little Too Much - Free Weekly Technical Analysis Chart - McClellan Financial", about the Nasdaq 100 ETF, the QQQ, getting ripe for a pullback:

Some sentiment indicators work by analyzing what people say, such as polls and sentiment surveys. Others work by analyzing what people actually do, and I tend to like those more.

....

The current number of [QQQ] shares outstanding is not at an all time high, but it is the highest we have seen since all the way back in 2006. And it is way above the upper 50-1 Bollinger Band, indicating that traders and investors are getting a little bit too interested in being invested in the QQQ. That overly bullish sentiment condition begs for at least a short term pullback, to reintroduce people to the idea that stock prices actually CAN go down.

....

See their chart showing and comparing the QQQ price and number of QQQ shares created, and full article describing this, at: http://www.mcoscillator.com/learning_center/weekly_chart/traders_like_qqq_a_little_too_much/

Stocks and corporate bonds flirt with Fibonacci, geomagnetics and time cycles

Some combination of bullish Apple (AAPL) and the Fed (FOMC today) push stock indices higher again. Starting during the noon hour, stocks anticipated by rising and then strengthened yet more after the Fed announcement. Interestingly the SPX went right to 1327, a level that was suggested by Fibonacci analysis I described back in November. If it tries higher, there's another even more interesting level - 1332, which is two times the 666 which SPX touched back in March 2009. The exact level was about 666.79 so twice that is somewhere around 1333 to 1334. But there's a Bradley turn date coming up on January 28 - normally a time I'd expect a low, because it's around the "fund manager special" end-month time that usually gives us a lift into the new-month new money that we'd expect the first several days of February. It isn't a major Bradley date, but there are cycles reasons to brace for a reversal to occur anytime soon.

One of those is suggested by geomagnetics work done by John Hampson, as shown in his MT Stock Market Model showing a full 2012 year forecast. This work in his MT Model is based on geomagnetism plus Bradley turn dates and new/full moons, and you can study it at his website at: http://amalgamator.co.uk/MTStockMarketModel.aspx.

Another is Fibonacci - one of the Fibonnaci time cycles work I've done is to take the 17-month decline from October 2007 to March 2009 (interesting in itself as two times 8.6 months, where 8.6 may be a basic time interval), and project highs at the 1.382, 1.618 and 1.786 projections - all of which did occur during 2011. This month, January 2012, is the 2.0 time extension, which I originally thought could also produce a high. Later I'd become concerned that it could be a low, based upon a certain view about cycle lows from Terry Laundry's T Theory, but that clearly didn't happen. Instead, the cycle high projected by Jim Curry for this time period seems to be converging with this Fibonacci time extension.

The idea of this month being the 2.0 time extension also means it's possible to see a high-low-high/low-high cycle playing out, based on the 17-month time periods. If the 17-month period retains predictive strength going forward, then it may point to a significant low (or high, but I'm guessing low) in June 2013.

The big question of course is whether stocks are topping out for a big move down, or just positioning for a pullback before another thrust upward. Honestly I can see it either way. The bullish percent for Nasdaq is getting overbought with a little negative divergence, and there's negative divergence in the McClellan Oscillator (for NYMEX and SPX) too. The Nasdaq is leading both SPX and the Dow Industrials by having exceeded its 2011 highs, but that might also be negative divergence among the indices. Near-term, I think we just need to see if the SPX makes it past 1327 (bullish if 1327 becomes support), or goes under 1307 (bearish).

At least, it look prudent to keep on watch for a potential reversal, which is what I recommend that KI$$ investors and swing traders do here.

If you're looking for a turn in something, check out high-quality corporate bonds. You can see below that corporate bonds have also continued to perform very well. Both LQD, representing high-quality bonds, and HYG representing high-yield corporate bonds, have continued bounding upward. LQD has now already exceeded its P&F projection, and HYG now has a new higher P&F target (114) based on its breakout. There is some negative divergence, however. Look especially at the LQD monthly chart - the StockRSI indicator is retesting up to its midline. When this occurs as price is tagging new highs, it is a warning and possibly a preliminary sell signal. It would be prudent to give it another day or two and look for price to close in the lower third of a daily range and below the low of the prior day that tags a high.

As part of this view, I'd like to note that LQD rose above the 109 price that was a Fibonacci extension, and then tested it as support before resuming the current rise. If LQD moves back under 109 on the next drop, it will be an important signal that it will have lower levels to test.

2011 closes with divergences to define 2012 market juncture: Tony Caldaro's 12/31/11 OEW update

2011 closed in a delicate balance between bullish vs. bearish prospects, and Tony Caldaro defines the important differences in this year-end Objective Elliott Wave update for the financial markets. Read on to understand what lies ahead for the U.S. and global stock markets, bonds, the U.S. dollar and other currencies, gold and precious metals, crude oil and other commodities (thanks again Tony!). You can also find his daily updates via his tweets as @OEWtony on Twitter, linking to his OEW website http://caldaro.wordpress.com/, or right here in the OEW feed at lower right side of the page):
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the ELLIOTT WAVE lives on

December 31, 2011
weekend update

by Tony Caldaro

REVIEW

A quiet holiday week closes out the volatile 2011. After making a new uptrend high at SPX 1269 on tuesday, the market declined to 1249 on wednesday. And that, was the entire range for the week. For the week the SPX/DOW were -0.60%, and the NDX/NAZ were -0.45%. Asian markets lost 1.1%, European markets were +0.8%, and the DJ World index was -0.1%. On the economic front reports were mainly to the downside. On the uptick: Consumer confidence and the WLEI. On the downtick: Case-Shiller, Pending home sales, the Chicago PMI, the Monetary base, and weekly Jobless claims increased. During the year the SPX traded between 1371 and 1075 ending with a net loss of 0.04 points. Trading for 2012 starts on tuesday with a full economic plate for the week. Highlights include the FOMC minutes, ISM, and the monthly Payrolls report. Happy New Year!

LONG TERM: inflection point

After completing a 26 month, (Mar09-May11), Primary wave I high at SPX 1371 the market declined in five waves to 1075 by Oct11. We initially interpreted this decline as five waves down completing Major wave A. Then we expected a Major wave B rally, lasting about two months, retracing about 61.8% of the entire decline: around SPX 1258. The market then surprised most with an impulsive looking uptrend to SPX 1293 in only 18 trading days. We then considered the five waves down might have been an extended flat. Similar to the extended flat that ended the 1987 crash. This opened options to both a bull and bear market scenario. After the late-October SPX 1293 high, the market corrected in an abc pattern into a late-November low at SPX 1159. This corrective downtrend, essentially, kept both bull and bear scenarios alive: a resumption of the bull market, or a Major wave B still underway.

For most of 2011 nearly every trend, (wave), has lasted only one month. The market has displayed five waves down from May to October, five months. Now, three waves up from early October into the end of December. January would make it three months. This is not typical bull market activity. Bull market uptrends usually last two months or longer, with downtrends about one to two months. During Primary wave I, for example, all uptrends lasted between two and seven months, while the downtrends were one to three months. Should the current uptrend extend into February this would be quite bullish long term. If the uptrend has already topped, or tops soon, bear market characteristics continue.

In the past 25 years the market has displayed three five wave down patterns after an important top: 1987, 2008, and 2011. In 1987, the five wave decline ended the, 36% market loss, bear market with an extended flat, and the 1987-2000bull market was then underway. In 2008, the five wave decline ended only wave A of that ABC, 58% market loss, bear market. The end result of the current 2011 five wave decline, market loss 22%, is still undecided. While the patterns of all three declines look similar, there are some relative strength differences. In 1987 three of the four major indices outperformed the SPX into its final December low. A new bull market resulted. In 2008 all four major indices underperformed into the March low. A two month B wave rally followed before a nasty ten month decline into the bear market low in March 2009. In 2011 the only index to outperform, three of the four majors, into the October lows was the NDX. A two month rally, thus far, has followed. While current relative strength, and other technicals, look better than the 2008 five wave decline. They do not look as good, as they did after the five wave bear market ending 1987 decline. This analysis suggests the five waves down was a Major A, and the current three waves up are a Major B, in an ongoing ABC bear market.

The technicals we have been tracking are still displaying B wave chartacteristics after nearly a three month rally. The monthly RSI has still not cleared the neutral line, and the MACD is on a negatively cross. The weekly RSI did not get into an extreme overbought condition, and the MACD is hovering around neutral. Corporate bond risk, while more subdued than 2008, is still rising. The rise in the NYSE percentage of stocks above their 200 dma still looks like a B wave response from an oversold condition. And, our smart money indicator has improved but remains mixed. If the bull market is resuming it needs to reassert itself soon.

MEDIUM TERM: uptrend high SPX 1269

The uptrend from the post-Thanksgiving day low at SPX 1159 was first confirmed by the DOW. Then the other three major indices followed. Unlike the first uptrend off the early-October SPX 1075 low, when all four indices rallied together, this uptrend displays a fragmented advance with three distinct and separate patterns. These patterns are best illustrated by the DOW, SPX and NDX.

The DOW is the only index, of the four majors, to make a higher uptrend high than the late-October uptrend high. This chart displays a classic ABC retracement rally after a Major A five waves down pattern. The retracement was quite strong, 78%, which bodes well should the bear market resume. The new high in the DOW uptrend has coincided with a negative daily RSI divergence, and it occurred around a holiday. Negative divergences at uptrend highs often signal weakness, and trends often reverse around holidays.

The SPX displays a weaker pattern during the current uptrend. Thus far, it has failed to reach the late-October SPX 1293 high by about 2%. This could be counted as a failed Intermediate wave C in a Major B wave bear market counter-trend rally. The retracement level at SPX 1293 was 73%. But if the potential Major B ended at SPX 1269 the retracement level falls to a more acceptable 66%, closer to the customary 61.8% level. The SPX is also displaying a negative RSI divergence.

The NDX displayed quite a bit of relative strength during the SPX/DOW five wave decline: May-Oct. The NDX made a new bull market high in July. It also displayed relative strength at the early-October low by failing to make a lower low. After it led all four major indices higher in October, retracing nearly all of its July-Aug decline, it has weakened dramatically during the current uptrend. The pattern it displays since the October low appears to be a contracting triangle. Triangles can occur in B wave counter-trend rallies during large corrections and bear markets. Should the bear market resume shortly this would be the count.

The bullish pattern posted on the SPX charts displays a Primary wave I in May at SPX 1371. This is followed by an extended flat Primary wave II decline to SPX 1075 in early-October. Since then the market has rallied, impulsively, to a Major wave 1 high in late-October at SPX 1293. Corrected to late-November in a Major wave 2 at SPX 1159. Then, started a Major wave 3. Since we expected some heavy overhead resistance initially during Major wave 3, we suggested the current uptrend would only be Intermediate wave i. With this in mind we counted the early-December rally to SPX 1267 as Minor wave 1, and the decline into mid month to SPX 1202 as Minor wave 2. Minor wave 3 would be underway now. Thus far this market is not displaying any signs of a strong third wave. The first few weeks of January will be crucial for this potential bullish scenario. This count is displayed quite clearly on the chart below.

SHORT TERM

Support for the SPX is at the OEW 1240 and then 1222 pivots, with resistance at the 1261 and 1291 pivots. Short term momentum is slightly oversold. During the 3+ week October uptrend the SPX ran into resistance at the OEW 1261 pivot, had one of its largest pullbacks, then broke through it to the 1291 pivot ending the uptrend. After that there was a sharp pullback to SPX 1215, then a rally back to the 1261 pivot. After a couple of weeks of vacillation, above and below this pivot, the market broke down into a confirmed downtrend. During the current uptrend the SPX again ran into resistance at the 1261 pivot. Then gradually sold off, over two weeks, to SPX 1202 before attempting again to break through this pivot.

Why is this pivot so important? It represents a 61.8% retracement of the entire five wave May-Oct decline. And, it represents where the first wave of that decline ended: SPX 1258. When the SPX rallied above this level in October it confirmed that entire May-Oct decline was a completed five wave pattern. Unfortunately this does not confirm the correction/bear market is over, only the completed pattern. Until the SPX can break solidly through this pivot, and then use it as support, the overall trend is down.

Short term OEW charts remain positive as long as SPX 1250 holds support. Short term support is around SPX 1249/50, the OEW 1240 pivot, and around SPX 1230/31. Overhead resistance is at the 1261 pivot, SPX 1278, and then the 1291 pivot. Best to your trading in 2012. Happy New year!

FOREIGN MARKETS

The Asian markets were mostly lower on the week for a net loss of 1.1%.

The European markets were all higher on the week for a net gain of 0.8%.

The Commodity equity group were mostly lower for a net loss of 0.9%.

The DJ World index lost 0.1%.

COMMODITIES

Bond prices (+1.0%) continue to drift higher in an uptrend as 10YR yields decline. The 30YR is again under 3.0%, and we expect the October 2008 2.52% yield to be reached, and exceeded, before the Bond bull market ends.

Crude (-0.6%) confirmed a downtrend after the $103 high in November. Initial support is at $95, $93, and then $89.

Gold (-2.8%) remains in a downtrend with signs of a potential bottom. This week Gold exceeded the September $1535 low with a lower low at $1524. It displays a positive divergence on the daily charts, and hit the $1463-$1535 support zone we had been anticipating. Silver hit $26, this week, for the third time this year: Jan, Sept. and Dec. Then bounced off that support.

The USD (+0.3%) continues to uptrend, but is currently displaying a negative divergence at this weeks highs. Just as it did in October before a large pullback. The EUR (-0.7%) is displaying a positive divergence, just like October as well.

NEXT WEEK

Monday is a holiday. Tuesday kicks off the economic week with ISM manufacturing and Construction spending at 10:00, then the FOMC minutes at 2:00. Wednesday we have Factory orders and monthly Auto sales. Thursday, weekly Jobless claims, the ADP index, and ISM services. Then on friday the monthly Payrolls report and Unemployment rate. The FED re-awakens on friday with two scheduled speeches. FED governor Duke will deliver a speech around 12:30 in VA, then FED governor Raskin speaks in MD at 1:00. On saturday, FED governor Raskin gives another speech in Wash, DC at 12:30.

All the best, to you and yours, in 2012!

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