weekend update

REVIEW: markets end mixed in short trading week

After a series of new highs in nearly every US stock index we follow, the market ended the week mixed. A small pullback in the cyclicals occurred, while the techs were trying to rally. New bull market highs were posted in the SPX/DOW/NYA/TRAN/NDX/NAZ/R2K, even the SOX started uptrending again after nearly a two month correction. For the week, the DOW lost 0.9%, the SPX lost 0.3%, the NAZ rose 0.8% and the NDX was nearly 1.0% higher. With all eight indices now in uptrends, we’ve raised our upside target for the SPX to 1530.

LONG TERM: bullish.

The worldwide bull market continues as the global economy expands. Ofttimes we seem to forget, the stabilization and integration of so many countries, over the past two decades, into the global economy. The technological advances, that have made communication nearly instantaneous around the entire globe. The world is a much smaller place than it was two decades ago, and more importantly, not as complex. Certainly it is not perfect, nor will it ever be. There are just too many differences of opinions. However, just as the US was once known as the world’s melting pot. The world, in the 21st century, may finally reach the stage of actually being humanity’s melting pot. Before any of this can occur, first, this generational Crisis era must conclude, and second, a new paradigm must be adopted and embraced by world leaders. Unfortunately, we are probably a decade away from either of these events. Historically, this period of time could only be shortened by a major military confrontation. For example in the US: the 18th century Revolution, the 19th century Civil War, and the 20th century WW II. It was only after the opponents to positive change and progress had been defeated, that they sat down to discuss the future. Have we matured as a species, capable of putting aside our differences, to discuss what is best for the future course of humanity? Or are we still the immature superior primates of the animal kingdom, where survival of the fittest rules? The next decade will provide that answer. For now, economic globalization continues to expand, and the bull market in stocks continues to unfold.

MEDIUM TERM: bullish.

Over the past two weeks, the negatives that had been holding the market back, have been gradually getting resolved. The negative NDX/SPX divergence, that was in place for more than a month, has been resolved to the upside with the NDX joining the SPX in new bull market highs. The sloppiness of the SPX wave structure, with the many overlaps, appears to be clearing up. A thrust up by the market would start to resolve all these apparent subdividing ones and twos. Also, a thrust higher by the market will resolve the apparent rising wedge formation that has contained SPX/DOW for the past several months. With all eight indices now in uptrends, I am expecting the market to do just that: thrust higher out of this trading range, and start trending upward again. Therefore, this week, I raised the SPX Intermediate wave three target to SPX 1530. This is the next long term EW pivot point, that should be achieved, as the SPX works its way back to its all time highs at 1553. The DOW/TRAN/NYA/R2K are all in, all time new high territory. Before the bull market ends, the SPX should at least retest its all time highs. The Tech sector, (NDX/NAZ/SOX), which took the brunt of the bear market, will likely take a decade or so before seeing their 2000 highs again. This bull market will not last that long. For now the trend remains up, and expecting higher prices in the weeks ahead.

SHORT TERM:

The techs and the cyclicals seem to be moving to different directions recently. Which is not that unusual during this major uptrend. Since the July06 low, they have taken turns in supporting the market and leading it higher. Only when they have moved in unison, has the market made dramatic progress to the upside in short periods of time. As soon as these sectors get in sync, then the market will rise. For now, I continue to observe the 3-month rising trendline in the SPX for major support, while these sectors again realign. Chart below.

FOREIGN MARKETS:

The Asian markets continue to uptrend. Australia’s ASX eclipsed 6,000 for the first time ever this week, and Japan’s NIKK closed over 18,000 for the first time in seven years. China was closed for the New Year, and India’s BSE has been choppy as their government deals with their budget. The European markets continue to uptrend, looking for higher prices ahead.

COMMODITIES:

Gold was in the headlines again this week, as it rallied strongly to new uptrend highs. Expecting the uptrend to continue.

Crude continues to edge higher and has been a difficult market recently. Major resistance is at $64.

Bonds continue to move higher, expecting that to continue.

Dollar is again weakening, as the Euro continues to gather strength. Expecting the Euro to continue higher.

SUMMARY:

The market ended mixed this week, but several positive signs were displayed by the tech sector. The positives continue to add up, indicating that the market should start impulsing higher soon. It’s been a tricky market since the beginning of January. But the trend has remained up and the market will respond soon. Best to your week!