REVIEW
For the eleventh week in a row the SPX made new bull market highs this week. Statistically that is quite a run as this seven month uptrend continues to extend. Economic reports were plentiful and positive. Thirteen were positive or improving, four negative or weakening, and one flat. The negatives were declines in industrial production, building permits and the M1-multiplier, plus an increase in weekly jobless claims. The NAHB housing index remains flat and bouncing along the bottom. On the positive side; the PPI/CPI were positive, along with import/export prices, retail sales, the leading indicators. On the improve were the NY/Philly FED, business inventories, capacity utilization, the monetary base and the WLEI.
For the week the SPX/DOW were +1.0%, and the NDX/NAZ were +0.75%. Asian markets gained 2.4%, European markets added 1.2%, the Commodity equity group rallied 1.8%, and the DJ World index rose 1.8% as well. US Bonds were +0.5%, Crude added 1.6%, Gold rallied 2.3% (Silver was +8.8%), and the USD declined 1.1%. With the FOMC minutes and Options expiration now behind us we look ahead this week to housing, consumer confidence/sentiment and friday’s second estimate on Q4 GDP. Monday is a national holiday in the US: Presidents Day.
LONG TERM: bull market
This week we will take another look at the OEW characteristics of a typical bull market. Keep in mind a bull market is not confirmed by OEW until there is a long term uptrend. We have been in one for over a year now. Gold, in contrast, has been in a confirmed long term uptrend since 2001.
When we review the SPX weekly chart above, which displays a bear market sandwiched by two bull markets, we observe several technical characteristics. First, during the 2002-2007 and the 2009 bull markets the RSI spends most of its time in an overbought condition and only gets slightly oversold during corrections. Inversely, during the 2007-2009 bear market the RSI spends most of its time in an oversold condition and during rallies gets only slightly overbought. Second, during bull markets the MACD generally remains above neutral during the entire bull market. Then during a bear market it remains below neutral. Lastly, during bull markets the OEW wave patterns unfold in impulse waves (five waves up). While during bear markets they unfold in corrective waves (three waves down). The technical evidence clearly suggests we have been in a bull market since March 2009. This is certainly one picture that is worth a thousand words.
MEDIUM TERM: uptrend high @ SPX 1344
In September we published the following bull market projection based upon the characteristics the stock market had displayed up until that point in time. The market at the time was at SPX 1149: http://caldaro.wordpress.com/2010/09/26/spx-bull-market-projection/. In this tentative projection we estimated a six month uptrend from July10 to Jan11 topping around the OEW 1313 pivot. The market hit that pivot range on February first. But the uptrend displays no signs of reversing yet and we are clearly into its seventh month.
Also noted in the report was the tendency for the uptrends to unfold in three month intervals, or their multiples: Mar-Jun, July-Jan and early Feb to late April. The next window for a potential top, using this bull market characteristic, would be April: nine months.
In regard to price. Since our first price objective of the OEW 1313 pivot has already been met. And, this uptrend continues to extend. Our second price objective of the OEW 1440 pivot is next. Between friday’s close at SPX 1343 and the 1440 pivot is nearly another 100 SPX points (7.2%) and four OEW pivots: 1363, 1372, 1386 and 1440. Notice the large gap between the 1386 and 1440 pivots. This gap is similar to the current pivot gap between 1313 and 1363 pivots.
Are we projecting SPX 1440 by April? Only if the SPX clears the 1386 pivot and remains in this uptrend. In fact, it is possible that this uptrend can extend all the way out until July, twelve months, and then hit the third price objective at the OEW 1552 pivot. If this did occur it would probably be all of Primary wave III, not just Major wave 1. All the anticipated Major waves would have unfolded within the context of one uptrend. Rare, but it did occur once before in the early 1950′s. For now, lets take this bull market one OEW pivot at a time.
SHORT TERM
Support for the SPX remains at 1313 and then 1303, with resistance at 1363 and then 1372. Short term momentum ended the week just above neutral. Tracking an extending uptrend, such as this, is quite testing for even the best technicians. We’re quite comfortable with the labeling of the four Intermediate waves noted in the chart above: wave i SPX1129, wave ii SPX 1040, wave iii SPX 1227 and wave iv SPX 1173. From that November Intermediate wave four SPX 1173 low, Intermediate wave five looked like it would complete at the OEW 1303 pivot in late January. But this uptrend was not done yet, and after the largest pullback since that low the market turned right around and the uptrend started to extend.
Currently the most probable wave count would suggest that Intermediate wave five is extending, and it is currently in Minor wave 3 of that extension. This suggests we still have a Minor waves 4 and 5 ahead of us before the uptrend ends. Minor wave 3 should run into resistance at the OEW 1363 pivot. Which also matches a cluster of fibonacci relationships (SPX 1360-1364) noted in last weekend’s report.
We are also carrying one other potential SPX wave count, which is labeled on the NDX daily chart. We will be moving that count over to the DOW daily chart shortly. The NDX, btw, has already exceeded its 2007 high by 7.4%, and the NAZ is less than 1% below its 2007 high. The very low probability alternate bearish count, labeled on the NAZ chart, will be eliminated. Best to your trading!
FOREIGN MARKETS
Asian markets were all higher on the week for a 2.4% net gain. India’s BSE and Hong Kong’s HSI may have both bottomed in their downtrends, India with a positive divergence, and are both rallying. The other three indices are uptrending.
European markets were also all higher on the week for a 1.2% net gain. All five european indices are in uptrends.
The Commodity equity group was mixed on the week for a net gain of 1.8%. Brazil’s BVSP looks very much like India’s BSE, with a downtrend low on a positive divergence and rallying. The other two indices are in uptrends.
The DJ World index remains in an uptrend and gained 1.8% on the week.
COMMODITIES: the bull market continues
Bond prices remain in a downtrend but bounced off of recents lows to gain 0.5% on the week. 10YR yields nearly hit 3.75% recently, their highest level since the spring of 2010.
Crude is still in an OEW uptrend, despite the recent weakness, and gained 1.6% on the week.
Gold continues to rally from its recent downtrend low at $1308. It gained 2.3% on the week. Uptrending Silver gained 8.8% for the week and made new bull market highs.
The downtrending USD lost 1.1% on the week. It has remained in a DXY 76-81 trading range since November.
NEXT WEEK
Monday is a national holiday. Tuesday kicks off the economic week with the always interesting Case-Shiller housing report. Identifying the end of this bear market, when it occurs, will impact the largest part of the population. Also on tuesday we have the Consumer confidence reading. On wednesday Existing home sales will be reported. Then on thursday, weekly Jobless claims, Durable goods, the FHFA housing index, and New home sales. On friday Q4 GDP and the Consumer sentiment reading. The FED has only one thing on their agenda. On friday vice-chairman Yellen gives a speech in NYC. Best to your extended weekend!
CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987
Unrest around the world …the “french revolution” of the 21th century ?…does anyone know how the markets reacted in those years ?…here some lines from wikipedia..sounds familiar ?
“Economic factors included hunger and malnutrition in the most destitute segments of the population, due to rising bread prices (from a normal eight sous for a four-pound loaf to 12 sous by the end of 1789),[3] after several years of poor grain harvests. The combination of bad harvests (due to abnormal/severe weather fluctuations) and rising food prices was further aggravated by an inadequate transportation system which hindered the shipment of bulk foods from rural areas to large population centers, contributing greatly to the destabilization of French society in the years leading up to the Revolution.
Another cause may have been France’s near bankruptcy as a result of the many wars fought by previous rulers, as well as the financial strain caused by French participation in the American Revolutionary War. The national debt amounted to almost 2 billion livres. The social burdens caused by war included the huge war debt, made worse by the loss of France’s colonial possessions in North America and the growing commercial dominance of Great Britain. France’s inefficient and antiquated financial system was unable to manage the national debt, something which was both partially caused and exacerbated by the burden of an inadequate system of taxation. To obtain new money to head off default on the government’s loans, the king called an Assembly of Notables in 1787.”
MGD, Commodity bull markets usually accompany Secular equity bear cycles. The last commodity bull (1967-1980) also aligned with a Secular equity bear cycle (1967-1982). This time however, the Saeculum cycle is in “crisis” mode, while previously it was in “protest” mode. The consequences of a “crisis” period have been echoing around the world. FWIW, the commodity bull ends in 2014 and the ‘crisis’ period ends around 2020. cheers!
Hey Tony, I remember you posted something abt it…when was it ?..could you pls give me the link ..I didn’t find it in your special reports and I would like to read it again
http://caldaro.wordpress.com/2010/11/04/politics-and-secular-bullbear-markets/
Bahrain nixes F1.
Next up 5th fleet?
Nice get Lee
Might get WTF spike on this
It has been relentless
http://elite.finviz.com/quote.ashx?t=Bno
Thanks Mike
SI is the real show !
Morn-
Looks like everyone wants to talk about CL now.
Don’t get too big for ur britches
Hey Lee, What CL contract are most using?
ES testing Fri low W TL just under.
Big week here in the desert Accenture WGC all week.
I’m CLJ H D
H D
It sure is but dont worry today wont matter cause SPX isnt open
Thx- BTFD? Gotta try em here.
Tony, a bit of a reacion in oil and metals thus far. Lets see if it lasts. I see $natgas has stalled once more. the wtic:natgas is nearing all time highs again (23:1 ish). We may need oil at $200 and some gov. incentive to move natgas higher. Thanks.
Think WTIC at $100 should help NatGas.
In my article … Exhaustion Of Quantitative Easing Starts The Mother Of All Bear Stock Markets … I write that the chart of the S&P, SPY, manifested three white soldiers, and a dragon fly candlestick, at the top of an ascending wedge; this is a terrifically bearish formation.
The S&P, SPY, will be forever falling lower on exhaustion of quantitative easing, as an Elliott Wave 3 Down commenced on Friday February 18, 2011 in the S&P, at a price of 134.53, as seen in the chart of SPY Weekly.The world has entered into Kondratieff Winter.
The emerging markets, EEM, and the BRICs, EEB, are cresting up into an Elliott Wave 2 High.
Brazil, EWZ, has risen to strong resistance, as has Brazil Financial, BRAF, and the Brazil Small Caps, BRF. Deflation in the Brazil Financials is taking Brazil down!
Quantitative Easing gave strong moneyness to investing in Brazil, but that inflation, and threat of capital controls has deleveraged investment out of Brazil and into US Financials, IYF, World Financials, IXG, and even the European Financials, EUFN, as is seen in the chart of Itau Unibanco Banco, ITUB, and the other financials, …. ITUB, IYF, IXG, and EUFN.
It’s reasonable to expect that the way is now down for the emerging markets, EEM, and Brazil, EWZ, India, INP, and China, YAO as well as oil laden Russia, RSX, as its chart shows that it has now fallen through the middle of a broadening top pattern.
Oil, USO, manifested a massive harami and wave 5 completion at the first of the year and is now in an Elliott Wave 3 Down delveraging investment in both the airline stocks, FAA, and airline supply company, BE Aerospace, BEAV, which is also in an Elliott Wave 3 Sell Off.
Small Cap Energy Shares, XLES, became the swing trade of QE 2 investing. While QE 2 deleveraged the precious metal mining stocks, it leveraged the Small Cap Energy Shares even more than the overall Energy shares, XLE. The small cap Energy Shares, XLES, manifested a massive bearish lollipop hanging man candlestick and closed 2% lower.
A Elliott Wave 5 high was achieved in commodities, DJP, on February, 2, 2011 at 50.13.
QE Exhaustion caused disinvestment from agriculture commodities, JJA, the week ending February 18, 2011, resulting in disinvestment from agricultural industry stocks, MOO.
Exhaustion of quantitative easing has started the mother of all bear markets, and a failure of traditional carry trade investing, the US Federal Deficit, a soon coming municipal bond funding crisis, and a worsening of the European sovereign debt and banking crisis, will be the dynamos that will propel the world from the Age of Leverage and into the Age of Deleveraging.
The world is passing from The Age of Leverage characterised by sovereign debt expansion, currency inflation, credit liquidity, stability, stock and junk bond inflation, economic growth and expansion and prosperity … and passing into The Age of Deleveraging characterised by failure of sovereign debt, currency deflation, credit ill-liquidity, instability, stock and junk bond deflation, economic contraction and austerity.
The primary money good investment will be ownership and physical possession of gold and silver.
http://seekingalpha.com/user/650374/profile
Just a friendly FYI
crazy wire stuff tonight.
Middle east, especially Libya and Iran, may disrupt the world’s oil supply if civil war breaks out.
g-20 shrimp feast a dump of bs
The Frenchmen lady wants Confederacy sprs …
Boj to study commodities mkts.
Warships on hold for 2 days so the chosen ones get set…
not a word of “blow back” by the boobers…
Pomo ritual has been great. I dont have to watch cnbc…
Sports cnt top 10s mo better…
Cartoons before 6:00
http://inflation.us/videos.html
The first one looks like it might be funny….
Tony, I see some ultrabears are calling the P2 is abt in place. We are bullish and have another completely different count and we are abt to remove the very low prob alt bear count on the NAZ. But even if this bear count would come in play we should be seeing wave C down unfolding and not P3 down. However, DJI have retraced abt 50%-78.6% of the price and run abt 62%-162% of the time of the 2007-2009 bear market and you know what this could mean. So I wonder if something goes wrong what could be the line on the sand ?
Hi MGD, Yes, you are correct. An oil embargo.
1970′s redo? oil quaruples, gas stations run dry, markets crashs. Remember it well. Don’t think it repeats but sure a lot of upheaval lurking with rising food and oil.
Crude is certainly something to keep an eye on this year. Love oneself, or love oneself and all others. It’s a choice. Your future depends on it. Time is short. Make the choice!
As much as I admire Tony’s work, and changing counts………..the bottom line is this. As long as the fed continues to devalue the dollar ( and they have no choice but to do so), equities are under pressure to rise……… It makes sense if you don’t think about it !
Hi Tony,
A question that you might have already addressed but I can’t find any of your analysis related to it on your blog.
Surely what you count as a completed [a],[b],[c] for SC2 can be also counted as a 5 five wave structure constituting only wave [a], with wave [b] still running now as a simple zigzag. Using your wave count but labeling differently one would count your Primary 1 at 1’219.80 being a 5 wave move constituting wave “a” of the zigzag, your Primary 2 being a 3 wave corrective a move to 1’090.91 being the “b” wave and the current uptrend from that level being a 5 wave structure “c” wave to complete the zigzag [b] wave.
This labeling doesn’t violate any of EW rules and it seems to make more sense to have a SC2 wave lasting more than 18 months, after all it is supposed to correct a multi-decade SC1 uptrend.
If you add to that the staggering complacency and the extreme sentiment readings, it is hard to imagine that we are at the mid-point of Primary Wave 3.
I would be interested to read your comments.
Hi Erka, The count you mention is a possibility but with a very low probability. The 2007-2009 decline can be counted as an ABC down creating a larger A. The 2009-2011 advance, however, has already exceeded the customary 61.8% retracement max for a B wave. And the Apr-July decline of 38.2% would be quite short for a smaller B wave. While 2007-2009 only lasted 18 months the decline was the largest for the general market since the early 1930′s. These types of declines only occur in very significant waves.
Tony, seems best to not attempt to call a top to this market. Too many expecting the Feb pullback. One of a few stocks that seems to be correcting is FCX -48-50 seems a likely spot?? Outside the market, I see some Wis. has some fallout of state budget problems. Perhaps, a 2012 event nationwide to end our bull market. Until then looks like any 10-15 point pullback is a gift. thanks.
Hi MLR, Agree with FCX. Also agree statewide budget problems will be nationwide next year. Maybe Ben will be buying munies.