REVIEW
US markets made a new uptrend high on thursday, but ended the week mixed. For the week the SPX/DOW were -0.20%, and the NDX/NAZ were +1.05%. Foreign markets were higher: with Asia +1.5%, Europe +0.7% and the DJ World index +1.2%. Economic reports were quite mixed with negatives outpacing positives 6 to 5. On the downtick: pending/new homes sales, durable goods, leading indicators, the M1 multiplier, and weekly jobless claims rose. On the uptick: FHFA housing prices, consumer sentiment, the monetary base, the WLEI and the GDP. Next week we will get reports on Case-Shiller, the Chicago PMI, ISM and nonfarm Payrolls.
LONG TERM: bull market
We continue to observe technical improvement supporting a bullish outcome to the second half correction of 2011. The three wave advance from early October looks impulsive, is not showing any tendencies of a bear market B wave rally, and just thursday the SPX was only 2.8% below its May 2011 Primary wave I high and the DOW was less than 0.2% below its high. The monthly chart below displays a rising RSI which looks similar to the 1990 and 1998 advances, and not the 2002 and 2008 bear market rallies.
The weekly chart is displaying bullish characteristics as well. With the RSI hitting overbought and the MACD rising above neutral. Many of our other technicals indicators are bullish as well. The NYSE now has 65% of its stocks above their 200 dma, while bear market rallies usually top between 40% to 50%. Market breadth is making new bull market highs, along with five of the nine SPX sectors. The DOW displays 87% of its stocks above their 200 dma, and the VIX continues to decline in the second downtrend from its secondary high in early October. Volume, however, remains a bit light and will probably pick up after the SPX/DOW make new bull market highs.
Our long term count continues to suggest Primary waves I and II completed in May11 and Oct11, at SPX 1371 and 1075 respectively. Primary wave III has been underway since that October low. Primary III should consist of five Major waves with waves 1 and 2 already completed, and Major wave 3 underway now.
MEDIUM TERM: uptrend high SPX 1333
The daily chart displays Major waves 1 and 2, off the SPX 1075 Primary II low. Major 1 topped in October at SPX 1293, and Major 2 bottomed in November at SPX 1159. The current uptrend, from the SPX 1159 low, is taking a lot more time to unfold. Its first important rally was to SPX 1267, which we labeled Minor 1. Next a pullback to SPX 1202, which we labeled Minor 2. Then a gradual rising wave to thursday’s SPX 1333 high, which we’re labeling Minor wave 3. Nearing that high the market hit extremely overbought and RSI momentum has started to decline. With Minor 1 travelling 108 SPX points, (1159-1267), and Minor wave 3 already 131 points, (1202-1333), it may be time for a Minor wave 4 pullback. Then a Minor wave 5 to new uptrend highs.
While Minor 1 only took nine smaller waves, five Minute waves, to unfold. Minor wave 3 has taken 17 smaller waves, five Minutes waves, to unfold. The longer a wave takes to unfold the more complex its underlying pattern. Should Minor wave 4 be underway now we would expect about a 50 point pullback from the SPX 1333 high. This would represent a 38.2% retracement of Minor wave 3, while Minor wave 2 retraced a larger 61.8% of Minor 1. And, since Minor wave 2 took two weeks to unfold in a complex pattern. We would expect Minor 4 to take about one week to unfold in a simple pattern. This would be wave alternation at work. Maximum downside support would be around SPX 1267.
SHORT TERM
Support for the SPX remains at the 1313, 1303 and 1291 pivots, with resistance at SPX 1327, 1347 and the 1363 pivot. Short term momentum ended the week rising to neutral from an oversold condition. Our very short term count from the Minor 2 low at SPX 1202 displays: Minute wave i, (1243), Minute ii, (1230), Minute iii, (1297), Minute iv, (1278), and potentially Minute v, (1333). This pattern displays that Minute iii was 1.618 Minute i, and Minute v is nearly 0.618 Minute waves i thru iii. During this entire six week advance the largest pullback was 20 points. After thursday’s SPX 1333 high the market pulled back 21 points to 1312 on friday. This suggests a larger wave, or Minor wave 4, is underway.
The technicals currently support this view. There are negative divergences up to the hourly charts, and declining momentum on the daily chart. As noted above, a pullback now to the lower end of 1291 pivot’s range would fit the uptrend pattern quite well. Then a Minor wave 5 should start taking this uptrend to higher highs. A decline into the lower end of the 1313 pivot range would be additional evidence Minor wave 4 was underway. Should the market rally above SPX 1333 before a Minor 4 unfolds, then it is likely Minute wave v is extending. Should the market drop below the 1291 pivot range, (1284-1298), then it should find support at the upper range of the 1261 pivot. Best to your trading!
FOREIGN MARKETS
The Asian markets were all higher on the week, gaining 1.5%, with the exception of China which was closed for the New Year. China has not confirmed an uptrend.
The European markets were mostly higher on the week gaining 0.7%. All indices are in uptrends.
The Commodity equity group were all higher gaining 2.2%. All are uptrending.
The uptrending DJ World index gained 1.2% on the week.
COMMODITIES
Bonds strengthened after the FOMC meeting, remain in an uptrend, and gained 1.2% for the week.
Crude is still uptrending gaining 1.3% on the week.
Gold is close to confirming its uptrend, Silver and Platinum already have, and gained 4.1% on the week.
The USD continues to weaken losing 1.7% on the week. The EUR gained 2.2%, and the Yen (+0.4%) remained in an uptrend despite some recent weakness.
NEXT WEEK
Busy economic calendar ahead this week. Monday kicks it off with Personal income/spending and PCE prices at 8:30. On tuesday: Case-Shiller, the Chicago PMI and Consumer confidence. Wednesday we have the ADP index, ISM manufacturing, Construction spending, and Auto sales. On thursday: weekly Jobless claims and Q4 Productivity. Then on friday the Payrolls report, Factory orders and ISM services. The FED has one extra activity scheduled: FED chairman Bernanke’s congressional testimony on thursday at 10:00. Best to your weekend and week!
CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987
NASDAQ W2 zigzag before W3 up?
http://www.wavegenius.com/2012/01/30/nasdaq-10-day-visual-zigzag-w2-before-a-w3-up/
NASDAQ W2 zigzag before W3 up?
Tony,
Let me re-answer that question. Today is the CIT date.
It should be the low date, BUT today could be the low close date
AND tomorrow could be the lowest print date. SO, depending on
how you count it, it could be today or tomorrow.
Best
thanks Scotty
Good day,
The dow broke the last week lows early at the open. My long positions were stopped out. So I went cash. This is a bit worse than I was expecting for today. Watching how this unfolds, but going short is very possible if the dow brakes the lows of this morning
GL
Tony,
I know that you keep a close eye on the monetary base (both domestically and around the world). You may also want to include the VELOCITY of that base in your analysis. I believe that central bank balance sheets are where bad debt goes to die, but if the base is not expanding at an accelerating rate while velocity IS slowing at an accelerating rate – it may be a (pardon the cliche) a canary in the coal mine.
http://research.stlouisfed.org/fredgraph.png?g=4AR
Cheers
Mauka,Interesting point.Was just in fact checking the FED’s monetary base.
Tony,
Looks like my CIT for today is going to be a low
Scotty, +/- one day right? 21dn, 8 up, 21/34 dn
Should be today, btw
Is that some of that fancy fibonacci stuff ?
exactly so far 21dn 8up 18dn
when is your next CIT please Scotty?
Alex,
Feb 6th
Do my eyes decieve,market allowing a trend change
If we open anywhere near current levels its Minor 4
GANN turn 30/31 Jan and based on current I think it’s likely to be a low either today or in overnight futures this evening/tomorrow morning in time for ‘turnaround Tuesday’. One chap I follow suggests a possible A-B-C flat for minor 4 and I am inclined to agree. The A Wave of minor 4 would bottom today/tomorrow morning and we would have a Wave B up into the next GANN turn 8/9 Feb before the C-Wave down to Tony’s suggested levels of 1291 pivot lower end perhaps. Keep a look out for it at the very least! Note that the B Wave could go right back to recent highs and a touch higher.
thanks Alex
Dr. CLee,
Did your trailing stops keep you short from ES 1328?
oh so close.
roadmap for monday for anybody interested:
http://standardpoor.wordpress.com/
Previous 4′s to be tested in SPX DOW NASDAQ
http://www.wavegenius.com/2012/01/29/elliott-wave-forecast-for-1-30-12-previous-4s-to-be-tested/
How much better can a weekend update get…….good stuff Tony.
Analysis done differently……..yet the same.
http://stocktiger.net/newsletters/news300112.php
thanks Fiona
Hi Tony, hi everyone.
I’ve updated my weekly chart of $SPX. Since my Long-Term count is different than yours, I actually expect a big top later this year. But for the next few months, I am also bullish:
http://www.trendrecognition.com/images/stories/2012/indexes2012/sp500_mt_20120129.gif
Shorter-Term the market is overextended on the upside, and some pullback is around the corner:
http://www.trendrecognition.com/images/stories/2012/indexes2012/sp500_st_20120129.gif
Alexander
thanks Alexander
Alex,won’t believe 1265 until i see it,market just does not want thru 1308
So far the trend is still higher. A daily close below 1305 is needed (in my opinion) to signal that the rally from the mid-December low has found at least a temp. top. If that happens, 1265 will be likely and the correction/consolidation will likely take at least 3-5 weeks to unfold.
Oy Vay you guys
Thanks Tony for all you do.
I’ll be in ur neck of the woods visiting my familia February 17th-20th
So u might want to get out of town since I’m predicting either an ice storm or massive winter snow storm / massive floods once we arrive
Sounds like a Presidents Day holiday weekend
Swany
With all due respect, it was I who told everyone on this thread when things were UBER BEARISH to be aware of a valid 3-3-5 Primary wave 2 pattern heading into October lows. ONly here I am bringing up yet another potential count that nobody is seeing, just like nobody saw the Primary 2 either…
So with that said, my update earlier this week indeed was in keeping with the Primary 2 at 1074, with this part of Primary 3 yes… but I must again repeat that this is a potential count to watch and not ignore… that 4 was at 1074 and we are in primary 5 up…
We will see
I wish you the best of luck
NOBODY?
H D says:
October 5, 2011 at 2:48 pm
Either way some major wave completed at 1074 me thinks
H D says:
October 3, 2011 at 1:53 pm
Hey that’s as cheap a long as ur gonna get for SPX.
Hindsight is 100%. Have some conviction and come pound the table when it’s happening. I would suggest examining your count and consider if you are counting 5′s that W4 can not overlap W1. Or come back in a couple months and hindsight it. JMHO
David….Your graph of a Expanding Diagonal Triangle with wave 4 overlapping wave 1 could fail or truncate at any point before or after your wave 3 high. Even tomorrow. As it appears your wave 3 consists of 5 waves up, it is more likely that your 3 and 4 are major waves 1 and 2 of P1.
This came from a respected analyst it lacks the documentation though. There’s been much speculation about this, and that’s all it is because the Fed, ECB and banks are notoriously secretive about what they’re doing. But we know the Fed is lending money to the ECB, which can’t print more money without Germany’s approval (it is against the treaty rules), and the ECB is then lending the money to the European banks who are then buying the sovereign debt at the bond auctions. It’s the back-door method for the Fed and ECB to bail out the European banks and getting European bonds for collateral (which are about as good as the subprime slime that the Fed already has on its books and taking on more).
The ECB is using a legal and proper channel to expand its balance sheet, without the FED.They used LTRO in 2009, and are using it again.No need to ask the FED for assistance. Since that assistance would likely appear on the FED’s balance sheet.
I think you alluding to the swap. Thay are swapping currencies not lending. Risk remain with the “local” CBs (unless you think the ECB will go bust)
I believe it was a Fed announcement. I will check for the document. Here is an article on the topic for now. You can read the whole piece at The Big Picture: http://www.ritholtz.com/blog/2012/01/living-in-a-qe-world/
Good piece until he noted this: So how does this process get reversed? How do central banks pull back trillions of dollars of money printing without throwing markets into a tailspin? Frankly, no one knows, least of all central banks as they continue to make new money printing records. This is incorrect. The FED already has a plan to wind down its balance sheet.It’s just not time to implement it yet. While many complain about CB intervention in asset prices, have they even considered the alternative?The FED was created to help smoothe out the “expansion to depression” swings in the 19th century economy.Economies in the 1800′s didn’t swing from expansion to recession like they do now. They went into straight into depression mode.The FED was not too successful in the early 1930′s. Many thought excesses to should cleanse without intervention.But have been successful since then.Someone once said; “Don’t fight the FED.”Obviously, that someone knew we live in a managed economy.
One thing we all know. They can keep “it” to maturity.
Looked at the latest COT report (see link). To me it looks like the non-reportable need to be little bit less bullish and the commercials a bit more bullish to get the next wave up. Timing is “impossible” with COT though.
http://screencast.com/t/cpAbkr2xvGP
Great update Tony. And thanks for keeping us on the trend for so long!
A couple things I am still considering. The neutral triangle I counted should be part of a corrective wave http://flic.kr/p/bkmW1M
Of course there are other ways to count it but the concern I have is the measured move from that pattern http://flic.kr/p/bkmWU4
completed on the Dow and others. The SPX being weakest sets up some possibility we are in a pattern of 3′s. Your 1261 zone is crucial and will define the wave. The osc did peak on your wave 3 labeling so all we have to judge now is the corrective back.
Interesting they peaked twice the lows again similar to last Feb. as the ’11 fractal keeps working.
This is the potential I see. http://flic.kr/p/bknbAe
Hi H D,
While I am not familiar with that type of analysis, it does look interesting since you have arrived at the same levels of importance.
The important factor going forward, as you are well aware, all corrections and significant pullbacks must remain corrective.
Any impulsive declines would create some reason for concern.
This market reminds me of 2005. While it continues to work its way higher, most are waiting for it to breakdown.
cheers!
Tony, can you explain to a newbie the difference between a corrective decline (advance) and an impulsive decline (advance)? What should I be looking at (for)? Thank you.
Welcome Timing, A corrective advance/decline unfolds in threes, and three significant waves.An impulsive adv/dec unfolds in fives, and five significant waves.
Interesting stock market article: “The Fed, the S&P 500, & Why Gold Is Shining Bright”
http://bit.ly/AajSWk
thanks Mav
Possible count I published this morning on the Free page at TMTF markeeting site
http://www.themarkettrendforecast.com/forecasts/jan-29th-the-long-term-bull-market-e-wave-count/
Again, if I see 1426 eclipsed to upside on SP 500 then we can eliminate this count as being in primary 5 from the March 2009 lows.
Peace
D
David…Your opinion is taking others off the most likely path. Do not blame other opinions for your loses as you have been fighting the highest percentage path for awhile and others may be justified in blaming you for misleading them. The most likely path where you have 3 and 4 labeled in your graph is 1 and 2 (of 3). We can find SEVERAL scenarios for Elliot Waves; but we must stay with the most likely until it isn’t. IF you are looking for detours in the road you should mention that it has a small percentage chance of occurring.
Marios count is correct I think. Wave 4 ended its lows at 1074 and we are in 5.
Otherwise primary 3 would be way to short both in time and price action.
3 months in and tony would have 3 of 3 already over
So instead look at that 335 pattern as 4…and we are in 3 of 5.
Cheers
D
Tony,Market action since Oct’11 genuinely strong enough to declare it bull market,but it always safe to be alarted about the worst case.Rightly said Tony,the European crisis may have postponed to next year when we will get the primary II correction of this bull market.
After studying other global market’s charts I’m also now leaving the bear market count behind and holding my bull market count which I have posted here on 1st january.Anyone wants to see it again can go to my blog.
Chinese market may have bottomed for its Major b wave and entered into Major c wave upmove of Primary B of bear market which started in 2007.
welcome to the bull camp Joy
Bernanki is feeding funds to ECB. That should kick the can out a ways. I think he is doing this to avoid defaults where US banks have exposure.
Abdullah, Do you have any documentation supporting this claim?
Tony, if you’ve addressed this previously, my apologies for not having paid a bit closer attention. I was curious, once Major wave 3 completes, what would be a reasonable expectation for Major 4′s decline? Thanks so much.
Hi Moose, Major 3?We have not gone through Minor 3-4 yet.That should give us a good idea going forward.
Tony
You have left the door open for the possibility that market extends and we are actually in major 3. You mentioned it the other night, no?
Yes Jason,But just going with what we see right now
I know, just a little premature, huh?
Thanks for your reply. Enjoy the rest of your weekend and thanks for all your work here. It’s much appreciated.
Thanks Tony,
As you know, I am bullish short term. The short term count and the inverse H&S suggest more upside.
However, I see several alt and possible scenarios long term. Check the charts below. I like the one that suggests the market is following the same count than the largest company on the world (aapl). If this is correct 2009 lows may actually had been PIV and not SC2. So the markets should be completing SC1 and Oct lows may had been major 4 and not PII.
This is a very bullish count, however it may be forecasting SC2 is just abt to beging. I like the fact that it works for NDX as well as for DJI.
On the other hand, the most bearish count is posted on the NYA chart. I use moving averages and they are suggesting the markets haven’t even complete cycle A.
GL and have a great weekend.
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID4067322
Hi Mario, Interesting that you should bring APPL into the discussion.While it is the highest market cap in the US, and was 20%, now 10%, of the NDX.It is not a DOW stock, which is the bellwether index in the US.When AAPL enters the DOW, as it must, its heyday will be nearing an end and the stock market will be close to the end of the bull market.MSFT and INTC were added to the DOW in Nov 1999.
Great insight!
As usual classic stuff tony, comprehensive coverage, its usually said that bull markets start on scepticism and they climb a wall of worry and its actually playing out that way,the only issue with the bullish count, i have felt is that the SPX 1075 Primary II low happenned too quick, is an ABC count still on or its ruled out now wherein we are doing B now and A finished at 1075
Vishal, Many of the world’s stock indices entered bear markets.The US did not. It held support and kept its long term trend intact.If the world’s indices remain in bear markets then your ABC scenario should work out.Technically, not seeing that possibility now. But do have it on the DOW charts.
Tony i have preferred the bullish count as have been quite bullish on US as we discussed before, but just want to keep my eye open on the OTHER possibilities as well,have always thought that big issues like euro zone sould end in full capitulation like we saw in US housing crisis of 2008, just feel that we have gotten away too easy
So far, the EU’s promise to resolve the debt crisis and the ECB’s LTRO 2 have passified the markets.Smart $$$ thinks the big crisis will likely be postponed, and not likely resolved, into next year.
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Great work Tony. I concur. Have a nice weekend.
thanks Steve