Another quiet week with a gradually rising market. In fact, the market has become so quiet that the volatility index VIX made a 5 year low on friday. After a small pullback on monday the market made upside progress nearly every day, and closed out the week a point below its new uptrend high. For the week the SPX/DOW were +0.70%, and the NDX/NAZ were +1.95%. Asian markets gained 0.5%, European markets gained 2.4%, plus the DJ World index was +0.8%. This market quietly continues to works it way toward the bull market high of SPX 1422. On the economic front positive reports outnumbered negative reports 11 to 5. On the uptick: retail sales, the PPI, industrial production, capacity utilization, the NAHB housing index, building permits, the Philly FED, consumer sentiment, leading indicators, the monetary base and the WLEI. On the downtick: business inventories, the NY FED, housing starts, the M1-multiplier, and weekly jobless claims were higher. Next week we get the FOMC minutes on tuesday, then reports from housing and durable goods orders.
LONG TERM: bull market
With the SPX/DOW now only a few points away from new bull market highs. We would expect many to stop fighting the tape and join in on the rally. The economy appears to be improving somewhat, as the WLEI continues to rise toward neutral. Market leader Apple just made a new all time high on friday. Market breadth (NYAD) is at all time highs, and all nine SPX sectors remain in uptrends. In fact, 19 of the 20 world indices we track are in medium term uptrends. Yet, the public is still under invested in equities.
The weekly chart indicators continue to display all the characteristics of a bull market. A MACD that is generally above neutral, plus a RSI that gets considerably overbought during uptrends and only slightly oversold during downtrends. The OEW count continues to track a five Primary wave Cycle  bull market. Primary wave I ended at SPX 1371 in May 2011. It unfolded in five Major waves with Major wave 1 subdividing into five Intermediate waves. Primary wave II ended in October 2011 at SPX 1075. Primary wave III, underway since that low, is also dividing into five Major waves with a subdividing Major wave 1 as well. The market is currently in Major wave 3, from the SPX 1267 Major 2 low. We continue to anticipate a rally into year end with the SPX hitting the OEW 1499 pivot.
MEDIUM TERM: new uptrend high
Medium term support is at the 1386 and 1372 pivots, with resistance at the 1440 and 1499 pivots. While this Major wave 3 uptrend, from early June, started out quite choppy it certainly appears to be impulsing now. The current rally, from SPX 1329, has now risen 90 points without the uncharacteristically 50+ point pullback of the first three rallies. In fact, this rally is now within 6 points of equalling the first advance: SPX 1267-1363.
The short term count we have been tracking appears to be working quite well. The first rally to SPX 1363 was counted as Intermediate wave i, and the pullback to 1309 Int. wave ii. Then the next rally to SPX 1375 was counted as Minor wave 1 of Int. iii, with an irregular flat (1325-1380-1329) Minor wave 2. Minor wave 3 has been underway from that low. Our fibonacci/OEW pivot relationships suggest a Minor wave 3 high around the 1440 pivot. Then after a Minor 4 pullback an Int. wave iii high around SPX 1470. Then after another pullback, Int. wave iv, a Major wave 3 high around the OEW 1499 pivot. Thus far, the market has been cooperating.
Short term support is at SPX 1413/15 and then 1402/03, with resistance at SPX 1422 then the 1440 pivot. Short term momentum is declining from thursday’s extremely overbought condition. The short term OEW charts remain positive from under SPX 1370, with the swing point now around 1406.
Early in the week we suggested Minor wave 3, from SPX 1329, was subdividing into five Minute waves: Minute i SPX 1392, Minute ii SPX 1355, Minute iii SPX 1407, Minute iv SPX 1396 and Minute v underway. We posted this count on the SPX hourly chart as it fit with the 1440 Minor wave 3 high projection. Thus far, we see no reason to change the count or the expectation.
The previous week we offered a potentially uptrend topping count, and posted it on the DOW hourly chart. We gave this count only a 30% probability, which has been lowered to 20% since then. On the DOW chart it still looks possible. But on the SPX chart the market appears to be riding the upper trendline, and has moved beyond it. When the market makes new bull market highs the probability will likely drop to zero. Best to your trading!
The Asian markets gained 0.5% on the week, with only China in a downtrend.
The European markets gained 2.4% on the week, all uptrends here.
The Commodity equity group gained 0.2% on the week, all uptrends here as well.
The uptrending DJ World index gained 0.8% on the week.
Bonds are displaying some of the characteristics of a multi-decade supercycle top. We have a potentially completed OEW pattern into the recent 1.39% 10yr yield low. And now, a nice uptrending yield spike off that low. For the week Bonds lost 1.0%.
Crude gained 2.6% as its uptrend continues. It has already reached the $96 level we were expecting. And, today’s announcement of a potential release of some strategic oil reserves did not stop the rally. It usually does.
Gold lost 0.3% on the week as it continues its choppy sideways activity. Even Platinum’s 5% two day rally did not move Gold all that much. While Silver has been in an uptrend since June, Gold has not made that much upside progress.
The USD continues to look like it made a Primary B high at 84.10 last month. Yet after a one month decline it has only falled 2 points. The USD gained 0.1% on the week.
A quiet economic week ahead with the FOMC minutes on tuesday. On wednesday we’ll get Existing homes sales. On thursday, weekly Jobless claims, FHFA housing prices, and New home sales. Then on friday Durable goods orders. Nothing on the FED’s schedule as of yet. Best to your weekend and week!
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