Stocks rallied nicely early in the week. Then consolidated thursday and friday. The SPX/DOW made new highs for the bull market, and the NDX/NAZ made new highs for the uptrend. Overall, the SPX/DOW was up 1.5%, and the NDX/NAZ 2%.
The bull market continues, as the economy slows down to a normalized, sustainable, growth level of 3%. OEW analysis continues to display an ongoing extension of Primary wave V. A bull market typically contains five Primary waves. Our bull market started in October 2002. Four Primary waves have been completed. Primary waves I – II ended in March 2003, and Primary waves III – IV completed in Auguest 2004. Since then, Primary wave V has subdivided into five Major waves. Major waves 1 – 2 completed in April 2005, and Major wave 3 is currently still underway. In fact, Major wave 3 is also subdividing into five Intermediate waves. Intermediate waves i – ii recently completed in July 2006, and Intermediate iii is currently underway. Thus from an OEW viewpoint, the bull market is currently in Intermediate wave iii, of Major wave 3, of Primary wave V. Until all these subdividing waves complete, the bull market will continue to rise higher.
I posted a chart at the end of July displaying the potential for the SPX over the next year or so. Based upon my proprietary Long Term Elliott Wave pivot point analysis, and the OEW wave structure. I was able to project the wave structure to complete the bull market, and the levels the SPX should achieve. I’ve posted the SPX.2000 chart again below. It is also posted in the photo section.
All major indices remain in uptrends as the market continues to rise toward the SPX 1383 target. Near the end of July we were able to pinpoint the end of the most severe correction the market had encountered since 2005. A major positive SPX/NDX divergence occurred, with positive RSI/MACD divergences right at the lows. Then, within a few days the SPX and DOW reversed thier downtrends and started moving higher. The NDX/NAZ followed shortly thereafter, and the uptrend began. Thus far, there appears to be two completed waves up from the lows and the third wave is still underway. Expecting the third wave to complete shortly, then a small fourth wave correction, followed by the fifth wave up into the targeted area. The Market Momentum Indicator (MMI), appears to have peaked two weeks ago. This often occurs during the third wave thrust. It then pulled back last week, and has now started rising again. a negative MMI divergence is expected when the market makes its highs for this uptrend. All four major indices: SPX/DOW/NDX/NAZ continue to unfold with the same patterns. The SOX index continues to rise, but some of the semiconductors are beginning to slow down. The TRANsports has been uptrending, but it has been quite choppy, as has been the R2K index.
I am noticing some short term negative RSI divergences on the 15min and 60 min charts. It is possible that, wave 3 of wave iii as labeled, could have completed and a small wave 4 pullback is possible over the next couple of days. See 60min chart below. If the SPX holds short term support at 1334 this rally can continue to extend. We’ll see how this unfolds. Either way, the uptrend should continue higher until wave iii is achieved, and then a wave iv pullback, before heading higher again to complete the uptrend.
Asia: All indices we follow continue to uptrend, as India’s BSE approaches its potential bull market high.
Europe: After some hesitancy by the FTSE in recent weeks, due to the commodity pullback, both indices are now trending higher.
Bonds: Their medium term uptrends appears complete, as both the 10Yr and 30YR bonds reached their targets, and their yields hit support. The 2YR yield, which is the one I have been monitoring during the trend, hit its previous 4th wave support perfectly and is now rising. Waiting for a trend reversal confirmation.
Dollar: Continues to trend higher, but it still looks corrective.
Gold: The downtrend continues, but will be scrutinizing this market over the next fews days.
Crude: Remains in a downtrend, but there are positive RSI divergences at the recent lows, and could be reversing. Will be examining this market closely as well.
Uptrend in stocks continues to look good. Bonds should have ending their uptrends. Crude may be reversing as well.
I would like to welcome four more market enthusiasts to our private International OEW group. Ashley and Max from Australia, Marc from Canada, and Achal from the USA. This brings our small but selective group up to 20. Twelve investors have been fully trained, and are already putting the OEW technique to good use. Making money in this market! We all continue to exchange ideas, and are gathered at a private forum on the web. Email me if you are interested in joining us firstname.lastname@example.org
BEST TO YOUR WEEK!