The stock market ended another good week with record highs in many of the indices, and bull market highs in the others. for the week the SPX gained 0.7%, the DOW/NAZ gained 1.2% and the NDX gained 2.4%. Bonds were flat, Crude gained over 2%, Gold lost 1.7% and the Euro posted an all time high gaining 0.25%. The foreign markets did not fare as well, with only Germany’s DAX and China’s SSEC posting new highs.
LONG TERM: bullish
The new millennium bull market continues, fueled by global economic expansion and liquidity. Interest rates have remained relatively low, inflation is moderate, and economic growth ranges from steady to outstanding as one looks across the globe. This is truly a worldwide phenomenon. Nearly everywhere one looks there is economic growth, a bull market in equities, and a stable capital market. Quite a contrast from just six decades ago, when the entire world was at war in a primitive attempt at gaining wealth and economic power. Now these goals are accomplished, and more, without ever firing one shot. Makes one wonder why our Executive branch, and other leaders here and there worldwide, still feel that a primitive exercise is necessary.
Technically, the bull market can be defined in Elliott Wave terms, more specifically, Objective EW terms. Cyclical bull markets, such as this, unfold in five Primary waves. Primary waves 1 through 4 have already completed. This bull market starting October 2002, and is in its fifth year. When Primary wave 4 completed in August 2004, an extending – subdividing fifth Primary wave began. This is very similar to the last Cyclical bull market of this nature, during 1932 – 1937. Then, as now, the fifth Primary wave subdivided as well. Primary waves subdivide into five Major waves, and each Major wave subdivides into five Intermediate waves. Waves within waves ad infinitum. The SPX and DOW display that Major waves 1 and 2 completed in April 2005, and we are currently in Major wave 3. Intermediate waves 1 through 4, of Major wave 3, completed at the recent lows in March 2007, and we are currently in Intermediate wave 5. Therefore, when this wave/uptrend completes, it will not only end Intermediate wave 5, but also Major wave 3. A significant event! The significance resides in the fact, that a major correction should follow the completion of this uptrend. Not only will the correction be Major wave 4 of the bull market, but it can retrace a good percentage of the entire advance from April 2005 (SPX 1136) until now (SPX 1498). For now, our target for this uptrend remains SPX 1530, and the market is uptrending. The ensuing correction will have to wait. Refer to the SPX charts below.
MEDIUM TERM: bullish
The current uptrend, Intermediate wave 5, started at the mid-March lows of SPX 1364. Intermediate wave 5 has been subdividing into five Minor waves. Minor wave one and two completed near the end of March at SPX 1409, and Minor wave 3 continues to unfold. This scenario was confirmed this week by the strength in the MMI (market momentum indicator), as it hit a new high for the uptrend. During a fifth wave, the MMI usually fails to confirm the new high, creating a negative divergence. Which is a clear sign of an impending top. Thus far this uptrend has traversed 134 points, or 9.8%. Quite a nice advance after just several weeks. The major indices: SPX/DOW/NDX/NAZ illustrate similar short term wave structures, but the NDX/NAZ have a different longer term structure unfolding. It will be interesting to see how this plays out in the weeks and months ahead. The uptrend remains on course, and SPX 1530 remains the long term EW pivot point target.
On wednesday it appeared that Minor wave 3 could have been concluding, see daily/60min charts. A small pullback followed, but it was not enough to confirm a Minor wave 4. Then, later in the day on thursday, the SPX eked out one more point to the short term rally. That one point alone, was sufficient to indicate that an extension of Minor wave 3 was underway. Interesting how just one point can make such a difference at times. It reminds us how markets move one point at a time. As a result of the SPX touching 1498 on thursday, the subdivisions for Minor wave 3 were labeled as illustrated in the 60 min chart. Today’s activity indicated that the small Nano wave 3 had completed, and Nano wave 4 was underway. Short term momentum did move to neutral, but never quite reached oversold. This indicates possibly a little more pullback on monday before making new highs.
In Asia the uptrends continue as well. China’s SSEC is obviously the strongest market, followed by Australia’s ASX. India’s BSE did come alive somewhat this week. But it remains a little concerning as does Japan’s NIKK.
In Europe the two major indices we follow continue to work their way to all time new highs. Both remain strong!
GOLD: Experienced a 4th wave pullback this week, after it looked like it was ready to accelerate upward last week. Commodities!
BONDS: Had a back-and-fill sort of week, not making much progress. But should start rising again shortly.
CRUDE: Remains in a strong counter- trend B wave rally, which is actually stronger than its bull market rallies were. Quite typical!
EURO: Made all time new highs this week verses the Dollar. Should be closing in on a medium term top at our 137 target.
Best to your weekend and week!