weekend update

REVIEW:
A week ago the market surged to 1396 on positive earnings reports amidst negative economic news. This week the market traded between 1370 and 1398, as earnings turned mixed amidst positive economic news. This narrowing range with slightly higher highs appears aiming toward the FOMC meeting tuesday/wednesday, and the Q1 GDP report wednesday morning. For the week the SPX/DOW were +0.45%, and the NDX/NAZ were +0.90%. Bonds lost 0.9%, Crude hit new highs +2.0%, Gold dropped 2.8%, and the Euro lost 1.2%.
LONG TERM: bear market
Bear market rallies (uptrends), can at times, look like new bull markets. Especially when the rallies look like a ‘kickoff’ to something new, rather than just a short covering rally within an overall long term downtrend. This particular uptrend is a bit different than the two previous bear market uptrends: November and February. In that, after the first surge off the lows, the second rally has made higher highs, while the other two failed to do so. Yet, if one examines the last bear market, this kind of uptrend is still quite normal for a bear market. During the 2000-2002 bear market, nearly every SPX uptrend failed at the 50% retracement level and appeared corrective in nature. This uptrend also appears corrective in nature, and the 50% retracement level is at SPX 1417. Therefore, nothing has changed in our long term count, nor our expectations. Reference the SPX projection chart in the photo section, and the chart link below.
MEDIUM TERM: uptrending into 1410 OEW pivot
After the market bottomed in March at SPX 1257, on the BSC bond bailout and the FED’s 75 bps rate cut. The market has zigzag’d its way higher in what appears to be an abc-x-abc pattern. This week the SPX slightly exceeded the February high at 1396. The next level of resistance on the charts is at the November low of 1406. This level also happens to coincide with the OEW pivot at 1410. To review, the potential bear market retracement levels are as follows: 1379 (38.2%), 1417 (50%), and 1454 (61.8%). The first one appeared possible when the market pulled back on the GE earnings news from 1387 in early April. However, the market held at the 1327 OEW pivot, and then rallied past that level as it now approaches what should be significant resistance at the 50% retracement level (1417). Supporting this topping scenario are the negative RSI hourly and daily divergences. And, daily/weekly MACD readings reaching their highest levels since the bear market began.
SHORT TERM:
Support for the SPX  remains at 1383 and then 1364, with resistance at 1410 and then 1438. Short term momentum is displaying negative RSI divergences, while the MACD is at its highest level since the bull market top in October 2007. The near term indicators are displaying sharp negative divergences at these highs as well. With lots of economic reports this week: ADP monthly employment and Q1 GDP on wednesday, core PCE and ISM on thursday, non farm payrolls and factory orders on friday. Plus the FED’s FOMC report on wednesday, the stage is set for quite a volatile week as earnings reports wind down. We’re not expecting the market to breach the OEW pivot at 1410.
FOREIGN MARKETS:
The Asian markets had a good week, led by the 15% gain in China’s SSEC. Nearly every one of these markets are in uptrends.
The European markets were similar to the US with only marginal gains in the FTSE and DAX.
COMMODITIES:
Bonds continue their downtrend, as rates rise. The 1YR rate is now at its highest level (1.97%) since February, likely indicating FED rates to remain unchanged.
Crude made all time new highs again this week. It flirted with $120/bbl as the uptrend continues.
Gold was off for the week during its downtrend, but the $860 level is now offering the opportunity for the completion of a wave 4 flat.
The Euro broke hard from that diagonal triangle topping formation, with negative divergences. The Yen confirmed a downtrend.

About tony caldaro

Investor
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32 Responses to weekend update

  1. tony says:

    Hi HD … during the last bear market the maximum retracement levels were 50% in the SPX.
    The TRANsports were all over the map, as was the DOW during that time.
     
    Hi Frank … been seeing large selling on many of the rallies for a few days.

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  2. tony says:

    Hi Piazzi … the DBA, DBB, DBC, GCC all track commodity indices.
    Since they all IPO\’d after the bull market began, the actual indices need to be tracked, not the ETFs.
    DBA is an AG weighted index, similar to the old CRB, which is now CCI.
     
    Hi Serg … thanks for that inSIGHTful post. 

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