holiday update

SHORT TERM: US cash markets closed.
Overnight the Asian markets were all lower. Europe markets opened higher and closed +0.35%. US index futures closed lower: (NDX) NQ -5.75, (SPX) -3.5 and (DOW) YM -32. Bonds lost 4 ticks, Crude slipped 35 cents, Gold rallied $6.00 and the USD was higher. Support for the SPX remains at 1061 and then 1041, with resistance at 1090 and then 1107. Short term momentum closed on friday above neutral and heading higher. Tomorrow, the Home builders index will be reported at 1:00.
In review of the last four major bear markets we have lots of variables to consider, like the 4-year cycle and price/time relationships during 1929-1932, 1937-1942, 1973-1974 and 2007-2010. The OEW long term trends and the actual OEW waves during these bear markets. Let’s see if we can piece together what’s next.
1929  -49% in 2 months, lost 24.5%/m, then 5 month uptrend retracing 53%.
1937  -50% in 12 months, lost 4%/m, then 19 month rally retracing 63%.
1973  -47% in 23 months, lost 2%/m, then 18 month rally retracing nearly 100%.
2007  -54% in 17 months, lost 3%/m, then 10 month rally retracing 54% so far.
Clearly 1929 is in a league of its own. Since the crash occurred at a GSC top the market collapsed. We had a similar crash in 1987, -41% in 2 months, but that was in the middle of Primary wave III. The other three bear markets look similar: -2 to -4%/month, 12-23 month declines, 10-19 month retracements. Also for all three a long term uptrend confirmation ended their rallies off the lows in the year it occurred. In example: 1937, 1938 uptrend confirmed then headed lower; 1973, 1976 uptrend confirmed then headed lower; 2007, 2010 uptrend confirmed so far … Now examining them separately.
Cycle wave top, twelve month decline into 1938 (4-year low). Then five wave rally for 8 months, sharp correction, then next rally was corrective. End result an ABC rally into 1938/39, accompanied by a long term uptrend, then retested the 1938 lows in 1942 (4-year low). The five waves up from the 1938 (4-year low) suggests it should have been a bull market. Something went drastically wrong. Probably, as we discussed before, Germany invading Europe. Market failed in 1939 and then had to wait until the next four year low in 1942.
Cycle wave top, twenty three month decline in 1974 (4-year low). Then five wave rally for 19 months, with a decent correction after just three waves which overlapped. Looked like three waves up at first. End result Cycle wave bear ended in 1974 (4-year low), long term uptrend and a new Cycle wave bull market. Primary wave I into 1976, then bear market began retracing over 60% of gains by 1978 (4-year low). Stayed range bound after than into the 1982 (4-year low) completing Primary wave II. The five waves up was a bull market but it took quite a while to get going again.
Supercycle top, seventeen month decline into 2009. Then a three wave rally for 10 months with a minor correction in between. Last 4-year low was in 2006 just before the top. Long term uptrend confirmed in 2010, a 4-year cycle low year. Since long term uptrends off of these types of bear markets have indicated a top for that year. And, at no time has this market created a significant low in line with the 4-year cycle. It would appear that the OEW three waves up is a clear ABC pattern and the market should make its bear market low this year.
The 1937 bear market declined into a 4-year low 1938 bottom, and should have entered a bull market. It did five waves up but failed on its attempt to continue higher creating an ABC top. Then it had to wait until 1942 to bottom again.
The 1973 bear market declined into a 4-year low 1974 bottom, and should have started a bull market and did. It did five waves up into 1976.
The 2007 bear market declined into a mid-year 2009 low. No reason to think it should enter a bull market since it was not a 4-year low. Then it rallied in an ABC into a 4-year cycle low year. The 1929 bear market, btw, declined into a mid-year 1929 low. Then rallied into a 4-year cycle low year (1930), and then totally collapsed making new bear market lows before the end of 1930.
Conclusion: Looks like our current SPX count is in line with this analysis. We should get a SC bear market low late in 2010. Since the SPX only has to drop 500 points in a whole year. It could be assisted on the downside by rising crude oil and commodity prices like what happened in late 2007-mid 2008. During that period the SPX dropped 576 points over nine months. Then the FED stepped in with that $600 bln currency swap to rally the USD in July 2008, and the commodity market collapsed. Needless to say, collapsing commodities collapsed equities as well. After a bounce the SPX dropped another 650 points before it bottomed in Mar 09 with a USD top. Seriously doubt they will play that mass liquidation game again just to rally the USD. The current rally, from SPX 1045, looks like its forming a diagonal triangle. When completed the downtrend should resume. Best to your trading!
MEDIUM TERM: downtrend
LONG TERM: bear market

About tony caldaro

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100 Responses to holiday update

  1. tony says:

    Hi G,The recent Cycle waves have been consistent with their four year cycle lows:Cycle wave [2] 1938 initial low, 1942 final low.Cycle wave [4] 1974 final low, 1978 Primary 2 initial low, 1982 final low. Primary wave 4 2002 final low.


  2. tony says:

    Hi Alex,Have seen some odd time relationships between waves in recent years.Can not give a definitive answer to that question.


  3. tony says:

    Hi Jeff,The four-year cycle has been quite regular during the entire Supercycle.It should bottom this year.


  4. tony says:

    Hi Randy,Thank you!You can contribute to our cause by making a donation to your favorite charity.


  5. The OO says:

    Lee X my friend -The One agrees with you – 50% retrace for all 3 major indexes.The One!


  6. Lee says:

    "Eckert just updated his counts with this as the new 2 with an alternate of this being X. Both look right now with this 50% retrace."Thats why I stick with fibs/pivots Aureliano.. EWT has more counts than Ginger has fleas


  7. G says:

    Tony, question. You have 2006 being the 4 year cycle bottom. why don\’t you think March 2009 could have been a 4 years cycle bottom and we should look for one in 2012-2013. Thanks for any input


  8. Aureliano says:

    Eckert just updated his counts with this as the new 2 with an alternate of this being X. Both look right now with this 50% retrace.


  9. The OO says:

    16:00Will short 2 more doses at the open, either gap up or down. Market price at the open.Stop 1105.The One!


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