weekend update

REVIEW

The market opened the week with a rally to new highs by noon Monday. After that it tested and retested the 1841 pivot four times, day traders delight, with the last test Thursday morning. Then the market hit an even higher high on Friday, before again selling off again. For the week the SPX/DOW were +1.30%, the NDX/NAZ were +1.00%, and the DJ World index was +1.00%. Economic reports for the week were again slightly biased negatively, for the fourth week in a row. On the uptick: Case-Shiller, the FHFA index, new/pending home sales, the Chicago PMI, and consumer sentiment. On the downtick: consumer confidence, durable goods orders, Q4 GDP, median new home prices, the WLEI (4th week in a row), the M-1 multiplier and weekly jobless claims were higher. Next week we get reports on the ISM, the FED’s beige book and monthly Payrolls.

LONG TERM: bull market

Last week we discussed the wave relationships the NDX/NAZ and the SPX/DOW had over the past, more or less, 30 years. The patterns that have unfolded during the past four bull markets and, now the fifth – this one. To recap, the NDX/NAZ have two more uptrends to complete before they can top in a Primary wave III. This suggests Major wave 5 of Primary III in the SPX/DOW will subdivide. Just like Major waves 1 and 3 of Primary III. Nothing out of the ordinary. Just something unexpected considering the characteristics of this bull market. Which has been weak and short fifth waves.

We continue to count this bull market as Cycle wave [1] of a new multi-decade Super cycle bull market. Cycle wave bull markets unfold in five Primary waves. Primary waves I and II completed in 2011, and Primary wave III has been underway since then. During Primary I’s five Major waves, only Major wave 1 subdivided. During this Primary III, it appears Major waves 1, 3 and 5 are all subdividing. Not unusual for a third wave. What is unusual, is that this market is already about 20% above its previous 2007 all time high. And, we are only in Cycle wave [1] of a five Cycle Super Cycle bull market.

MEDIUM TERM: uptrend

With the SPX/NDX/NAZ in confirmed uptrends, and the DOW only points away from confirming, we can now count the January SPX 1851 high as Intermediate wave one, and the February SPX 1738 low as Intermediate wave two. Intermediate wave three has been underway since that low. There is about a 20% probability that the SPX 1738 low was a Minor a, and this uptrend is Minor b, of an irregular a-b-c Intermediate wave two. We give this a possibility since the DOW has been lagging quite a bit. The SPX/NDX/NAZ have already hit new bull market highs, and the DOW has not.

We reviewed the long term count, and wave relationships, of Primary III to get an idea of where Int. three should end. If the probabilities hold up, Intermediate wave three underway, and the market characteristics hold as well. Then we should expect an Intermediate wave three top in May/June around the overlapping OEW 1962 and 1974 pivots, or the 2019 pivot. Naturally if this uptrend is only a B wave, then the timeframe will move further out. But the pivot ranges should remain about the same. Medium term support is at the 1841 and 1828 pivots, with resistance at the 1869 and 1901 pivots. We dropped the 1884 pivot since it no longer applies to this wave structure.

SHORT TERM

Short term support is at SPX 1851 and the 1841 pivot, with resistance at SPX 1859 and the 1869 pivot. Short term momentum ended the week around neutral after getting extremely overbought on Friday. The short term OEW charts remain positive with the reversal level now SPX 1852.

The current uptrend can again be counted in two ways. Thanks to the continued volatility over the past week. We can count a clear five waves up to SPX 1848, a pullback to 1825, as Minor waves 1 and 2. Then a series of subdividing smaller waves for the early stages of the next five waves up of Minor wave 3. This count remains on the SPX charts and has a 50% probability.

We can also count again, five waves up to SPX 1848 to complete Minor 1. But now the pullback to SPX 1825 as only Minute a, of an irregular a-b-c Minor wave 2. This count suggests Minute b may have topped at SPX 1868, or slightly higher, before Minute c drops to around SPX 1825 to complete an irregular flat. This count is in green on the DOW charts and has a 30% probability. The count in red is the 20% probability count noted in the medium term section.

FOREIGN MARKETS

The Asian markets were quite mixed on the week ending only slightly positive.

The European markets were mostly higher gaining 0.8%.

The Commodity equity group were also mixed and lost 1.3%.

The DJ World index is uptrending and gained 1.0%.

COMMODITIES

Bonds continue to uptrend and gained 0.5% for the week.

Crude continues its uptrend gaining 0.3% for the week.

Gold has run into a negative divergence in its uptrend and lost 0.3% on the week.

The USD continues to downtrend losing 0.6%. But is getting close to a long term low.

NEXT WEEK

Busy week ahead economically. Monday: Personal income/spending and the PCE at 8:30, ISM manufacturing and Construction spending at 10am, then monthly Auto sales during the day. Wednesday: the ADP index, ISM services and the FED’s beige book. Thursday: weekly Jobless claims and Factory orders. Friday: the monthly Payrolls report, the Trade deficit, and Consumer credit. Tuesday: FED governor Powell testifies before the Senate. Let’s hope the upcoming week will be a bit less volatile. Best to your weekend and week!

CHARTS: http://stockcharts.com/public/1269446/tenpp