weekend update

REVIEW

The US markets spent the entire week in a narrow range of SPX 1860 to 1889, which occurred between 10am Wednesday and noon Thursday. The low, in fact, was hit just before FED chair Yellen addressed Congress, and the high occurred right after she addressed the Senate. For the week the SPX/DOW were mixed, the NDX/NAZ were -1.1%, and the DJ World was -0.3%. Economic reports for the week were all positive: ISM services, consumer credit, wholesale inventories, the WLEI, the M1-multiplier, plus the trade deficit and weekly jobless claims improved. Next week we get Retail sales, the CPI/PPI, and the NY/Philly FED.

LONG TERM: bull market

Project, monitor and adjust has been our mantra with OEW. Using the quantitative feature of OEW we can identify the significant waves, during bull and bear markets, quite easily. The more difficult part is, in some bull/bear markets, projecting the proper wave sequence as these waves unfold. This is where the monitor and adjust, when necessary, portion comes into play. Thus far we see no change in our long term count.

We continue to expect this bull market to be Cycle wave [1], with five Primary waves. Primary waves I and II completed in 2011. Notice how the topping pattern for Primary I took about five months: February to July. Then Primary II corrected with a 22% market decline. Currently, having completed Major waves 1-2-3-4, we are again in the topping process but of Primary wave III. This too should take several months to unfold. Our wave counts, for all four major indices, suggests it will also take two more uptrends. At the moment, only the DOW has confirmed the first of these two uptrends.

MEDIUM TERM: uptrend probable

The current potential SPX uptrend from the 1814 early April low rose to 1885, then pulled back to 1851. Since then it has become somewhat choppy as it has traded in a 1860 to 1891 range for about two weeks. This market is having a difficult time breaking SPX 1900. Once it clears that level we should see quite an impulsive move higher.

The key for us not becoming bearish too early is obviously the NDX/NAZ count, and the broader NYSE count. Both are suggesting two more uptrends before a Primary wave III high. While we have been waiting for the NDX/NAZ to start impulsing. The NYSE, like the DOW, has already confirmed a new uptrend. Naturally, an impulsing NDX/NAZ would certainly create breakouts for both the NYSE, DOW, and the SPX.

In the meantime we continue to track the SPX while it works its way higher from the April 1814 low. This far we have counted a Minor wave 1 at SPX 1885, and Minor 2 at 1851. Minor wave 3 should be underway, but it is certainly taking its time getting going. Medium term support is at the 1869 and 1841 pivots, with resistance at the 1901 and 1929 pivots.

SHORT TERM

Short term support is at the 1869 pivot and SPX 1851, with resistance at SPX 1889/1891 and the 1901 pivot. Short term momentum ended the week above neutral. The short term OEW charts are slightly positive, with the reversal level now SPX 1877.

As noted above we have counted the first two waves of this potential uptrend as Minor waves 1 and 2, at SPX 1885 and 1851. The next rally we counted as Minute wave i at SPX 1891, and possibly a Minute ii low at SPX 1860. Since an expected Minute iii has yet to kick in, it is possible Minute ii is still ongoing. We have been stuck in a day traders market for nearly three weeks. If SPX 1860 was the low, once the market clears 1889/1891 Minute iii should make its presence known. Best to your trading!

FOREIGN MARKETS

Asian markets were mostly mixed on the week for a net loss of 0.2%.

European markets were also mixed for a net loss of 0.3%.

The Commodity equity group were mostly higher for a net gain of 2.0%.

The DJ World index continues to uptrend with a net loss of 0.3% on the week.

COMMODITIES

Bonds remain in an uptrend and gained 0.3% on the week.

Crude is still downtrending but gained 0.2% on the week.

Gold is having a difficult time getting an uptrend going and lost 0.9% this week.

The USD had a good two day rally off this week’s DXY 78.93 low and gained 0.5% on the week.

NEXT WEEK

Monday: Budget deficit at 2pm. Tuesday: Retail sales, Export/Import prices and Business inventories. Wednesday: the PPI. Thursday: weekly Jobless claims, the CPI, NY/Philly FED, Industrial production (est. -0.1%), and the NAHB housing index. Friday: Housing starts, Building permits, Consumer confidence, and Options expiration. A busy week. On Thursday we also have a speech from FED chair Yellen. Best to your weekend and week!

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