Another wild FOMC week. The market started the week at SPX 1961. After a pullback to SPX 1948 on Monday, the market rallied to 2004 just before the FED announcement. After they announced no change in the ZIRP the SPX hit 2008, dropped to 1988, rallied to 2021, then dropped to 1987, all within one hour. On Friday the market was greeted with a gap down opening and the SPX ended the week at 1958. For the week the SPX/DOW were -0.20%, the NDX/NAZ were +0.05%, and the DJ World index was +0.20%. Economic reports for the week were mixed. On the uptick: retail sales, business inventories, the NAHB, building permits, leading indicators, plus weekly jobless claims improved. On the downtick: the NY/Philly FED, industrial production, capacity utilization, housing starts, and the WLEI. Next week’s reports will be highlighted by Q2 GDP, Durable goods and more reports on Housing.
LONG TERM: bull market
The five primary wave Cycle wave  bull market continues to unfold. Primary waves I and II completed in 2011, and Primary waves III and IV should be completing in 2015. While Primary I was a simple 9 wave structure that topped at SPX 1371. Primary III was a somewhat difficult, at times, 21 wave structure that topped at SPX 2135. Primary II was a five wave elongated flat that lasted five months. Primary IV should be a less complicated three wave zigzag that should conclude this month.
When it does conclude, probably with a retest of the OEW 1869 pivot range, Primary V should carry the market to all time new highs. Over the past 30 years, fifth waves have lasted anywhere from two to six months. Unless the fifth wave subdivided into five waves of its own. This occurred once, out of six opportunities, and the fifth wave lasted 9 months. Price targets for Primary V, should SPX 1867 be the low, are posted on the weekly chart above. Overall it looks like this extended bull market should end either late this year or in Q1/Q2 of 2016. When it does conclude we would then expect the market to lose about half of its value, over the next one to two years, to complete Cycle wave . Based upon these projections, it appears time to monitor and adjust one’s portfolio.
MEDIUM TERM: downtrend
In the modern world of computerized trading it is not too surprising that Primary IV has been a near perfect analog of Primary II. In May 2011 Primary I topped, and in May 2015 Primary III topped. These Primary wave tops were both followed by a six week downtrend of about 100 points. Then there was a two to three week uptrend of about 95 points, ending at slightly lower highs, while the NDX made a new high. After that, a big selloff lasting six weeks for an average decline of 260 points. This represents the current SPX 1867 low. This was followed by a three week rally of about 140 points, i.e. Thursday’s SPX 2021 high. This brings us up to the present.
What followed next, during Primary II, was a 156 point decline lasting five weeks. At this point we believe the time factor of the analog will end. We do not expect the last leg down of Primary IV to last five weeks. We expect it to end this month. Medium term support is at the 1956 and 1929 pivots, with resistance at the 1973 and 2109 pivots.
With the potential for the last leg down of Primary IV underway, we took a look at its entire wave structure to identify some Fibonacci support levels. Primary II retraced 42% of Primary I, or about 10% more than a normal 38.2% retracement. Currently Primary IV has retraced 25% of Primary III, or about 6% more than a normal 23.6% retracement. Should Primary IV also reach a 10% premium over 23.6%, support should arrive at SPX 1860. Major C, the current downtrend, will be three times Major A at SPX 1860. Intermediate c will equal 4.236 Intermediate a at SPX 1836. The last relationship is Minor a equals 0.618 Minor a at SPX 1875. To summarize, we have three wave relationships between SPX 1860 and 1875, which is the 1869 pivot. And, one relationship at SPX 1836, which is the 1841 pivot. This suggests a Primary wave IV low between the OEW 1841 and 1869 pivots.
With this week’s wild market activity the short term wave structure finally cleared. After the Minor wave A low at SPX 1867, the market rallied in three Minute waves to SPX 2021. Minor wave C should now be underway to complete Primary IV. Short term support is at the 1956 and 1929 pivots, with resistance at the 1973 and 2019 pivots. Short term momentum ended the week with a slight positive divergence. Best to your trading in this volatile market!
The Asian markets were mixed on the week for a net gain of 0.6%.
The European markets were mostly lower for a net loss of 0.1%.
The Commodity equity group were all higher and gained 2.2%.
The DJ World index is still in a downtrend but gained 0.2%.
Bonds are trying to uptrend again and gained 0.4% on the week.
Crude is also trying to establish and uptrend and gained 1.2% on the week.
Gold is trying to uptrend as well and gained 2.8% on the week.
The USD is still in a downtrend and lost 0.2% on the week.
Monday: Existing home sales at 10am. Tuesday: FHFA housing prices. Thursday: weekly Jobless claims, Durable goods, New home sales, and a speech from FED chair Yellen at 5pm. Friday: Q2 GDP and Consumer sentiment. Best to your weekend and week!