weekend update

REVIEW

The market started the week at SPX 2099. After a gap down opening on Monday the market quickly dropped to SPX 2068. After that it rallied into Wednesday and hit SPX 2087. On Thursday/Friday the market had two successive gap down openings and hit SPX 2022, before ending the week at 2023. For the week the SPX/DOW lost 3.65%, the NDX/NAZ lost 4.35%, and the DJ World lost 2.9%. Economic reports for the week were biased to the positive side. On the uptick: retail sales, business/wholesale inventories, consumer sentiment and the WLEI. On the downtick: export/import prices and the PPI. Next week’s reports will be highlighted by Industrial production, the NY/Philly FED, and Housing.

LONG TERM: bull market

The six year Cycle wave [1] bull market continues to unfold. Primary waves I and II, of this five primary wave bull market, completed in 2011. Primary waves III and IV completed this year in 2015. Primary wave V has been underway since the late August SPX 1867 low.

For the past 30 years, whenever a significant fifth wave up in a bull market has made new highs during its first uptrend, 83% of the time, that was the high of the bull market. What this means is that there is an 83% probability that the bull market high will be reached soon, if the current uptrend makes all time new highs.

We have had the potential targets for Primary V posted on the weekly chart for several weeks now. Depending upon how the current uptrend unfolds there is the possibility of one lower target than those already presented. It can not be calculated at this time, possibly during new week. With probabilities suggesting a potential bull market top approaching we continue to suggest preparation for the next bear market makes sense.

MEDIUM TERM: uptrend

The uptrend that began at the Primary wave IV, SPX 1867, low continues to unfold. Major wave 1, of five major waves, topped at SPX 1993. Major wave 2 had an irregular pattern and bottomed at SPX 1872. Major wave 3 recently topped at SPX 2116. And Major wave 4 has been underway since that high.

At the Major 3 high we have counted five Intermediate waves up from the Major 2 low: 2022-1991-2094-2079-2116. There was a possibility that the SPX 2116 high was only Int. wave iii. But when the market opened on Monday below SPX 2094 it eliminated that possibility.

We have been expecting Major 4 to be the largest pullback since Major wave 2, find support between the 2019 pivot range and SPX 2040, and take some time to unfold. Probably not as long as Major wave 2, which was over four weeks, as that was quite a volatile period for the market. Two weeks may be sufficient for a simple zigzag, a bit more time if it unfolds as a flat. Medium term support is at the 2019 and 1973 pivots, with resistance at the 2070 and 2085 pivots.

SHORT TERM

Major wave 4 is currently about two weeks old as it started a week ago Tuesday. The decline was quite orderly until Wednesday’s SPX 2087 high. We had counted three waves down from SPX 2116 for Minute a: 2090-2104-2084. A one wave bounce to SPX 2099 for Minute b. Then one wave down to complete Minor a at SPX 2068.

After that the market rallied three waves up to complete Minor b: 2083-2070-2087. Then Minor c kicked in to the downside and it has been quite swift. In just two days the market has dropped more than it had in the previous week. On Friday the SPX hit 2027, rallied to 2041, then hit 2022 just before the close. When this last decline ends we will have three waves down for Minor c.

With Major wave 4 now firmly in the support zone, a slight positive short term divergence, and oversold short term MACD, and an oversold daily RSI, we should see the end of Int. a or Major wave 4 soon. Short term support is at the 2019 pivot and SPX 1993, with resistance at SPX 2040 and the 2070 pivot. Short term momentum ended the week extremely oversold.

One item of note. Should this decline continue and overlap the Major wave 1 high at SPX 1993, then there is another pattern unfolding other than the one we are expecting. This could suggest a retest of the SPX 1867 lows. Be careful. Best to your weekend and week!

FOREIGN MARKETS

Asian markets were mostly lower for a net loss of 1.9%.

European markets were all lower losing 3.2%.

The Commodity equity group were all lower and lost 2.2%.

The DJ World index is still in an uptrend but lost 2.9%.

COMMODITIES

Bonds remain in a downtrend but gained 0.4%.

Crude is also in a downtrend and lost 8.5%.

Gold is in a downtrend as well and lost 0.7%.

The USD continues to uptrend but lost 0.3%.

NEXT WEEK

Monday: NY FED at 8:30. Tuesday: Industrial production, the CPI and the NAHB. Wednesday: Housing starts, Building permits, and the FOMC minutes. Thursday: weekly Jobless claims, the Philly FED and Leading indicators. Friday: Options expiration.

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