weekend update

REVIEW

The market started the week at SPX 2297. After a pullback to SPX 2289 on Monday, the market rallied to SPX 2299 on Tuesday. Wednesday’s pullback took the SPX to 2285. Then the market rallied to all-time new highs on Thursday/Friday. For the week the SPX/DOW gained 0.90%, and the NDX/NAZ gained 1.25%. Economic reports for the week were split. On the downtick: consumer credit/sentiment, import prices and the Q1 GDP estimate. On the uptick: wholesale inventories, export prices, treasury budget, plus the trade deficit and weekly jobless claims improved. Next week’s reports will be highlighted by FED chair Yellen’s semiannual monetary policy report to Congress, industrial production and retail sales. Best to your week!

LONG TERM: uptrend

After weeks of an upper-level consolidation the market broke out to new highs. This extends the current uptrend to 3 months in duration. Making it longer in time, than either of the previous two impulsive uptrends in this bull market. This uptrend is starting to look like a third wave. Third wave uptrends usually take the longest time to unfold and travel the most points as well. Total market breadth made new highs for this bull market, supporting this probable scenario.

The count from the Primary II bear market low in February 2016 remains unchanged. A lengthy Primary III bull market is underway, and we are tracking Major wave 1 of Primary III. This far, Intermediate waves i and ii completed in April and June respectively. Minor waves 1 and 2 completed in August and November respectively. Minor wave 3, of Int. iii, is currently underway from the SPX 2084 November low.

The last bearish possibility, for this long term uptrend, is straight ahead at SPX 2336. Once cleared SPX 3000+, over the next one to three years, should be possible.

MEDIUM TERM: uptrend

The current uptrend began just days before the election in November at SPX 2084. The market rallied, in five waves, to SPX 2279 by mid-December. Then pulled back to SPX 2234 by early-January. Anticipating that this uptrend should be Minor wave 3, we knew it was too short in time and price for that labeling, and labeled the rally and pullback as Minute waves i and ii of Minor 3.

The advance for the rest of January was choppy and only three waves. We then suggested the possibility that it could be an irregular B wave of Minute wave ii. The upside limit for that possibility was SPX 2305. When the market surged past that level this week we eliminated that possibility, and firmed up the Minute ii wave low at SPX 2234. Minute wave iii of Minor 3 clearly appears to be underway.

Our estimate for this uptrend, back in November, was the SPX 2380’s. The current internal wave structure suggests it could be higher. Minute wave i was 194 points (2084-2278). Normally third waves are equal to, or greater than, first waves. This would give us a minimum upside target in the SPX 2420’s. And, that is only if Minute waves iii through v equal Minute i. It could go a lot higher. Medium term support is at the 2286 and 2270 pivots, with resistance at the 2321 and 2336 pivots.

SHORT TERM

While the first two sections of this week’s report are quite bullish, there is still a price obstacle ahead of this market: SPX 2336. This level represents a 1.618 multiplier of the recent bear market decline SPX: 2135-1810. Once cleared the last potential bearish scenario gets eliminated. This is of long term significance.

There is also a medium term significance. We do have an alternate short term wave count that could end the uptrend between the OEW 2321 and 2336 pivots. As noted earlier, third waves are usually quite strong. However, if these two pivots offer as much resistance as the OEW 2270 and 2286 pivots. Then the resulting choppy activity could end this uptrend in that price zone. Something to watch in the weeks ahead.

Putting those caveats aside. Minute wave iii, as labeled above, should currently be in Micro wave 3 from the recent Micro 2 low at SPX 2257 low. Micro wave 1, also in orange, ended at SPX 2282 from the Minute ii SPX 2234 low. This count suggest a powerful move to the upside. However, if the rally fizzles out between those pivots then a correction of about 5% should follow. Short term support is at the 2286 and 2270 pivots, with resistance at the 2321 and 2336 pivots. Short term momentum ended another negative divergence. Best to your trading!

FOREIGN MARKETS

Asian markets were all higher on the week for a net gain of 1.5%.

European markets were mixed and ended mixed.

The DJ World index gained 0.7%, and the NYSE gained 0.6%.

COMMODITIES

Bonds continue to uptrend and gained 0.4%.

Crude appears to be in an uptrend and gained 0.1%.

Gold remains in an uptrend and gained 1.2%.

The USD is still in a downtrend and but gained 0.9%.

NEXT WEEK

Tuesday: the PPI and FED chair Yellen’s senate monetary testimony. Wednesday: CPI, NY FED, retail sales, industrial production, and the NAHB. Thursday: housing starts, building permits, and the Philly FED. Friday: leading indicators and options expiration.

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