The market started the week at SPX 2384. After a rally to SPX 2394 on Monday the market pulled back to 2380 on Wednesday, and retested it on Thursday. Then the market rallied to end the week SPX 2399, its highest level since March 1st. For the week the SPX/DOW gained 0.45%, and the NDX/NAZ gained 1.0%. Economic reports for the week were generally positive. On the downtick: the Q2 GDP estimate, the WLEI, the PCE, construction spending, ISM manufacturing and the ADP. On the uptick: personal income, auto sales, ISM services, factory orders, monthly payrolls, consumer credit; plus weekly jobless claims, the trade deficit and the unemployment rate all improved. Next week’s highlights: the CPI/PPI, retail sales and wholesale/business inventories.
LONG TERM: uptrend
We continue to believe a Secular growth cycle began in 2016, following 16-years of a Secular crisis cycle. During the crisis cycle we experienced a dotcom bust, 9-11, a war in the Middle East, a housing boom/bust, an international banking crisis, quantitative easing, US debt nearly quadrupling, and the middle class nearly became extinct. In response to this, the US electorate choose a businessman who had a plan and campaigned on Making America Great Again. It’s the right time, hopefully its the right person. If not, they will choose another in four years. Despite some character flaws he has the Saeculum in his favor, and we think he will succeed. If correct the secular growth cycle should last 16-20 years.
The Saeculum also aligns with OEW. We have been labeling the charts with a Primary III bull market underway from the February 2016 low. The count thus far displays subdivisions within Major wave 1 of the 5 Major waves that will create Primary III. Intermediate waves i and ii ended in the spring of 2016. Minor waves 1 and 2, of Int. iii, ended in the fall of 2016. And Minor waves 3 and 4 recently ended in the spring of 2017. Minor wave 5 of Intermediate wave iii should be currently underway.
MEDIUM TERM: uptrend
The recent Minor wave 4 correction, which lasted a bit more than a month, was a bit tricky in that it only corrected about 3%. And the NDX/NAZ did not correct at all. These two sectors, cyclicals and tech, have completely diverged in their wave counts creating a bifurcation in the market. This divergence allows for the possibility that despite the uptrend in the SPX/DOW, it may still be part of Minor wave 4. We consider this an alternate count, and are going with the Minor 5 scenario.
Thus far on a larger time frame we have three waves up from the recent SPX 2329 low: 2361-2345-2399. Using a smaller timeframe we can now count a more detailed three waves up: 2349-2335-2361-2345-2398-2380-2399. This count looks more impulsive than the simple three waves up, suggesting Minor 5 is indeed underway. Medium term support is at the 2385 and 2336 pivots, with resistance at the 2411 and 2428 pivots.
With the new high on Friday, for this rally from the SPX 2329 low, the key level to watch going forward is SPX 2361. Should this level be broken on the downside then the uptrend is probably a B wave. If not, the next likely target for the SPX is 2500+. Naturally the 2411, 2428 and then 2488 pivots will have to be exceeded to reach that level. But the uptrend is only three weeks old at this point and has plenty of time.
Short term support is at the 2385 pivot and SPX 2361, with resistance at SPX 2401 and the 2411 pivot. Short term momentum ended the week quite overbought. Best to your trading with the French election ahead on Sunday.
Asian markets were mixed on the week for a net loss of 0.1%.
European markets were all higher and gained 2.8%.
The DJ World index gained 0.9%, and the NYSE gained 0.7%.
Bonds are in an uptrend but lost 0.4%.
Crude is in a downtrend and lost 6.3%.
Gold is in a downtrend and lost 3.3%.
The USD is also in a downtrend and lost 0.4%.
Tuesday: wholesale inventories. Wednesday: export/import prices and the budget deficit. Thursday: weekly jobless claims and the PPI. Friday: the CPI, retail sales, consumer sentiment and business inventories. Best to your weekend and week!