The week started at SPX 2426. After a decline to SPX 2417 on Monday, the market gapped up on Tuesday hitting s high of SPX 2455. This was followed with a gap down on Wednesday to a low of SPX 2436 on Thursday. On Friday the market gapped up again, hitting SPX 2454, then pulled back to end the week at SPX 2443. Gap openings like this typically occur during corrections. For the week the SPX/DOW gained 0.65%, and the NDX/NAZ gained 0.70%. Economic reports for the week were sparse and all negative: new/existing home sales, durable goods, the Q3 GDP estimate, and weekly jobless claims rose. Next week’s reports will be highlighted by monthly payrolls, Q2 GDP, the Chicago PMI, and ISM. Best to your week!
LONG TERM: uptrend
The last few weeks we have been reporting on some potential headwinds to the long term scenario. After reviewing all the charts we have decided to concentrate on the Transports, as they are often a leading indicator of stock markets tops.
As previously noted the TRAN have risen nine waves up from their 2016 low. This is basically five waves with a subdividing third. Potentially the TRAN could have ended their bull market at their recent July 9764 high. Longer term indicators also suggest that may be the high as well. Typically when this does occur there is a multi-month lag until the general market tops. With the medium term counts in the four major indices set up as they are, there is certainly the potential for a bull market top in the next few months.
The key chart going forward is not the weekly chart, but the daily chart. The daily chart displays the last 9 months. The count posted is exactly the same as the weekly chart. The key level to watch is the Major 4 low in May at 8744. Should the TRAN drop below that level that would confirm the nine waves up from early 2016 did complete at the July 9764 high, and a bear market in this index is probably underway. This is the negative news. The positive news is. If the TRAN can hold above that level, and then establish an uptrend to news highs. Then the Major wave 5, May-July, would only be the first wave of Major 5 and the TRAN bull market would then be extending from nine waves to thirteen waves. This would be an all clear for the bull market in the four major indices. The main factor that will determine the outcome, of course, is investor confidence.
The long-term count in the SPX remains unchanged. We continue to count seven waves up, an incomplete bull market, from the early-2016 lows. An Int. i with an irregular Int. ii zigzag ended in the spring of 2016. Then an extended Int. iii: Minor 1 and 2 in the fall of 2016, Minor 3 and 4 in the spring of 2017, and Minor 5 topping in June at SPX 2454. Int. iv appears to be another irregular correction, that should alternate with the Int. ii zigzag. Thus far, Minor a of this correction ended in July at SPX 2408. Minor b probably ended in August at SPX 2491, still awaiting a downtrend confirmation. And Minor c has been probably underway since that high. Once this correction concludes, probably at the cycle low in September, the bull market should go to new highs.
MEDIUM TERM: downtrend probably underway
As noted above we are labeling the entire activity in the SPX since the June SPX 2454 as an irregular Int. wave iv correction. The Int. ii irregular correction lasted 2+ months and ended at the Br-exit cycle low in June 2016. This one could end over the Labor day weekend, which is up next. Currently the NDX/NAZ could confirm the downtrend as early as this week. Should this occur the SPX/DOW will likely follow in short order. Downtrend confirmations, in this bull market, have been oddly enough buying opportunities.
The decline from the August SPX 2491 high has been fairly simple. Three waves down to the recent SPX 2417 low: 2438-2475-2417. Three waves up from that low: 2455-2436-2454 (Friday). Notice all the waves ended right within the pivot ranges. Since this is a Minor c wave of an a-b-c Int. iv we took a look at the completed Minor a from June-July. That correction unfolded in seven waves. Three down: 2431-2450-2419, one up 2443, then three more down: 2406-2439-2408. Notice all these waves also ended within the pivot ranges. Medium term support is at the 2428 and 2411 pivots, with resistance at the 2444 and 2456 pivots.
Since corrections are often filled with gap openings, we do not find the seven gap openings since the recent SPX 2491 high thirteen days ago all that unusual. Corrective patterns may appear erratic short term, great for day traders, but when filtered properly one can uncover the larger cleaner pattern. The below is an alternate count and will not be discussed.
As noted previously we have filtered the noise and presented the simpler pattern for both the completed Minor a and incomplete Minor c. We have also observed some symmetry in the Minor a decline. The first three waves down from SPX 2454 bottomed at 2419: 35 points. The last three waves down from SPX 2443 bottomed at 2408: also 35 points. In other words Minute a and Minute c were exactly equal.
Thus far for Minor c we have the first three waves down from the SPX 2491 high bottoming at 2417: 74 points. Now we have a three wave rally up to SPX 2454 thus far. This comparison suggests, when Minute c does get underway the decline may equal 74 points or a Fibonacci 0.618 relationship to that number. The low is naturally relative to where the current three waves rally ends. Short term support is at the 2428 and 2411 pivots, with resistance at the 2444 and 2456 pivots. Short term momentum ended the week around neutral. Best to your trading!
Asian markets were mostly higher on the week for a net gain of 0.9%.
European markets were mixed for a net gain of 0.1%.
The DJ World index gained 1.0%, and the NYSE gained 1.0%.
Bonds remain in an uptrend and gained 0.1%.
Crude appears to be in another downtrend and lost 1.6%.
Gold is still in an uptrend and gained 0.5%.
The USD definitely looks to be in its first bear market since 2011, and all other currencies should rise against it in their own bull markets. Reversals in long term trends like this typically last about 5 years. The USD remains in a downtrend and lost 0.7% on the week.
Tuesday: consumer confidence and Case-Shiller. Wednesday: Q2 GDP (est. 2.8%) and the ADP. Thursday: jobless claims, personal income/spending, the CPI, pending homes sales, and the Chicago PMI. Friday: monthly payrolls (est. 180k), ISM , construction spending, consumer sentiment, and auto sales. Best to your weekend and week!