The market started the week at SPX 2502. After pullback to SPX 2488, on another N.K. event, the market rebounded for the rest of the week. By Friday the SPX was making new highs at 2519. For the week the SPX/DOW gained 0.50%, and the NDX/NAZ gained 0.95%. Economic reports for the week were mostly positive. On the downtick: consumer confidence/sentiment, new/pending home sales, and weekly jobless claims rose. On the uptick: Case-Shiller, durable goods, Q2 GDP, personal income/spending, the PCE, the Q3 GDP estimate, and the Chicago PMI. Next week’s economic highlights are the ISMs and monthly Payrolls.
LONG TERM: uptrend
For the past couple of months we have been tracking a few indices, especially the Transports, to determine if the general bull market will run into some trouble in the next few months. The Transports had completed a potential five wave structure at 9764 in July and entered a downtrend. If that downtrend broke below the May 8744 low it would have confirmed the five waves up, and since the Transports is often a leading/coincident indicator, it would have suggested a general bull market top in the next several months.
The downtrend, however, held above that low at 9010, and the Transports started a new uptrend. This week the uptrend rallied to new all-time highs, suggesting Major wave 5 is extending. The labeling was updated during the week to display this extension. For now, we can put the Transports on the back burner until the next potential five wave event occurs.
The Major wave 1 bull market has been underway since early 2016. Intermediate waves i and ii completed in the spring of 2016. Minor waves 1 and 2, of Int. iii, completed in the fall of 2016. Minor waves 3 and 4 completed in 2017. And Minor wave 5, in the SPX/DOW/NAZ, continues to be underway. When it ends Int. wave iii will end as well. Then after an Int. wave iv correction, Int. wave v will carry the market to all-time new highs. We continue to estimate a SPX 3000+ between 2018 and 2020.
MEDIUM TERM: uptrend
With such a lengthy uptrend the wave pattern at times can look a bit complex. We are counting the SPX/DOW Minor 5 uptrend having started in April. From the Minor 4 low at SPX 2329 the market rallied in five Micro waves (orange) to complete Minute wave i at 2454. Then after a Minute ii decline to SPX 2406/08 the market has rallied in a Minute wave iii.
When Minute iii ends, there will be a Minute iv decline. Then a Minute v rally will take the market to new highs before completing Minor5/Int. iii. We’re estimating this will occur around SPX 2650. Medium term support is at the 2479 and 2456 pivots, with resistance at the 2525 pivot.
Minute waves i and iii of this Minor 5 uptrend look quite similar. Minute i had a strong Micro 1, a steep Micro 2, a strong Micro 3, then shallow Micro waves 4 and 5. Look how favorably Minute iii compares. In fact, Minute iii will equal Minute i at SPX 2531, (within the 2525 pivot range).
The Micro 3 short term count from SPX 2417: 1. 2455, 2. 2428, 3. 2480-2447-2509-2488-2519 so far. After the current rally ends there should be about a 20 point pullback, then one more rally to new highs to complete Micro wave 3’s five waves. Then after a smallish Micro 4 and Micro 5, Minute wave iii will end. Short term support is at the 2479 and 2456 pivots, with resistance at the 2525 pivot. Short term momentum ended the week quite overbought. Best to your trading!
Asian markets were mostly lower for the week losing 0.4%.
European markets were all higher gaining 0.9%.
The DJ World index gained 0.1%, while the NYSE gained 0.5%.
Bonds are in a downtrend and lost 0.6% on the week.
Crude continues to uptrend and gained 2.0%.
Gold appears to be in a downtrend and lost 1.0%.
The USD looks to be uptrending for the first time in many months and gained 1.1%.
Monday: ISM and construction spending at 10am. Tuesday: auto sales. Wednesday: ADP and ISM services. Thursday: jobless claims, the trade deficit and factory orders. Friday: monthly payrolls (+156K), wholesale inventories and consumer credit.