Weekend update

REVIEW

The week started at SPX 2779. After gap down openings on Monday/Tuesday the market traded down to SPX 2743. Then after a gap up opening on Wednesday the SPX reached 2775 before heading back down to 2744 by Thursday. Friday had a gap up opening, which was sold in the afternoon, and the SPX ended the week at 2755. For the week the SPX/DOW lost 1.45%, and the NDX/NAZ lost 0.75%. Economic reports for the week were mixed. On the downtick: the NAHB, building permits, existing home sales, and the Philly FED. On the uptick: housing starts, leading indicators, and jobless claims improved. Next week: Q1 GDP revision, personal income/spending, and more housing reports. Best to your week!

LONG  TERM: uptrend

Lots of chatter this week about OPEC and Crude oil. In the end the Russian/Saudi cartel raised production 1m/bbls per day, and crude rallied $3. Guess the increase was less than the market expected. We last wrote about Crude in August 2016: https://caldaro.wordpress.com/2016/08/23/crude-and-the-commodity-cycle/. What was said then, at $45 Crude, still applies. We are expecting a bear market rally high to reach between $70 and $85 by the year 2020. Then Crude will turn lower, and probably return to $25 around the year 2026. Since Crude has already hit $70 (May18), the $85 level is more likely to occur by 2020.

Nothing has changed on the long term count, as you can see by the weekly chart below. A Major wave 1 bull market underway, with all but Intermediate wave v to complete. Intermediate waves i and ii ended in the spring of 2016. Then Int. iii divided into five Minor waves. Minor waves 1 and 2 completed in the fall of 2016, and Minor waves 3 and 4 ended in the spring 2017. After that a very long Minor wave 5, completing Int. iii, in January 2018. Int. wave iv followed with a 3-month flat ending in early-April. A choppy Int. v has been underway since then.

MEDIUM TERM: uptrend

While the general market has been in an uptrend since early-April, only the NDX/NAZ has looked impulsive while the SPX/DOW displays a lot of internal chop and overlapping larger waves. Guess one would expect this type of outcome, if they expected the NDX/NAZ to have a blow off fifth wave while the SPX/DOW formed an ending diagonal triangle. It’s a possibility.

Unfortunately there are a lot of possibilities at this time medium term. The long term target (SPX 3000+ by 2018+) remains on track. For now we continue with the short term count posted. The recent rally SPX: 2677-2791, appears to be just part of Minute iii, possibly a Micro wave 1 and 2.

SHORT TERM

While we do have a Minor 1-2, Minute i-ii, and now possibly a Micro 1-2 posted, we have been noting that the internal structure of these waves looks choppy compared to other uptrends in the bull market. Currently we have three waves up from SPX 2677 (2729, 2701, and 2791). After that three waves down, which may be a fourth wave flat (2743, 2775, 2744). SPX 2729 is a key level in this structure.

If the market rises above 2791 it starts to look impulsive. If it breaks down below 2729 the corrective activity continues. Short term support is at SPX 2742/43 and the 2731 pivot, with resistance at the 2780 and 2798 pivots. Short term momentum ended the week with a positive divergence. Best to your trading!

FOREIGN MARKETS

Asian markets were mostly lower and lost 1.6%.

European markets were also mostly lower and lost 0.9%.

The DJ World index lost 1.0%, and the NYSE lost 0.6%.

COMMODITIES

Bonds could be uptrending and gained 0.1% on the week.

Crude also could be uptrending and gained 5.4%.

Gold remains in a downtrend and lost 0.6%.

The USD remains in an uptrend but lost 0.1% on the week.

NEXT WEEK

Monday: new home sales at 10am. Tuesday: Case-Shiller and consumer confidence. Wednesday: durable goods and pending home sales. Thursday: Q1 GDP (est. 2.3%) and weekly jobless claims. Friday: personal income/spending, core inflation, consumer sentiment, and Chicago PMI.

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