Weekend update

REVIEW

The week started at SPX 2801. After a slightly higher open on Monday the SPX dropped to 2789 by Tuesday’s open. After that the market rallied to SPX 2817, (new uptrend high), on Wednesday, before pulling back to 2800 on Thursday/Friday. For the week the SPX/DOW were +0.1%, and the NDX/NAZ were -0.25%. Economic reports again were generally positive on the week. On the downtick: the NY FED, housing starts and building permits. On the uptick: retail sales, business inventories, industrial production, capacity utilization, the Philly FED, leading indicators, plus weekly jobless claims were at a 48-year low. Next week’s economic reports are highlighted by Q2 GDP, and more housing reports. Best to your week!

LONG TERM: uptrend

While the general market has remained in a 6-month trading range, between SPX 2500+ and 2800+, the economy was surging during Q2. The latest forecast from the Atlanta FED is +4.5%. Next/last update on Thursday. The market consensus is +3.9%. Either way this appears to be the strongest quarter since 2014, which registered Q2 and Q3 over 4%.

We continue to see the current uptrend as potentially the last of this Major wave 1 bull market. The market has already completed four Intermediate waves since the early-2016 low, with a subdivided Int. wave iii. All that is left to complete five waves up is an Int. wave v uptrend. Which has been underway since early April. Our market goal, since mid-2016, has been SPX 3000+ by 2018+. Now some of the other indices are suggesting that upside possibility as well.

MEDIUM TERM: uptrend

While this uptrend had been difficult to track in the SPX/DOW. The NDX/NAZ has been quite clear and impulsive. Recently we noticed the NYSE forming a leading diagonal first wave from its April low.

Applying that pattern to both the SPX/DOW would help in resolving the choppiness that has been noted for a few months in those indices. With the SPX starting to look impulsive that pattern seems to fit.

The minimum required then, to complete Int. wave v and the Major 1 bull market, would be new all-time highs in the SPX. The SPX is currently about 2% from the previous high at 2873. When we review the other three major indices were find the NDX/NAZ have already made new all-time highs in their 5th wave uptrend. But the DOW is drastically short by about 6%. A quick review of the NYSE and DJ World index also displays they too are 6% below their all-time highs. We would not expect the bull market to end until these latter three indices had also made new all-time highs.

This would suggest the SPX could advance 6% from here, rather 2%, before it tops. Six percent from current levels is about SPX 3000.

SHORT TERM

Counting the SPX advance from the April low at 2554 to the June high at 2791 as a leading diagonal in the SPX/DOW, or the pattern presented on the hourly chart in the SPX, leads to the same general conclusion. Minor wave 1 completed at SPX 2791, and Minor wave 2 likely ended at SPX 2692. Minor wave 3 would then be currently underway.

Since Minor 1 displayed a lot of internal choppiness which fits a leading diagonal scenario. Minor 3 should shed that choppiness and be impulsive. So far we are seeing that unfold. From the Minor 2 SPX 2692 low we see three waves up: 2743-2699-2817 so far. The first advance from SPX 2692 looks impulsive: 2711-2699-2724-2716-2743. And the advance from SPX 2699 looks impulsive too: 2737-2711-2796-2771-2817. To increase the impulsive scenario probability we would need to see a pullback of about 30-40 points, and then a rally to higher highs. Then this advance would not only look impulsive, it would be impulsive. Short term support is at the 2798 and 2780 pivots, with resistance at the 2835 and 2858 pivots. Short term momentum ended the week oversold. Best to your trading!

FOREIGN MARKETS

Asian markets were mixed on the week for a net loss of 0.1%.

European markets were mixed as well, and ended unchanged.

The DJ World index gained 0.2%, as did the NYSE.

COMMODITIES

Bonds continue to uptrend but lost 0.3%.

Crude appears to be in a downtrend and lost 3.9%.

Gold remains on a downtrend and lost 0.8%.

The USD is still in an uptrend and gained 0.5%.

NEXT WEEK

Monday: existing homes sales 10am. Wednesday: new home sales. Thursday: weekly jobless claims, and durable goods. Friday: Q2 GDP (est. +3.9%), and consumer sentiment.

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