By: Tony_Caldaro
The market started the week just as it has left off last Friday, with a gap up opening. There were three gap up openings during this week, and two unchanged openings. The net result: SPX/DOW +2.60%, and the NDX/NAZ were +3.65%. Foreign markets fared well: Asia +1.9%, Europe +1.3%, and the DJ World index gained 3.4%. On the economic front negative reports outpaced positive ones for the first time in a while. On the downtick: wholesale inventories, export/import prices, consumer sentiment, the WLEI and weekly jobless claims rose. On the uptick: consumer credit, the PPI, the Treasury budget and the monetary base. Next week we get reports on Industrial production, the Philly/NY FED, Retail sales, Housing and the FED’s Beige book.
LONG TERM: bull market
This week the count we had been projecting, an Intermediate wave iv low in June, was confirmed by OEW. The market is now uptrending in Intermediate wave v of Major wave 3. We have been tracking this bull market as Cycle wave [1]. Cycle wave bull markets unfold in five Primary waves. Primary waves I and II completed in 2011, and Primary wave III has been underway since then. Primary wave I divided into five Major waves, with a subdividing Major wave 1. Primary III is also dividing into five Major waves, but both Major waves 1 and 3 have been subdividing into five Intermediate waves.
Major waves 1 and 2, of Primary III completed by mid-2012, Major wave 3 has been underway since then. Intermediate waves i and ii completed by late-2012, and Intermediate waves iii and iv just completed in mid-2013. Intermediate wave v, to complete Major wave 3, is currently underway. When this uptrend concludes the market should enter a Major wave 4 correction. Then the next uptrend, Major 5, will complete Primary wave III. Then after a Primary IV correction, a Primary V uptrend should complete the bull market. We are still anticipating this bull market will end by late-winter to early-spring 2014.
MEDIUM TERM: uptrend
After a lengthy six month Intermediate wave iii uptrend we identified the top in May and then expected a one month downtrend for Intermediate wave iv. Over the next few weeks the market down trended in an ABC pattern completing Intermediate wave iv towards the end of June. Since then the market has rallied 120 SPX points, and is now just 7 points shy of the all time high at SPX 1687. A quick turnaround in just three weeks.
We have been anticipating this Int. v uptrend will unfold with five simple Minor waves. Minor wave 1 rallied in a 9 wave pattern from SPX 1560-1627. Minor 2 pulled back in a three wave pattern to SPX 1605. Minor wave 3 has thus far rallied in a five wave pattern from SPX 1605-1680. On Friday Minor 3 closed at exactly our minimum target of the OEW 1680 pivot.
Our projection for this Int. v uptrend was for it to complete within the OEW 1699 pivot range, if it concluded in July. We are currently in mid-July. If it was to extend into August then it should reach our next OEW pivot at 1779. Currently, with Minor 3 already larger then Minor 1 (75 pts. vs 67 pts.). Minor 3 can top at any time and the market could rollover into a Minor 4 pullback. This would set up the next rally, Minor 5, to complete at the minimum target of the 1699 pivot range. Should Minor 3 extend into a nine wave pattern, then we are likely looking at an August top within the 1779 pivot range. The next pullback and rally could be quite important to this uptrend. Medium term support is at the 1628 and 1614 pivots, with resistance at the 1680 and 1699 pivots.
SHORT TERM
Short term support is at SPX 1658-1667 and SPX 1648-1649, with resistance at the 1680 and 1699 pivots. Short term momentum ended the week with a negative divergence. The Short term OEW charts remain positive from SPX 1620 with the reversal level now 1649.
Minor wave 3 has currently unfolded in five Minute waves SPX: 1627-1615-1658-1648-1680. With a short term negative divergence in place it could pullback at any time. A pullback between 9 and 13 points would suggest it is only a small wave, and Minor wave 3 could be extending. A pullback greater than this range would suggest it is Minor wave 4, and the next rally, Minor 5, could end the uptrend. The market is now at a short term inflection point.
We should note fifth wave uptrends, during this bull market, have lasted from 1 – 2 months. The first two lasted two months and exceeded the third wave high by a comfortable margin. The last one lasted only one month and barely reached a higher intraday high. This would suggest, although a small sample, a probable top in August at the 1779 pivot range. However, during this Primary III, fifth waves of even a lesser degree have been generally weak. As a result the overall probabilities of a July or August high are 50-50. Best to your trading!
FOREIGN MARKETS
The Asian markets were all higher on the week for a net gain of 1.9%. Australia, India and Japan are in confirmed uptrends.
The European markets were mixed on the week, notably the PIGS were negative, for a net gain of 1.3%. Only Switzerland is in a confirmed uptrend.
The Commodity equity group were all higher on the week for a net gain of 3.0%. Only Russia is in a confirmed uptrend.
The DJ World index is uptrending and gained 3.4% on the week.
COMMODITIES
Bonds continue to downtrend, but gained 0.6% after a positive divergence appeared on the daily chart.
Crude continues to uptrend, hitting its highest level in over one year, and gained 2.2% on the week.
Gold is still in a downtrend but rallied 5.4% on the week.
The USD had a volatile week, along with most currencies, losing 1.9% on the week.
NEXT WEEK
Monday kicks off this busy week with Retail sales and the NY FED at 8:30, then Business inventories at 10:00. Tuesday: the CPI, Industrial production and the NAHB housing index. Wednesday: Housing starts, Building permits, and the FED’s Beige book. Thursday: weekly Jobless claims, the Philly FED and Leading indicators. Friday: Options expiration. One speech and two testimonies from the FED this week. On Wednesday and Thursday FED chairman Bernanke testifies before Congress, and then the Senate, with the Semiannual Monetary Policy Report. Also on Wednesday FED governor Raskin give a speech in Wash, DC. Best to your weekend and week!
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