in support of farsight's read, this is from one of my weekend reads.
08 March weekend update REVIEW:
As we suspected in last weekend's update, the rally to SPX 1388 ended the January uptrend when the market broke through 1360. This week all twelve US indices we follow confirmed downtrends, from the popular SPX/DOW to the sector specific XLF/XLY. Also, all five Asian indices and the two European indices we follow are in confirmed downtrends as well. The FED continued to talk up a storm and took some limited action on friday. The economic numbers continued to deteriorate from not so good to bad. The market bounced around early in the week, then on wednesday it headed lower. For the week the SPX/DOW -2.9%, and the NDX/NAZ -2.4%. Bonds and Gold ended flat, but Crude ($106) and the Euro (154) gained. LONG TERM: bear market The October 2007 bear market has resumed, after spending the month of February in a narrow trading range. Thus far this bear market has made a trend reversal every month: November 1406, December 1524, January 1270, February 1388, and now in March. Quite unusual! The OEW count remains the same: an ABC ended Major wave A at 1270 in January; Major wave B ended at 1388 in February; and expecting another ABC down for Major wave C now underway. The EW pivots and fibonacci ratios suggest the target for wave A should be SPX 1170, and SPX 1070 for wave C. When that final low is reached, everything should line up for a terrific bullish market rally into 2009. To illustrate this scenario we have updated the bear market forecast chart, which was first posted in early January, with current market data. The chart is posted below, and will be added to the photo section. The blue numbers on the left are the EW pivots that have already occurred, and those that are expected to occur as the bear market continues. Also notice that once Primary wave A ends around 1070 (EW pivot 1061), a strong bullish market should carry the SPX back up to the EW pivot at 1383. That's a 30% rally! Long term investors can also note the relationship between the 89 week moving average (gold line) and the MACD at the bottom of the chart. When the SPX broke below the 89 wma, and the MACD turned negative in late 2000, a bear market commenced. When the SPX broke above that 89 wma and the MACD turned positive in early 2003 a new bull market followed. Now the SPX is again below the 89 wma, and the MACD is in negative territory. Simple charts like this can provide a lot of useful long term information. MEDIUM TERM: downtrend A week ago wednesday the SPX topped at 1388, ending the uptrend since January, with a failed C wave. The failure occurred because the C wave of this flat failed to reach the previous A wave at 1396. When C waves fail the following reversal is usually sharp and swift. Which is exactly what transpired, and is still onging. Within the next seven trading days the SPX dropped 106 points (7.6%), and was within 12 points of the low for the bear market. Therefore counting a failed C as the end the flat formation for Major wave B appears correct. Within this same time period, not only did the SPX confirm a downtrend, but every one of the twelve US indices we follow confirmed as well. During the next several weeks we should look for 5 waves down during this downtrend to complete Intermediate wave A. The daily MACD should get quite oversold, and the weekly MACD should continue lower. The following EW pivots should also come into play: 1344, 1327, 1316, 1287, 1261, 1240, 1226 and finally 1168. If the market keeps following the monthly reversal scheme. Expect an end to Intermediate wave A some time in March. Then an uptrend for Intermediate wave B into April. SHORT TERM: Support for the SPX remains at 1287 and then 1261, with resistance at 1316 and then 1327. Short term momentum is oversold and displaying a positive divergence. Friday's low of 1282 held the 1287 EW pivot well and then rallied to 1302 before easing back into the close. After reviewing this decline from 1388 closely, it still appears to be only Minor wave 1 of the five Minor wave decline. If this 1287 pivot does not hold, then a decline to 1270 (the low for the bear market), or to the next pivot at 1261 is likely. After Minor wave 1 does end, the market should then get a good rally, with 1344 the likely limit. Bear markets in downtrends, are very tough to trade on the long side. Rallies should be used as selling opportunites. When this downtrend bottoms, then the risk of long positions diminishes. FOREIGN MARKETS: All of the Asian markets are in confirmed downtrends. Japan's NIKK and India's BSE remain the weakest, followed by Australia's ASX, then Hong Kong's HSI, and finally China's SSEC. Certainly feel that China has not ended its bull market and will make new highs before yearend. Also, Hong Kong appears to have the same possibility. The two European indices we follow: England's FTSE and Germany's DAX are both in bear markets and both in downtrends. The DAX should underperform the FTSE. COMMODITIES: Bonds continue to uptrend and long term rates continue to decline. The 1YR dropped to its lowest level thus far: 1.55%. Indicating the FED is now nearly 100 bps behind the curve, as liquidity pressures continue. For now rates should continue to decline. But they appear to be closing in on a major bottom soon. Crude made all time new highs this week, nearly $106, as its uptrend continues. Gold also made all time new highs this week, $995, but its uptrend continues to display signs of weakness. Maybe another try at $1,000 before it turns over. The Euro/USD continue to go their separate ways. The Euro made all time new highs, and the USD continued to sink against nearly all currencies. NEXT WEEK: The economic data starts on monday with wholesale inventories; tuesday the trade gap; wednesday the budget deficit; thursday unemployment claims and retails sales; then friday the core CPI. Only two presentations by the FED: on tuesday FED governor Kroszner at 10:00, and FED chairman Bernanke on friday at 1:00. Best to your week and weekend.
(20min delay)