REVIEW: Market rallies to new highs for the uptrend on monday, and then retreats after a steady supply of negative economic reports. For the week the SPX/DOW lost 2.5%, the NDX/NAZ dropped 3.5%. The anti-stock market sectors gained: Crude +3.7%, Gold +1.5%, CRB +3.1%, and the Yen +1.0%. Bonds, and the Euro showed slight gains. LONG TERM: bear market Nothing has changed in the projected long term count. The bull market topped in October 2007. Then declined in three Intermediate waves (ABC) into the January lows at SPX 1270. This appears to have ended Major wave A. After a rally to 1396 (1388) in February, the market then turned over in what appeared to be the start of the next ABC down. However, when the market started making new lows, the FED intervened again, and abruptly ended the downtrend. This type of FED intervention is exactly what occurred at the August 2007 low, and the January 2008 low, as noted a few weeks ago. Since the decline from the February highs to the March lows was choppy, we labeled the entire activity since the January low as an irregular Major wave B, consisting of three Intermediate waves. For those counting the waves: Intermediate wave A Nov 1406, Intermediate wave B Dec 1524, Intermediate wave C Jan 1270, ending Major wave A. Then Intermediate wave A Feb 1388, Intermediate wave B Mar 1257, and Intermediate wave C Apr 1387, ending Major wave B. The end of this last wave in April has not yet been confirmed by OEW, but it certainly appears to be breaking down. Following our 2008 projection, illustrated in the photo section. The next downtrend should take the bear market to news lows, possibly to the SPX 1170 level. This could complete an Intermediate wave A, of Major wave C. After an uptrend, Intermediate wave B, the next downtrend should put in the low for 2008 near SPX 1070. This would end the decline from the October 2007 high at 1576, and complete a 61.8% retracement of the entire 2002-2007 bull market. After that, a bullish like series of rallies should follow, retracing approximately 50%-61.8% of the entire decline. When that begins it will be time to turn bullish. MEDIUM TERM: uptrend beginning to breakdown When the FED intervened in mid-March, with the surprise discount rate cut and the Bear Stearns (BSC) giveaway to JP Morgan (JPM) on a sunday night. They followed it up with a 75 bps rate cut across the board on the following tuesday. We sensed, yet again, that the downtrend had ended and another uptrend was underway. The uptrend from the March SPX 1257 low took the form of an abc-x-abc. SPX 1360 marked the end of the first abc, SPX 1313 the low of the x wave, and the tricky abc into the recent 1387 highs. Rather than mark all these waves, we labeled the entire uptrend as an abc, which it was. Again, OEW has not yet confirmed the new downtrend. Until it does, there is still an opportunity, although not probable, for one more rally to new uptrend highs. If SPX 1387 was indeed the top, as we expect. This would be the third time this year that the market has failed to penetrate the 1383 EW pivot, and failed to break through a 38.2% retracement of the bear market. When reviewing the overall structure of the bear market thus far. The first abc decline, Major wave A was 306 points (1576-1270). The Major wave B, abc counter rally topped at SPX 1387. Should the next abc decline, Major wave C equal the first, then 1387 - 306 = 1081. Which is right in the area of our SPX 1070 target. SHORT TERM: Support for the SPX is now at 1327 and then 1316, with resistance at 1344 and then 1364. Short term momentum is oversold. The near term indicators are getting oversold, but not quite there yet. This would suggest a bit more downside into monday/tuesday near the 1316 pivot. Then a sizeable rally should follow to get the indicators overbought again before the next decline. We would be counting this first decline as wave 1, and the counter rally as wave 2, of the next downtrend. If you recall, SPX 1364 held support for the market for over a week. When the market broke through that pivot, there was still an opportunity for support at the next EW pivot 1344. On friday, that pivot failed as well. With all the double bottom bullishness in the media lately. There should be plenty of sellers when this market starts breaking. FOREIGN MARKETS: The Asian markets continue to be quite mixed. The ASX, HSI and NIKK followed the west in uptrends. But the BSE and SSEC never did confirm. The European markets have reflected the bear market in the US. Both the FTSE and DAX have been uptrending, but this should change when the US breaks. COMMODITIES: BONDS are quite mixed. Bonds prices are in a downtrend, but rates have yet to confirm an uptrend. The 1YR is signalling a 25 bps cut by months end. CRUDE continues on its merry way making new highs again this week as the uptrend continues. GOLD is starting to display some resilience after hitting $860 cash during its downtrend. If short, tighten stops. EURO uptrend continues, as does the Yen uptrend. The G-7 meeting this weekend should be crucial for the USD. NEXT WEEK: Options expiration week is up next. It certainly looks like it will be a wild week after a couple of weeks of low volatility. Monday kicks it off with March retail sales. Tuesday the core PPI, wednesday the core CPI and Beige book, then thursday leading indicators. Plus, earnings season will be well underway. Expecting lots of volatility.
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