final post for the weekend - see you all later. latest from my fav. e-wave dude:
REVIEW Economic reports last week were mostly negative. Housing starts reached their lowest level since WW II. The manufacturing Empire index and Philly FED dropped about 50% lower than last month, and year over year inflation hit its lowest level since 1955. The President signed his much heralded 1100 page fiscal stimulus plan, which was approved by the House and Senate without hardly a review. The market was not impressed and dropped 4.6% that day. Bank stocks were under serious selling pressure all week: Citigroup lost 44% trading under $2, BAC dropped 32% trading under $3, WFC dropped 31% trading under $9, COF and USB also traded below $10. Most of the others declined about 15%. As a reminder, the $10 level is the first sign that a bank is in trouble. When it drops below $5 it's not likely to survive in its current form. For the week the SPX/DOW were -6.55%, and the NDX/NAZ were -5.65%. Asian markets dropped 5.2%, Europe dropped 8.1% and the Commodity equity markets dropped 7.8%. Bonds gained 0.5%, Crude rallied 4.6%, Gold hit $1,000 again +6.4%, and the Euro lost 0.5%. LONG TERM: bear market Since the bull market high in October 2007 the DOW has dropped 49%, the SPX 53% and the NDX/NAZ 55%. And yes, OEW generated a long term sell signal in the beginning of January 2008. That sell signal still holds. While tracking this bear market we started by labeling it as a series of abc's. Then well into 2008 we realized a potential alternate large abc count and posted it on the DOW charts. For the past several weeks we have been preferring that alternate count, and it was confirmed this week with the DOW making new bear market lows. As a result we have updated the SPX count, and a few others, to reflect this preferred count. The NDX/NAZ remain with the original series of abc's count, nothing has changed for those indices. It should be a lot easier to follow along now since the SPX/DOW have the same counts. Recapping the bear market thus far. We count five waves down into the March 08 low, this is labeled Major wave A. A two month rally into the May 08 high is labeled Major wave B. This is followed by another five waves down into the recent lows which will be labeled Major wave C and Primary wave A. Upon completion of this downtrend in the general market we are still expecting a 50% bear market retracement rally. This would be labeled Primary wave B. Upon completion of that counter-trend advance the market should likely retest the lows to end the bear market and Primary C. Until this entire structure unfolds we remain long term bearish. MEDIUM TERM: downtrend As noted above Major wave A consisted of five waves: Nov-Dec-Jan-Feb-Mar. Major wave B rallied into May. Major wave C is also unfolding in five waves: Jly-Aug-Nov-Jan-current downtrend. The current downtrend, which will end Major wave C and Primary wave A, appears to be in or completing wave 3: wave 1 SPX 804, wave 2 SPX 875, and wave 3 at the recent low SPX 754. The daily and hourly RSI are both quite oversold, and there was a very short term positive divergence on the Globex futures charts. When this downtrend does end, we will be expecting positive divergences on all timeframes: hourly, daily and weekly. We posted a fibonacci target range last week SPX 680-725, which aligns with the OEW pivots of 696, 717, and 734. This range makes sense if there is a simple equality relationship between Intermediate wave one and Intermediate wave five, or a diagonal triangle forms. Should this range not hold the next two pivots display large gaps to the downside as they are at SPX 644 and 606. We'll need to follow this downtrend day by day for signs of an impending bottom. We certainly do not want to miss a potential 50% retracement rally. Especially after the market has already dropped from SPX 1576 to 741. Our upside target for Primary wave B remains at SPX 1107 to 1179. SHORT TERM: wave 3 Support for the SPX remains at 768 and then 734, with resistance at 789 and then 848. Short term momentum was extremely oversold at friday's lows and ended the day near neutral. Daily momentum is also as oversold as it usually gets during this bear market, but it could drop a bit further. Since wave one was 140 points (944-804), and third waves usually equal or exceed first waves. Probably suggests that wave 3 will drop further in the coming days, i.e. wave 3 = wave 1 @ SPX 735. The low thus far is SPX 754 on friday. On a positive note. Once this downtrend ends we should see the best rally of the bear market. Suggest creating a potential shopping list. Of the nine SPX sectors; XLB, XLE, XLK, XLU, XLU, and XLV remain above their bear market lows. But only XLK (tech), XLV (healthcare) and XLU (utilities) have positive patterns at this time. XLB (materials) and XLE (energy) are extremely oversold, and could respond quite favorably to a market rally. FOREIGN MARKETS The Asian markets have generally held well over the past few months. Australia's ASX is building a base, as is India and Hong Kong, while China outperforms. The European markets, as usual, are in line with the US indices. Germany's DAX is making new lows, but England's FTSE is holding well. The Commodity equity markets are mixed. Canada's TSX is close it its lows and Brazil's BSVP is outperforming. COMMODITIES Bonds had a volatile week swinging nearly one point every day. Expecting the Bond rally to resume. Crude was quite volatile as well, and remains in a downtrend. Gold rallied over $1,000 for the first time since March 08. Uptrend still underway with resistance around the previous high: $1,034. The currencies had their typical volatile week with most of the action again occurring on friday. USD-up and Euro-down remain the trends. NEXT WEEK On tuesday Case-Shiller reports the change in december Home prices. Professor Shiller, btw, was not impressed with the Mortgage Relief bill. Also on tuesday Consumer confidence. On wednesday Existing home sales. Thursday we have the weekly Unemployment claims, Durable goods, and New homes sales. Then on friday the first revision to Q4 GDP, the Chicago PMI and another Consumer sentiment reading. As for the FED, governor Duke gives a speech on tuesday, and chairman Bernanke addresses Congress on tuesday and wednesday. Best to your week!
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