By: Tony_Caldaro
The market started the week by making a new uptrend high on Monday, pulled back, made a new all time high on Thursday, pulled back, then ended the week within one point of the all time high. For the week the SPX/DOW were +0.60%, the NDX/NAZ were -0.75%, and the DJ World index gained 1.0%. Economic reports returned to a positive bias this week. On the uptick: retail sales, the NY/Philly FED, business inventories, the CPI, industrial production and capacity utilization, the NAHB housing index, and weekly jobless claims were lower. On the downtick: housing starts, building permits, the M1 multiplier and the WLEI. Next week more housing reports, durable goods orders and consumer sentiment.
LONG TERM: bull market
The market ended the week within one point of the all time high established on Thursday at SPX 1693. The bull market continues. Unfortunately, as we have been reporting, the US is one of the few, if not the only, bonafide bull market of the twenty international indices we track. When this bull market starts to stumble the thud will be heard worldwide.
We continue to count this bull market as Cycle wave [1] of Super cycle wave 3. Super cycle bull markets last 70 – 80 years. But Cycle [1] bull markets typically last about five years. We continue to expect five Primary waves to conclude before this bull market ends. Primary wave I and II completed in 2011, and Primary III has been underway since then. Primary I divided into the typical five Major waves, but had a subdividing Major wave 1. Primary III is also dividing into five Major waves, but both Major 1 and 3 are 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 Int. waves iii and iv completed by mid-2013. Intermediate wave v, of Major wave 3, of Primary III is currently underway. When this uptrend concludes a Major wave 4 correction will follow, and the market should lose about 10% of its value. After that we expect a Major wave 5 uptrend to new highs, concluding Primary wave III. Then after a Primary wave IV correction, a Primary wave V uptrend to new highs should complete the bull market. We continue to target the bull market conclusion by late-winter to early-spring of 2014.
MEDIUM TERM: uptrend
When this uptrend began at SPX 1560 in mid-June we projected a minimum target of the 1680 pivot for Minor wave 3, and the 1699 pivot for Minor wave 5. These targets were met this week when the SPX entered the 1699 pivot range. We had also projected a July uptrend high would probably end at the 1699 pivot, or an August uptrend high at the 1779 pivot. The question on some traders minds; “Is the market topping here, or preparing to extend into August?”
During the week we posted three potential short term counts to address this question. One of the three has already been eliminated. This leaves us with two potential counts: one posted on the SPX hourly chart, and the other on the DOW hourly chart. Both counts, as of Friday’s close are still valid. The SPX count suggests the uptrend is in the process of a forming a top. The DOW count suggests the uptrend will probably extend into August. The internal wave structure of this uptrend and the technicals, are the keys to this inflection point. Medium term support is at the 1680 and 1628 pivots, with resistance at the 1699 and 1779 pivots.
SHORT TERM
From the SPX 1560 Intermediate wave iv downtrend low we counted five waves up to SPX 1627, then a three wave pullback to 1605. This completed Minor waves 1 and 2. After that the market rallied quite strongly, in a five wave sequence, to SPX 1685. This could have ended Minor wave 3. The pullback that followed, however, was smaller than the 20+ points expected for a Minor wave 4 (1685-1672). From that low the market rallied to SPX 1693, and then pulled back on Friday to 1684 for another small pullback. During an Int. wave i or wave iii uptrend, we would consider this normal Minor wave 3 activity. However, since there have be several shortened fifth waves during this bull market. We can not assume this fifth wave will follow normal uptrend activity.
During this uptrend the smaller pullbacks, and there have been quite a few, have declined between 9 and 13 points. Minor wave 2 stands out as a 22 point pullback. From the Minor wave 2 SPX 1605 low the market has advanced into Friday’s close with four small pullbacks between the same 9 and 13 points. Normally, we would consider this rally an ongoing Minor wave 3. In fact, should the SPX rise above 1693 we would count this advance as an ongoing Minor wave 3. The count posted on the DOW charts. If it fails to clear SPX 1693, then the count posted on the SPX charts, a potential uptrend high, becomes the probable count.
Technically there are some negatives supporting a potential uptrend high scenario. The SPX/DOW have met the minimum requirements to complete this uptrend, and there are negative divergences on most timeframes. A strong rally, however, would clear them away. Currently, we would put the probabilities for the two scenarios at 50-50. Short term support is at the 1680 pivot and SPX 1658-1667, with resistance at the 1699 and 1779 pivots. Short term momentum ended the week overbought. The short term OEW charts remain positive with the reversal level now SPX 1675.
FOREIGN MARKETS
The Asian markets were mostly higher gaining 0.2% on the week. Australia, India and Japan are in confirmed uptrends.
The European markets were mostly higher gaining 1.9% on the week. England, France, Germany and Switzerland are in confirmed uptrends.
The Commodity equity group were all higher on the week gaining 3.3%. Canada and Russia are in confirmed uptrends.
The DJ World index is uptrending and gained 1.0% on the week.
COMMODITIES
Bonds continues to look like they are beginning to uptrend gaining 0.7% on the week.
Crude remains in an uptrend since April gaining 1.8% on the week.
Gold continues to work its way higher gaining 0.9% on the week.
The USD may be downtrending again losing 0.3% on the week.
NEXT WEEK
Monday we have Existing home sales at 10:00. Tuesday: FHFA housing prices. Wednesday: New home sales. Thursday: weekly Jobless claims and Durable goods orders. Friday: Consumer sentiment. A quiet week, with a quiet FED, ahead of the FOMC meeting on Tuesday/Wednesday of the following week. Best your weekend and week!
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