Elliott Wave TRIGGERS and TARGETS

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weekend update by tony caldaro
REVIEW

An interesting week. The market open higher every day this week, then sold off for the rest of the day. Except on wednesday and thursday it continued higher. Despite this choppy activity the DOW made a new bull market high, as the SPX/DOW were +1.30%, and the NDX/NAZ were +0.55%. Asian markets gained 0.9%, European markets gained 3.2%, and the DJ World index was +1.6%. Economic reports remained on the positive side, with upticks outpacing downticks seven to four. On the downtick: construction spending, factory orders, the monetary base, and jobless claims increased. On the uptick: ISM manufacturing/services, the ADP index, Payrolls, consumer credit, the WLEI, and the unemployment rate declined. Next week we get a look at the FED's Beige book and the twin deficits.

LONG TERM: bull market

For the past three and a half years investors have remained bearish-neutral, consumers have remained negative, and even the economy has looked like it was heading back into a recession twice. Yet the US stock market has continued to rise from its March 2009 low at SPX 667 to a recent high of SPX 1475. Recently consumers have remained negative, investors are back to neutral, but the economy is rebounding again. Typically, nearing bull market highs, consumers are positive, investors are extremely bullish, and the economy starts to weaken. If history repeats this bull market may continue to surprise many.



We continue to expect a five Primary wave, Cycle [1], bull market. Primary waves I and II were labeled complete in 2011 at SPX 1371 and SPX 1075 respectively. Primary wave III has been underway since that low. Primary I divided into five Major waves with a subdividing Major wave 1. Primary wave III has been following the same path. After a subdividing Major wave 1, Major wave 3 has now extended into its fourth month. Primary I's Major 3 was seven months long.

MEDIUM TERM: uptrend

After a somewhat choppy start this uptrend has progressed quite nicely. Intermediate waves one and two completed in June at SPX 1363 and SPX 1309 respectively. An extended Intermediate wave three divided into five Minor waves, which also subdivided, completing in September at SPX 1475. Intermediate wave four, somewhat more complex than Int. two, completed at SPX 1431 in September as well. Intermediate wave five has been underway since that low. When Int. wave five concludes this uptrend, Major wave 3, should end as well.



We have calculated some upside targets using both our long term OEW pivots and the Fibonacci wave relationships. The first objective, is naturally, to make new highs above SPX 1475. The first area of resistance then becomes the 1499 OEW pivot. The next level of resistance is the OEW 1523 pivot, and the Fibonacci target range SPX 1527-1534. After that we have two more OEW pivots: 1552 and 1576. Should the uptrend continue higher we have another series of Fibonacci wave relationships at SPX 1586-1606. For now we will be conservative, and project an uptrend high at the OEW 1523 pivot or the Fibonacci 1527-1534 range.


Medium term support is at the 1440 and 1386 pivots, with resistance at the 1499 and 1523 pivots. As an uptrend nears its conclusion we will often notice technical weakness in various sectors. Currently we see no signs of this. All nine of the SPX sectors are in uptrends, market breadth is close to new highs, and 19 of the 20 foreign markets we track are in uptrends. In our chart review we have also noticed Greece has put in a substantial, possibly bear market, low, and the Baltic Dry Index may have done so recently as well. Longer term the worldwide economy appears to be gaining traction.



SHORT TERM

Short term support is at the 1440 pivot and SPX 1422/27, with resistance at SPX 1463/64 and the 1499 pivot. Short term momentum hit quite overbought on friday before declining to nearly oversold. The short term OEW charts remain positive from SPX 1447, with the swing level now at 1453.



After we counted SPX 1431 as the Intermediate wave four low, we have observed a series of rallies and pullbacks. The first rally and pullback, SPX 1450-1436, we have labeled Minor waves 1 and 2. Next we observe a rally to SPX 1457, a pullback to 1439, a rally to 1471, and then a pullback to 1457 on friday. This entire sequence should be part of a dividing Minor 3. Should SPX 1457 be breeched to the downside, then Minor wave 3 will be subdividing even further. For the market to invalidate this count the SPX would have to drop to 1439. Once the market clears the current resistance at SPX 1463/64, by closing above it, the uptrend should resume. Best to your trading!

FOREIGN MARKETS

The Asian markets were mostly higher on the week for a net gain of 0.9%. Only China, which is on holiday, remains in a downtrend.

The European markets were all higher on the week for a net gain of 3.2%. All uptrends here.

The Commodity equity group were mixed on the week for a net gain of 0.6%. All uptrends here as well.

The DJ World index remains uptrending and gained 1.6% on the week.

COMMODITIES

Bond prices continue to downtrend losing 0.4% on the week. Prices and yields have been quite choppy lately.

Crude is downtrending and remains volatile losing 2.3% on the week. Currently we are observing a positive divergence at wednesday's $87.70 low.

Gold remains in an uptrend since June, and gained 0.6% on the week. Negative divergences are beginning to set up, as Gold has hit resistance and is extremely overbought on the weekly chart.

The USD remains in a downtrend losing 0.8% on the week. The uptrending EUR gained 1.4%, and uptrending JPYUSD lost 0.9%.

NEXT WEEK

A relatively quiet economic week ahead. On wednesday: Wholesale inventories, the Budget deficit and the FED's Beige book. Then on thursday: weekly Jobless claims, the Trade deficit and Export/Import prices. On friday: the PPI and Consumer sentiment. The FED gets active again starting with a speech by FED governor Tarullo on wednesday after the market close. Then on thursday a speech by FED governor Stein, and a panel discussion by FED vice chair Yellen. Best to your week!

CHARTS: http://stockcharts.com/public/1269446/tenpp