REVIEW
The week started off with a meltdown in Europe. They lost 4.35% on monday while the US markets were closed. When the US market opened on tuesday, it gapped down losing about 3%, made the low for the week, rallied nearly 6% from that low, then ended the week with another meltdown in Europe (-3.20%) closing about 1% above the low for the week. Economic reports for the week were sparse with positives edging out negatives four to three. On the plus side: ISM services, consumer credit, the trade deficit and wholesale inventories all improved. On the negative: weekly jobless claims rose, and both the monetary base and the WLEI declined. For the week the SPX/DOW were -1.95%, and the NDX/NAZ were -0.35%. Asian markets lost 2.4%, Europe was -3.9%, the Commodity equity group slid 1.8%, and the DJ World index lost 3.3%. This week we have a plethora of economic reports and it’s Options expiration week.
LONG TERM: bear market highly probable
We have been posting every day, for some time now, “bear market highly probable”. What this means is that we suspect we are in a bear market, by the wave patterns, but it has not yet been confirmed by OEW’s quantitative analysis. The March 2009 to May/July 2011 bull market unfolded in five quantified waves. This is quite clear. We have counted these waves as five Primary waves, expecting this first bull market off the Mar09 Supercycle low to be of a Cycle wave degree. Historically Cycle waves can last anywhere from one (1973-1974) to thirty-three years (1974-2007). The shorter ones are typically bear markets, and the longer ones bull markets.
The recent two year bull market we have currently labeled Cycle wave [1]. It should be followed by a Cycle wave [2] bear market which could end anywhere between 2012 and 2016. We are currently expecting either 2012 or 2014. Both are tech cycle low years, and 2014 is a 4-year presidential cycle low year. Fibonacci relationships suggest a potential low at three specific areas: 38.2% retracement at SPX 1102, (which we already hit exactly); 50.0% retracement at SPX 1018, (which is within a few points of the Primary wave II 1011 low); and 61.8% retracement at SPX 935. Currently we are targeting the Primary wave II low area. We’ll see how the market looks, technically, as it approaches.
MEDIUM TERM: downtrend may have bottomed at SPX 1102
The current downtrend, OEW has not confirmed an uptrend yet, started in early July at SPX 1356. We counted three Intermediate waves down into the early August SPX 1102 low, then a potential 4th wave at SPX 1208 in mid-August, and a potential 5th wave failure at SPX 1121 to end Major wave C. We then expected an abA-B-abC wave uptrend lasting about two months. Thus far the market has followed that scenario.
The abA wave unfolded with a rally to SPX 1191, a pullback to 1136, and then a rally to 1231. The B wave followed with a decline to SPX 1140. Now the ab of the abC appear to be unfolding with a rally to SPX 1204, then a pullback to friday’s 1148 low. What should follow next is a rally to a higher high than SPX 1231. We’re sticking with this scenario but we do see a potential problem.
Typically during this type of wave setup the market internals should improve dramatically. At the lows the percentage of stocks above their 200 dma dropped to 10%. This signalled an extremely oversold condition even for a bear market. Since that low the percentage had risen to 30%, then dropped recently to 20%. We would have expected a more significant improvement in the area of 40% to 50% during this type of wave setup. Thus far it has not occurred. Should the market internals continue to deteriorate it would indicate that the recent rally from 1102/1121 is not the beginning of an uptrend, but an Intermediate wave iv with Intermediate wave v underway now. We have posted this alternate count on the DOW charts. The next fews days of trading should clear up this situation.
SHORT TERM
Support for the SPX is at 1146 and then 1136, with resistance at 1168 and then 1176. Short term momentum is quite oversold. When we review the wave activity since the SPX 1121 low we find the waves to be quite similar. The length of the waves in the abA were: 70 – 55 – 95. Then after the B wave, the length of the abC have been: 64 – 56.
Should the recent SPX 1148 low fail to hold, and the OEW 1146 pivot fail to hold as well, then the similarity would have been broken and the alternate DOW count would come into play. This would suggest that Intermediate wave iv topped at 1231, and the market is now in a Minor 1-2-3 down of Intermediate wave v. Should the 1146 pivot hold support the market would have to rally above the 1176 pivot to turn the short term OEW charts positive again, and the C of the abC would be underway. Since the market closed at SPX 1154 on friday we should know soon either way. Best to your trading!
FOREIGN MARKETS
The Asian markets were mostly lower on the week for a net loss of 2.4%. India’s BSE was the only gainer.
The European markets were also mostly lower losing 3.9%. Switzerland’s SMI gained 1.3%.
The Commodity equity group were all lower for a net loss of 1.8%.
The DJ World index lost 3.3% on the week, and remains in a downtrend along with all the world’s indices.
COMMODITIES
Bonds lost 0.2% on the week but remain in an uptrend as 10YR rates made a new record low at 1.90%. The 30YR yield ticked down to 3.19%.
Crude gained 0.4% on the week in what appears to be a choppy uptrend.
Gold has been quite volatile lately losing 1.4% on the week. We expected it to correct but this uptrend has been quite resilient. Silver, which has been lagging, lost 4.2% on the week.
The USD continued its uptrend in earnest this week gaining 3.3%. The downtrending EUR lost 3.9%, and the JPY lost 0.9%. The bullish 17-year Supercycle in the foreign currencies appears to have rolled over.
NEXT WEEK
Tuesday kicks off a busy economic week with Import/Export prices and the Budget deficit. Then wednesday we have the PPI, Retail sales and Business inventories. On thursday the weekly Jobless claims, the CPI, the NY and Phily FED, and Industrial production. Then on friday Consumer sentiment and Options expiration. The FED has two speeches scheduled, at their headquarters, on thursday. First chairman Bernanke in the morning, and then FED governor Tarullo in the afternoon. The next FOMC meeting in on September 20th and 21st. Also, the G 7 is meeting this weekend. Best to your weekend and week!
CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987
the ELLIOTT WAVE lives on 
RSI’s +D on Tony’s 60 min. Thanks Tony.
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+ 1136 pivot time again with an impulse up on the 5 minute 😛
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Get back to work!
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I can do this in my sleep 🙂
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So that’s where you get your market signals 😉
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haaaaaa I will
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Thanks Lee!
See? U were right that we were gonna miss you. .. 🙂
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Hi Tony!
Thanks for your effort! Been reading your posts for at least four year. First time asking you a question. Is it possible that the move from 1230 to 1136, whit divergence, is abc in (major) b? Then we should reach 1240,1261 or 1291?
Thanks again Tony!
/PD
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Welcome PD, Yes, we were just discussing that possibility.Difficult market.
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Just in case: IF interm 5 from 1231 is unfolding, I think 1204-1136 may be minute 1 or minor 3. So I would expect some kind of an extended Interm 5.(related to Interm 4) i.e: 2.62 of I4=338 (+/- 10%)…target: 860-926
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pde11: thanks for your comment. Also, the R2K is still above the low of a few days back while DJIA and SPX are below. If that divergence holds => positive. Often R2K leads.
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Back 5 weeks ago, even when most were bearish, I mentioned that 1102 was a very important support and should hold the market for at least 1-2 months. (I insisted several times). Thats what I saw at that moment. And I still think this support should hold for abt 1-2 more weeks.
Then I thought 1102 could be wave A and 1231 wave B. With two possible targets for wave C: 935-989 or 750-840.
So lately, I’ve been trying to fit that forecast with Tonys prefferred count.
I see only one chance left: We have a truncated major C wave at 1204 and C is already unfolding.
IF we had 5 waves up from 666 to 1371. Then I think we should not have 5 waves down below 1000. That may suggest wave 1 of 5 is unfolding instead of wave A.
Tony, I would appreciate your opinion. Thanks.
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M1, So far we have had three waves down from SPX 1371.Until we get an uptrend confirmation, we’re still in wave three … second decline.Now this decline can be counted as an abc, or a 1-2-3, but nothing more than that at this time.Should we do get five waves down the bear market will not end there.Bear markets are not five waves.Hope this helps.
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Thanks Tony, you are right. But I thought we were expecting 3 primary waves ending at some place below 1000 and we have had only 3 major waves. ..OR these are not major waves anymore ??
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Still Major waves.The count remains the saem.
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Gotta hold 1141 in SPX and rally back over 1150 to setup a W3 up into the close..
http://www.wavegenius.com/2011/09/12/251pm-elliott-wave-midday-update-video-for-9-12-11-gotta-hold-1140-1141-and-rally-back-over-1150-to-setup-a-w3-up/
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I find it interesting that, 1)everybody seems to be looking at the broken support at 1140 (here, cnbc, elsewhere) and yet, 2) the selloff refuses to accelerate. In fact, buyers seem to come in. Everybody already positioned for the break perhaps? Or everybody looking at the same thing so it doesn’t happen?
Maybe I’m just reading to much into the micro-moves and we’ll tank tomorrow…
I know in credit mkts (in which i work) the fear still seems to be of missing the rally. Folks are quick to cover their shorts and very late to put them on. Maybe that just speaks to persistent (misplaced) bullishness that needs to be washed out and supportive of further lows. But interesting nonetheless.
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I agree with RC anecdotally, I am surrounded by guys looking to put money to work. But anecdotal evidence only works for “Climate Change”…We will see soon enough…Looks like we are testing the break of the channel at 1150, no one expected it to go straight down after the break..Might just be working off oversold levels before breaking lower again.
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You could be right re: just working off oversold. Afterall, on 8/3, the day when the SPX broke the neckline, we closed up and back above the level on the day. Shorting at that close proved to be near perfect timing.
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We are hitting for the 4th times 1142 today. Quadruple bottoms rarely happen, it looks like we break down from here…. What do you think?
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Too late we already did
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Isn’t 1,138.88 still within 1146 pivot?
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Yes, but it hit 1138.09 … which is not
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Boy I am glad I am good at my day job, this market ain’t easy. I went short at the break of 1140, so I would bet the house on a rally here…
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Tony, SPX has 5 waves from 1347 to 1102. So I guess NDX should also have 5 waves from 2438 to 2034, right ?. ..and from 2034 to 2268 looks like we have 3 corrective waves.
So I wonder if there is any chance that 2034 was actually Major A/1 and 2268 major B/2 ?..
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M1,The NDX is not in sync with the SPX.SPX topped in May, NDX July.Each is moving on its own, being swayed by the other.
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