Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Stock Market Downtrend Could Make a Double Bottom

Stock-Markets / Stock Markets 2011 Aug 07, 2011 - 05:55 AM GMT

By: Tony_Caldaro

Stock-Markets

Best Financial Markets Analysis ArticleIn the US, the market recovered from its midday low on friday to close mixed but still posted the worse weekly decline since the early May 2010 flash crash. Europe, however, was not that fortunate and ended the week with their worse weekly decline since November 2008. The SPX/DOW lost 6.5%, and the NDX/NAZ were – 7.6%. Asian markets performed best losing 5.4%. While Europe lost 10.6%, the Commodity equity group lost 8.5%, and the DJ World index dropped 8.8%. We now have six of the fifteen international indices we track in confirmed bear markets, with the rest likely to follow.


On the economic front reports ended the week mixed. On the positive side: construction spending, personal income, auto sales, the payrolls report, consumer credit and the WLEI all improved. On the negative side: ISM manufacturing/services, personal spending, the ADP index, and factory orders all declined. The unemployment rate nudged lower, while weekly jobless claims nudged higher. Next week all eyes will be on tuesday’s FED FOMC meeting. The twin deficits and retail sales will also be reported.

LONG TERM: bear market highly probable

For quite a while now we have been reporting on the technical deterioration in the foreign markets, and the negative divergences in 75% of our long term indicators. These repeated warnings came to fruition this week as markets worldwide tumbled. We hope most heeded the call, beginning about three weeks ago, to take a defensive investment posture until the inflection point resolved itself. Fortunately, it resolved itself on monday with the market about 5.5% off its closing high. Unfortunately, it projected a new bear market and by friday the market ended 12.1% off the closing bull market high. So what’s next?

We’re expecting a long term downtrend to be confirmed by OEW analysis in the near future. Until then we have a wave structure, and now a drastic decline, that supports the new bear market scenario. The bull market of March 2009 advanced in five Primary waves to complete Cycle wave [1]. Primary wave I divided into five Major waves, and Primary waves III and V did not. They were simple structures. A Cycle wave [2] bear market should now be underway.

Initially we estimate this bear market could take between one and three years. If one year it should bottom in either Q3 or Q4 of 2012, along with the 2-year Tech cycle. If three years it should bottom in Q3 or Q4 of 2014, along with the next Tech cycle low and the 4-year Presidential cycle. In regard to price. Typically corrections to bull markets find support at the previous 4th wave of a lesser degree if the fifth wave was strong. This one was quite weak, so support notches down to the low of Primary II at SPX 1011. However, since this should be a Cycle wave bear market it could drop as low as the low of Major wave 2 of Primary I at SPX 869. We have a green line posted at that level on the above weekly chart. A decline of this nature would represent about a 70.7% retracement of the bull market, and a total loss of about 37% for the stock market. Project, monitor and adjust when necessary.

MEDIUM TERM: downtrend low SPX 1168

The bear market in the SPX/DOW started in early May. Kudos to several in our group who called it, we posted their counts. The bear market in the NDX/NAZ started in late July. During that month is when we publicly started to turn bearish. Since we mainly cover the SPX/DOW our report will continue based on that wave structure.

The first decline in the SPX from May-June was 113 points (1371-1258), we labeled it Major wave 1/a. Since this is the beginning of a bear market we can not determine, in advance, if the larger three wave structure will take the form of a 5-3-5, or an abA-B-abC complex three. Remember bull markets unfold in five waves, and bear markets in three waves. The counter-trend rally from June-July was 98 points (1258-1356), we labeled it Major wave 2/b. This uptrend retraced an unusually high 87% of the previous downtrend. The reason for this is the NDX/NAZ had to complete their bull markets by making new highs. When the current downtrend began, early July for the SPX and late July for the NDX, it started in a gradual manner like the first downtrend of the bear market. When it broke through the March (SPX 1249) and June (SPX 1258) lows on wednesday it accelerated to the downside on thursday/friday. At friday’s low this downtrend had already declined 188 points (SPX 1356-1168). Marking the total correction, thus far, from the SPX 1371 bull market high at 14.6%.

At friday’s low, SPX 1168, the market found support at the Major wave 4 low of Primary wave III (SPX 1173). This is very important support, in that, it represents a bit more than a 1.618 relationship to wave 1/a, hit the OEW 1168 pivot exactly, and the hourly chart displays the most oversold condition since November 2008. Should this level fail to hold, Fibonacci analysis suggests the next important levels of support for are at SPX 1130 (wave 3/c = 2.0 wave a) and SPX 1060 (wave 3/c = 2.618 wave a).

SHORT TERM

Current support for the SPX is at 1187 and then 1168, with resistance at 1222 and then 1240. Short term momentum displayed a positive divergence at friday’s low and the market responded with its best rally (46 points) since this current decline began from SPX 1347. We have been labeling this downtrend as a five wave sequence: Intermediate wave i SPX 1296, Int. wave ii SPX 1347 and Int. wave iii underway. We tentatively placed an Int. iii green label at the SPX 1168 low. The market would, currently, have to go sideways for several days or get above the OEW 1240 pivot to help confirm that count.

Should this occur the downtrend could make a double bottom around the OEW 1168 pivot and conclude. If not, we could hit the October 2008 extreme oversold condition of the last bear market. With the S&P downgrade of US debt to AA+ on friday night, the FED’s response: http://www.federalreserve.gov/newsevents/press/bcreg/20110805a.htm, and the FOMC meeting on tuesday. This event could possibly be used as an excuse for QE 3. Europe’s ECB just started another QE program by pledging to support the bond markets in Spain and Italy. The next few days should prove to be quite interesting.

FOREIGN MARKETS

The Asian markets were all lower on the week, are all downtrending, and lost 5.4%. Australia, China and Japan are in confirmed bear markets.

The European markets all dropped quite hard this week, all are downtrending, and lost 10.6%. Spain, Switzerland and the Stox are in confirmed bear markets.

The Commodity equity group were also hit quite hard, all downtrending, and lost 8.5% on the week. Brazil remains in a confirmed bear market.

COMMODITIES

Bonds are uptrending and benefitted from the stock market turmoil +1.6% on the week. 10-Year yields dropped to a yearly low of 2.43%. The 1-Year hit a record low of 0.11% yield.

Crude was hammered this week losing 9.7% and remains in a downtrend. May need QE 3 to resume its bull market.

Gold is uptrending and also benefitted from the turmoil, gaining 2.2% on the week. Silver, however, lost 3.9% on the week suggesting we may have seen the current uptrend highs for these metals. Either way this bull market continues.

The downtrending USD also benefitted from the turmoil and the BOJ currency intervention, gaining 1.0% on the week. The EUR/USD lost 0.8% and the JPY/USD lost 2.0%.

NEXT WEEK

Tuesday kicks off the economic week with the Q2 Productivity report and the FED’s FOMC statement that afternoon. There may be another press conference. Wednesday we have Wholesale inventories and the Budget deficit. Then on thursday the weekly Jobless claims and Trade deficit. On friday, Retail sales, Consumer sentiment and Business inventories. Nothing yet on the FED’s agenda except the meeting. Be careful with your investment dollars, markets drop a lot faster than they go up. Best to your weekend and week!

CHARTS: http://stockcharts.com/...

http://caldaroew.spaces.live.com

After about 40 years of investing in the markets one learns that the markets are constantly changing, not only in price, but in what drives the markets. In the 1960s, the Nifty Fifty were the leaders of the stock market. In the 1970s, stock selection using Technical Analysis was important, as the market stayed with a trading range for the entire decade. In the 1980s, the market finally broke out of it doldrums, as the DOW broke through 1100 in 1982, and launched the greatest bull market on record. 

Sharing is an important aspect of a life. Over 100 people have joined our group, from all walks of life, covering twenty three countries across the globe. It's been the most fun I have ever had in the market. Sharing uncommon knowledge, with investors. In hope of aiding them in finding their financial independence.

Copyright © 2011 Tony Caldaro - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules