Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
QE Forever: The Fed's Dramatic About-face - 21st Feb 19
Gold Technical Perspective – Why So Bullish? - 21st Feb 19
Sheffield "Mi Amigo" Memorial Fly Past at 8.45am on 22nd Feb 2019 - 20th Feb 19
Here’s The Real Reason You Stress About Money - 20th Feb 19
Five Online Marketing Predictions that will Matter in 2019 - 20th Feb 19
Has Gold Price Reached Upside Resistance Near $1340-1360? - 20th Feb 19
So Many Things are Not Confirming Stock Market Rally - 20th Feb 19
Forex Trading Management: The Importance of Being Prepared - 19th Feb 19
Gold Stocks are Following This Historical Template - 19th Feb 19
Here’s Why The Left’s New Economic Policies Are Just Stupid - 19th Feb 19
Should We Declare Emergency for Gold? - 19th Feb 19
Why Stock Traders Must Stay Optimistically Cautious Going Forward - 19th Feb 19
The Corporate Debt Bubble Is Strikingly Similar to the Subprime Mortgage Bubble - 18th Feb 19
Stacking The Next QE On Top Of A $4 Trillion Fed Floor - 18th Feb 19
Get ready for the Stock Market Breakout Pattern Setup II - 18th Feb 19
It's Blue Skies For The Stock Market As Far As The Eye Can See - 18th Feb 19
Stock Market Correction is Due - 18th Feb 19
Iran's Death Spiral -- 40 Years And Counting - 17 Feb 19
Venezuela's Opposition Is Playing With Fire - 17 Feb 19
Fed Chairman Deceives; Precious Metals Mine Supply Threatened - 17 Feb 19
After 8 Terrific Weeks for Stocks, What’s Next? - 16th Feb 19
My Favorite Real Estate Strategies: Rent to Live, Buy to Rent - 16th Feb 19
Schumer & Sanders Want One Thing: Your Money - 16th Feb 19
What Could Happen When the Stock Markets Correct Next - 16th Feb 19
Bitcoin Your Best Opportunity Outside of Stocks - 16th Feb 19
Olympus TG-5 Tough Camera Under SEA Water Test - 16th Feb 19
"Mi Amigo" Sheffield Bomber Crash Memorial Site Fly-past on 22nd February 2019 VR360 - 16th Feb 19
Plunging Inventories have Zinc Bulls Ready to Run - 15th Feb 19
Gold Stocks Mega Mergers Are Bad for Shareholders - 15th Feb 19
Retail Sales Crash! It’s 2008 All Over Again for Stock Market and Economy! - 15th Feb 19
Is Gold Market 2019 Like 2016? - 15th Feb 19
Virgin Media's Increasingly Unreliable Broadband Service - 15th Feb 19
2019 Starting to Shine But is it a Long Con for Stock Investors? - 15th Feb 19
Gold is on the Verge of a Bull-run and Here's Why - 15th Feb 19

Market Oracle FREE Newsletter

The Real Secret for Successful Trading

Stock Market Downtrend May Have Bottomed

Stock-Markets / Stock Markets 2012 May 26, 2012 - 11:22 AM GMT

By: Tony_Caldaro

Stock-Markets

Best Financial Markets Analysis ArticleMarkets rebounded this week after last week’s nasty selloff. Last week’s decline of SPX/DOW 3.9% was the largest weekly decline in six months. The previous one was the week of November 21, 2011: a 4.75% decline that marked the end of Major wave 2. Thus far, it looks like the recent selloff may have marked the end of Major wave 4. For the week the SPX/DOW were +1.20%, and the NDX/NAZ were +2.05%. Asian markets were flat, European markets were +0.6%, and the DJ World index gained 0.7%. On the economic front it was a mixed week. All five the publicly watched indicators were higher: existing/new home sales, FHFA housing prices, durable goods orders and consumer sentiment. Yet, four of the not so publicly watched indicators we track were all lower: the M1- multiplier, new home sale prices, the monetary base and the WLEI. The last week of May starts off with a US holiday, then is followed by a slew of economic reports. Q1 GDP, the Payrolls report and PCE prices highlight the week. Best to your week!


LONG TERM: bull market

While we entertained some alternates counts for the medium term last week. None of them suggested this Mar 2009 bull market was over. Even though the market hit a level which was about 2% lower than expected. It did hit a medium term oversold level that has only occurred once in each of the past four years. Each time this has occurred, the market has rallied about 100 SPX points within two weeks. Currently the market has only risen 36 points, 1292-1328, with a week to go. If this pattern prevails this week could be quite interesting.

Since the world’s markets are linked these days, and our OEW analysis covers twenty world indices. We thought it would be best to give a quick overview, by region, and alert everyone to the negative long term prospects in the majority of these indices. In Asia we track eight countries. Six remain in long term downtrends, and our smart money indicator has seven of these markets with negative outflows. The only real positive is Indonesia. In Europe we track seven indices. Six remain in long term downtrends as well, and five have negative outflows. The only real positive is England. Of the five that are left: the DJ World index, Brazil, Canada, Russia and the US. Four remain in long term uptrends, but three (the commodity indices) have negative outflows. The real positives here are the US, and oddly enough the DJ World index. With only 35% of the world’s market in long term uptrends, it will be a difficult task for these bull markets to make much more upside progress. Unless, of course, world markets change dramatically. Our bull market target remains SPX 1545-1586.

MEDIUM TERM: downtrend may have bottomed

Last weekend we noted the six corrections during this bull market have ranged from 7.4% to 22.0%, with 9.1% being hit twice. A week ago friday the SPX hit 1292, a decline from 1422 and exactly 9.1%. The decline in the SPX appears to have taken the form of a double three: a failed flat ending at 1359, a B wave to 1415, then a zigzag to 1292. Note the zigzag (1415-1292) equalled twice the length of the flat (1422-1359). During Major wave 2, a zigzag, wave C (1278-1159) equalled 1.5 times wave A (1293-1215). So we have alternation between the waves. Also note Major wave 2 declined 134 points (1293-1159), while Major wave 4 has declined 130 points (1422-1292). Symmetry. And, SPX 1292 represents a 50% retracement of the entire Major wave 3 uptrend from SPX 1159-1422. The market harmonics appear to point to SPX 1292 as a significant low.

The DOW, however, has taken on a different pattern. A five wave downtrend from 13,300 to 12,700, a three wave uptrend to 13,300, then another five wave downtrend to 12,300. This looks more like an irregular zigzag, with wave C equalling 1.618 times wave A. This wave activity also allows for a potential alternate count which was posted in last week’s weekend update. For now, we remain with the primary counts posted on the SPX and DOW.

SHORT TERM

Support for the SPX remains at the 1313 and 1303 pivots. Resistance is at the 1363 and 1372 pivots. Short term momentum ended the week right around neutral. The short term OEW charts signalled a potential positive swing on friday when the SPX traded above 1321. This is the first potential reversal since the C wave SPX 1415 decline began. As a result we labeled the recent low with a tentative green Major wave 4.

While the correction was unfolding between April and May. The DOW made a new intraday high for one day on May 1st, while the other three major indices did not. This signalled the end of its uptrend, and all four major indices then declined in unison. Last wednesday the DOW made a new, one day, intraday low for its downtrend while the other three major indices did not. This in reverse may have signalled the end of the downtrend and correction. Note after the high in May the markets moved very little for the first two days and then accelerated to the downside. After wednesday’s low the markets again moved very little for the next two days into friday’s close.

Short term support is at the OEW 1313 and 1303 pivots, with resistance at SPX 1324/28 and 1342/47. If our short and medium term count is underway the SPX should hold the OEW 1313 pivot range (1306-1320) during any further pullbacks. The SPX closed at 1318 on friday. Best to your trading and extended weekend!

FOREIGN MARKETS

The Asian markets were quite mixed on the week and ended flat. Only China is in an uptrend.

The European markets were mostly higher gaining 0.6% on the week. All indices in downtrends.

The Commodity equity group was also mixed on the week for a net gain of 0.5%. All downtrends here as well.

The downtrending DJ World index gained 0.7% on the week.

COMMODITIES

Bonds continue to uptrend but were flat on the week. The 10 yr yield is 1.75%.

Crude made a new low for its downtrend at $89.28 and has now corrected 19% from its early March $110.55 high. It declined 0.8% for the week. We are now observing a positive divergence on the daily chart, with the most extreme oversold condition since 2008 on the weekly chart.

Gold has remained in a downtrend for three months and lost 1.1% on the week. The most obvious count, since the $1924 high, is a contracting Major wave 4 triangle. This would also fit into the Silver long term count. A rally above $1675 should turn both metals positive again.

The USD continues to uptrend gaining 1.4% on the week. It is starting to display a negative divergence at extremely overbought levels. Should it start to weaken here its uptrend is likely over.

NEXT WEEK

Monday is a holiday. Tuesday we have Case-Shiller at 9:00, and Consumer confidence at 10:00. On wednesday Pending home sales. Thursday, Q1 GDP (estimate 1.9%), weekly Jobless claims, ADP and the Chicago PMI. On friday the monthly Payrolls report, Personal income/spending, PCE prices, ISM manufacturing, Construction spending, and monthly Auto sales. The FED has nothing scheduled for the week. Best to your 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 © 2012 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