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
Silver Outlook Is 'Excellent' - 23rd July 19
Why The Coming Silver Rally Might Be The Greatest - 23rd July 19
We Are in for Decades of Ultra-Loose Monetary Policy - 23rd July 19
Gold & Gold GDX Stocks Ripping. What’s Next? - 23rd July 19
Stock Market Breadth Warning Signs for the Stock Market’s Rally? - 23rd July 19
U.S. Recession Watch: The Six-Cycle Forecast - 23rd July 19
US Dollar Index tightly wound between: US Bond Yields down on safety flows - 23rd July 19
Stocks Bull or Bear? The Market’s Message - 23rd July 19
This Dividend Aristocrat Is Leading the 5G Revolution - 22nd July 19
What the World Doesn’t Need Now is Lower Interest Rates - 22nd July 19
My Biggest 'Fear' For Silver - 22nd July 19
Reasons to Buy Pre-Owned Luxury Car from a Certified Dealer - 22nd July 19
Stock Market Increasing Technical Weakness - 22nd July 19
What Could The Next Gold Rally Look Like? - 22nd July 19
Stock Markets Setting Up For A Volatility Explosion – Are You Ready? - 22nd July 19
Anatomy of an Impulse Move in Gold and Silver Precious Metals - 22nd July 19
What you Really need to Know about the Stock Market - 22nd July 19
Has Next UK Financial Crisis Just Started? Bank Accounts Being Frozen - 21st July 19
Silver to Continue Lagging Gold, Will Struggle to Overcome $17 - 21st July 19
What’s With all the Weird Weather?  - 21st July 19
Halifax Stopping Customers Withdrawing Funds Online - UK Brexit Banking Crisis Starting? - 21st July 19
US House Prices Trend Forecast 2019 to 2021 - 20th July 19
MICROSOFT Cortana, Azure AI Platform Machine Intelligence Stock Investing Video - 20th July 19
Africa Rising – Population Explosion, Geopolitical and Economic Consquences - 20th July 19
Gold Mining Stocks Q2’19 Results Analysis - 20th July 19
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
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

Market Oracle FREE Newsletter

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

Stock Market Trifurcation

Stock-Markets / Stock Markets 2013 Oct 06, 2013 - 12:57 PM GMT

By: Tony_Caldaro

Stock-Markets

While the stock market acted like business as usual: the SPX opened the week at 1692 and ended at 1691. The US government shut down on Tuesday due to lack of a budget, and a potential default looms as the debt limit is less than two weeks away. The political circus – democrats v republicans – continue to push for next year’s election talking points, while holding the American public and the economy hostage. For the week the SPX/DOW were -0.65%, the NDX/NAZ were +0.55%, and the DJ World index was -0.4%. On the economic front negative reports outpaced positive ones for the first time in quite a while. On the uptick: the Chicago PMI, ISM manufacturing and Investors turned more positive. On the downtick: the ADP index, ISM services, the Monetary base, the WLEI and weekly Jobless claims rose. Next week we may, or may not, get reports on Retail sales, Consumer sentiment and the FOMC minutes. Best to your week.


LONG TERM: bull market

While most of us agree this is a bull market. After all the SPX/DOW recently hit all time new highs. The trifurcation between the DOW, SPX and NDX/NAZ has produced a number of general market counts in the blogosphere. Quite confusing for most we would imagine. At OEW we try to tune out all the noise created by following a number of indices and just concentrate on one. The bellwether. The index that has a one hundred plus year history, is not heavily traded in the futures markets, and gets quoted every night on the news: the DOW. Certainly we track the popular SPX, and even the other indices. But when the four major indices start taking on a life of their own we always rely on the DOW.

For this entire bull market the DOW has provided clean, clearly defined waves. The SPX, NDX and NAZ unfortunately have not. This trifurcation reminds us of 1999-2000. Then the major indices were like they are now: strength in the NDX/NAZ, weakness in the DOW, and the SPX caught up somewhere in the middle. When the DOW made its last downtrend of the bull market in late 1999 it bottomed at DOW 9976. The SPX hit 1234 and the NDX hit 2300. Then in January 2000 the DOW ended its bull market at 11750, gaining 18% in its last uptrend. The SPX looked like it was topping in January too but continued on to SPX 1553 by March, gaining 26%. The NDX was the reason. It topped in March 2000 at 4816, gaining 109% in the blow off dotcom bubble. Irrational exuberance. We all know what happened next.

The catalyst then was the “new economy” and easy money. Is the catalyst this time quantitative easing? There are quite a large handful of momentum stocks already selling at valuations that are discounting the next five to ten years of earnings growth. Twitter just filed for its IPO. They are not making any profits, nor have they made any profits, but they are valuing their company in excess of $9 billion. Sound familiar? It should. The way things currently look we could have quite a wild ending to this bull market.

For now we continue to track this five Primary wave Cycle wave [1] bull market in OEW terms. Primary waves I and II completed in 2011. Primary wave I divided into five Major waves with a subdividing Major wave 1. Primary wave III has also divided into five Major waves, but both Major waves 1 and 3 subdivided. Major waves 1 and 2 of Primary III completed by mid-2012. Major waves 3 and 4 completed by mid-2013. Major wave 5 was probably simple and just completed in September, ending Primary wave III. The recent decline appears to be Primary wave IV. When this concludes a simple Primary V uptrend should take the market to all time new highs to end the bull market. We are still expecting this to occur by late-winter to early-spring 2014 near the OEW 1779 pivot.

MEDIUM TERM: uptrend weakening

After the Intermediate wave iii, of Major 3, high in May all four major indices corrected into an Intermediate wave iv low in June. Since then, yes it has been that long, the NDX/NAZ have been displaying strength, the DOW weakness, and the SPX has been caught in the middle. We labeled the simple, five wave, Jun-Aug uptrend as Intermediate wave v ending Major wave 3. Then the market trifurcated. The DOW confirmed a downtrend and dropped 5.7%. The SPX dropped 4.9% and the NDX dropped only 3%. This is when a plethora of counts arrived on the EW scene.

While the downtrend was shorter than expected in the SPX/DOW. It was sufficient to trigger a downtrend which we labeled Major wave 4. Then the market shot right up quickly to new all time highs on non-taper rumors and the non-taper news. The day after the non-taper news the SPX/DOW made their highs and have been declining ever since. We can label that high as the end of Primary III, with Primary IV currently underway. The DOW has already dropped 4.9% and the SPX 3.5%. But the NDX/NAZ are less than 0.5% from their highs. Trifurcation.

For now we take the conservative count as posted on the SPX charts: Primary III done and Primary IV underway. We do offer an alternate count which is posted on the DOW charts. But until the SPX 1730 highs are exceeded we prefer the Primary IV underway scenario. Medium term support is at the 1680 and 1628 pivots, with resistance at the 1699 and 1779 pivots.

SHORT TERM

The decline from SPX 1730 looks like a double zigzag. The first zigzag, SPX 1730-1675, we labeled Minor a. The rally to SPX 1697 we labeled Minor b. Then the recent decline to SPX 1670 we labeled Minor c to complete Intermediate wave a. Under the Primary IV scenario we would expect a potential flat to form consisting of Major waves A, B and C. This first decline, SPX 1730-1670, should be the first wave of the three Intermediate waves creating Major wave A. Intermediate wave b, currently underway, is the second wave. Upside potential is SPX 1693 (38%), SPX 1700 (50%) and SPX 1707 (62%).

Short term support is at the 1680 pivot and SPX 1654-1665, with resistance at the 1699 pivot and SPX 1730. Short term momentum ended the week nearly overbought. The short term OEW charts are positive with the reversal level SPX 1688.

FOREIGN MARKETS

The Asian markets were mixed on the week for a net loss of 1.1%.

The European markets were also mixed but gained 0.8%. The FTSE is downtrending.

The Commodity equity group were mixed for a net loss of 0.7%.

The DJ World index is still uptrending but lost 0.4%.

COMMODITIES

Bonds appear to be uptrending but gained only 0.1% on the week.

Crude is downtrending but gained 0.9% on the week.

Gold is downtrending and lost 1.9% on the week.

The USD is downtrending as well and lost 0.1% on the week.

NEXT WEEK

Some of these reports may be delayed or not reported due to the government shutdown. Monday: Consumer credit at 3:00. Tuesday: the Trade deficit. Wednesday: Wholesale inventories and the FOMC minutes. Thursday: weekly Jobless claims, Export/Import prices, and the Treasury Budget. Friday: Retail sales, the PPI, Consumer sentiment and Business inventories. As for the FED there is a speech by FED governor Powell on Friday. Best to your weekend and week!

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

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 © 2013 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.

Tony Caldaro Archive

© 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