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weekend update

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REVIEW
The market held up fairly well after a series of mixed economic reports. Employment dropped for the sixth month in a row, but unemployment remained at 5.5%. The weekly jobless claims increased to 404,000. ISM manufacturing and services are both fluctuating around neutral. For the week the SPX/DOW were -0.85%, and the NDX/NAZ were -2.55%. Bonds gained 0.3%, Crude made new highs +3.6%, Gold was +0.3%, and the Euro lost 0.6%.

LONG TERM: bear market
The equity bear market that started in October 2007 continues, as both the SPX and DOW made new bear market lows this week. The weakest sectors, housing and banking, continue to drag the market lower as their respective indices (HGX, BKE, XLF) made new bear market lows as well. The broader based NYAD also made new lows, confirming that overall market breadth continues to decline. Many of the other major indices; NDX, NAZ, WLSH, NYA, R2K, SOX, TRAN have not made new lows yet. Counting from the October high at 1576, the SPX has now retraced more than 38.2% of the entire 2002-2007 bull market, and 61.8% of the Primary wave V advance from 2004. Primary wave V, we estimate, will be entirely retraced. At SPX 1170 the bear market will have retraced 50% of the bull market, and at SPX 1070 it will have retraced 61.8%. We expect the FED to again get aggressive at 1170 and then 1070, just as they have at 1370 and then 1270. Our January projection for this leg of the bear market remains on track, (see photo section). With Major waves A and B completed, Major wave C continues to unfold.
MEDIUM TERM: downtrending
Referring to our long term SPX count, posted in stockcharts. The Major wave A decline consisted of three Intermediate waves (abc). Intermediate wave A was 170 points (1576-1406) and Intermediate wave C was about 250 points (1524-1270). An irregular Major wave B followed into the May high, and also traveled 170 points (1270 to 1440). Thus far this downtrend, Intermediate wave A, has already traveled 188 points (1440-1252) as of friday. Should it continue to trend lower, the next stop based on the symmetry of this bear market, would be around SPX 1190 (1440-250). This is just above an OEW pivot at 1179, and right near the next estimated FED panic level of SPX 1170. Trying to catch bottoms in bear markets can often be hazardous to your wealth. Since nearly every one of the downtrend bottoms thus far, have been triggered by massive FED intervention. This one may not be any different. Remember, the objective is to sell bear market rallies, and buy bull market corrections. When this downtrend does bottom, it is not a buy, unless you are a short term trader.
SHORT TERM: correction keeps extending
Support for the SPX remains at 1261 and then 1240, with resistance at 1287 and then 1316. Short term momentum closed above oversold on friday and the near term indicators are again declining. The short term count on the SPX remains the same, and is displaying some symmetry too. Minor waves 1-2-3-4 completed in mid-June at SPX 1367. Then Minute waves i-ii-iii-iv appear to have completed at thursday's open at SPX 1292. Minute wave v broke through support at the 1261 pivot on friday, and support is now near the 1240 pivot. Since Minor wave 5 did not hold the SPX 1258 fibonacci relationship (W5 = W's 1 thru 3). The next fibonacci relationship is at SPX 1246 (W5 = 1.618 times W3). With an OEW pivot at 1240, this level has a good chance to hold. If it doesn't the next standard fibonacci relationships do not appear until the SPX drops under 1200. Also, if the pivot at 1240 fails to hold, the next two pivots are at SPX 1219 and then SPX 1179. Not good news for the permabulls. Personally, I'm an optimist, the glass is always half full. Objectively, I just follow OEW and let the market dictate where it's heading. Anticipate and then observe.
FOREIGN MARKETS
The Asian markets remain in downtrends, and all but Japan's NIKK and Hong Kong's HSI have made new lows. China's SSEC continues to struggle.
The European markets remain in downtrends but neither the FTSE nor the DAX have made new bear market lows yet.
The Commodity markets, Canada and Brazil are both in downtrends too.
COMMODITIES
Bonds have been downtrending since Mid-March, and not even a selloff in the stock market has helped much. Bear market continues.
Crude again made new highs this week $145, as the uptrend since February continues. The next fibo targets are at $147, $158, and $164. Bull market continues.
Gold is working its way higher in an uptrend. Expecting new highs soon in its bull market.
The Euro/USD is certainly at an inflection point. If the USD breaks below 70.70 the bear market resumes, and the USD will continue to lose its standing as the world's reserve currency.
NEXT WEEK
On tuesday, May pending home sales and wholesale inventories are reported in the morning, then consumer credit in the afternoon. Then thursday provides the weekly jobless claims. On friday the Trade deficit, import price index, and consumer sentiment in the morning, and the Budget deficit in the afternoon. For the FED it's Bernanke week. On tuesday, before the open, the FED chair speaks at the FDIC forum. Then on thursday he gives testimony at 10:00 to Congress, the subject regulatory restructuring. Maybe he can explain why the FED allowed the housing market to boil over, while US banks duped the entire international banking system with its securitized mortgage ponsi scheme. The FED should NOT be given more power, as Treasury Secretary Paulson has proposed. Quite the contrary! All of its power should be removed, and the FED should be placed under the total control of Congress as written in Article I, section 8 of the US Constitution: "The Congress shall have the power ... to coin money, regulate the Value thereof..." The FED should be federalized. Happy Independence day!    


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