Tony Caldaro | Jan 11, 2014 02:51PM ET
REVIEW
Quite a choppy week. After Monday’s SPX 1824 low we counted seven small waves between SPX 1830 and 1843. Net progress for the week was mixed in the SPX/DOW, the NDX/NAZ was +0.85%, and the DJ World index gained 0.6%. On the economic front positive reports remained in control. On the uptick: factory orders, the ADP index, wholesale inventories, the WLEI, long term investor Sentiment; plus the unemployment rate, weekly jobless claims and the trade deficit all improved. On the downtick: ISM services, consumer credit, monthly payrolls, and the monetary base. Next week lots of economic data, highlighted by the FED’s beige book, Retail sales, the CPI/PPI and Industrial production. Best to your week!
LONG TERM: bull market
With the unemployment rate dropping to 6.7% this week. It certainly looks like QE 3 tapering will probably be given a steady diet of $10bn per FOMC meeting throughout 2014. This suggests the QE3 program, which started tapering this month, will end by November. Should this be the case we should start looking for a bull market high, providing a complete five wave pattern appears, by August/September/October.
MEDIUM TERM: uptrend
We continue to count this uptrend as Major wave 5 from the August low in the SPX, and October low in the DOW. The trifurcation of the US major indices is the reason for the differences. We have counted an Intermediate wave one, from SPX 1627-1814, then an Int. two to SPX 1768. Intermediate wave three has been underway since then.
We have been expecting the daily MACD to make a negative cross, which it did this week. Plus, the daily RSI to drop somewhat lower below neutral than it has thus far. Also, we have been expecting an extremely oversold reading on the hourly RSI (10) which has yet to occur as well. With all the choppy action recently it has been a day traders market. Medium term support is at the 1841 and 1828 pivots, with resistance at the 1869 and 1884 pivots.
SHORT TERM
Short term support is at the 1841 and 1828 pivots, with resistance at SPX 1849 and the 1869 pivot. Short term momentum ended the week overbought. The short term OEW charts have been vacillating since the year began, and are currently positive with the reversal level at SPX 1836.
After Minute wave b concludes, which may reach SPX 1847-1849 if not done, a Minute wave c lower should end the entire Minor wave 2 pullback. Mostly likely support is around SPX 1814, with the 1828 pivot range on the high end and SPX 1800 on the low end. With retail sales Tuesday, the FED’s beige book Wednesday and options expiration Friday, it should be an interesting week.
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