Weekend Update: U.S. Equities Trading Remains In Range
Tony Caldaro | Aug 01, 2016 12:47AM ET
REVIEW
The week started off at SPX 2175, then spent the entire week trading within the two week, 20 point/1% trading range, until it nudged above it by one point on Friday. In the end the SPX made an all time high at 2177. For the week the SPX/Dow lost 0.45%, and the NDX/NAZ gained 1.30%. Economic reports for the week were negatively biased. On the downtick: Case-Shiller, consumer confidence/sentiment, durable goods, the Chicago PMI, plus weekly jobless claims rose. On the uptick: Q2 GDP, new/pending homes sales. Next week will be highlighted by monthly payrolls and ISM.
LONG TERM: uptrend
For the past few months we have been following two specific counts. The NYSE Primary V count, and the SPX Primary B count. For now both counts suggest higher prices ahead, at least in the medium term. A third count, introduced last week and posted on the DOW charts, suggest much higher prices ahead. But we will leave that for another time.
The Primary V count in the NYSE has been underway since the Primary IV February low. Thus far we have observed a Major wave 1 uptrend, then an irregular Major wave 2, and currently a Major wave 3 uptrend underway since the June low at 9919. Primary V should consist of five Major waves, plus the NYSE should at least make a new all time high. Currently it is still about 4% below the 11,285 all time high made in 2015.
The Primary B count in the SPX has been underway since the Primary wave A February low. Thus far we have observed a Major wave A uptrend, then an irregular Major wave B decline, and currently Major wave C underway from the June SPX 1992 low. Primary B should consist of three Major waves, and oddly enough the SPX has already made all time new highs.
There is also the possibility of counting the three wave advance to SPX 2121 as Major A, the decline to SPX 1992 as Major B, and now another three wave advance for Major C. These last three waves could coincide with Majors 3, 4 and 5 in the NYSE. Should this occur these two indices would be back in sync, and the bifurcation will have ended as both decline in bear markets. However, should SPX 2335 be exceeded before all of this unfolds, then the Primary B count will be abandoned in favor of the alternate DOW count. Lots of possibilities in the months to come, while the indices work their way higher.
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MEDIUM TERM: uptrend
After the February SPX 1810 low the SPX had a 301 point uptrend (1810-2111), an 85 point downtrend (2111-2026), a 95 point uptrend (2026-2121), then a 129 point downtrend (2121-1992). During this uptrend we have been focusing on the first uptrend (1810-2111) for comparative purposes.
That first uptrend advanced in five waves [1810]: 1947-1891-2075-2034-2111. The first wave was 130+ points, the third wave 180+ points, the fifth wave was 70+ points, and the two declines, waves two and four, were between 40+ and 50+ points.
The current uptrend started off strongly enough but has been weakening as of late [1992]: 2109-2074-2177 so far. The first wave was 110+ points, the second wave 30+ points, and the third wave 100+ points so far. This uptrend has been less volatile than the first, smaller pullbacks, and the third wave has yet to exceed the first. Thus far clearly a bit weaker. Nevertheless, we are maintaining our upside target for this uptrend between SPX 2250 and 2280. Medium term support is at the 2131 and 2085 pivots, with resistance at the 2177 and 2212 pivots.
SHORT TERM
This uptrend, as noted above, has thus far advance in three waves. The first two waves were quite swift with few subdivisions. This third wave has been subdividing into five clear Minor waves: 2109-2089-2176-2159-2177 so far. Minor wave 4 was quite a trading range ordeal, as it remained in a 1% range for about two weeks. With Friday’s tick up to SPX 2177, we were able to accept the Minor 4 low at SPX 2159 this week.
With the fifth wave underway for Intermediate wave three we can make some Fibonacci projections. These projections at +/- 2 points: 2180, 2193, 2214 and 2248. Since our target all along has been the OEW 2212 pivot, that appears to be the most probable area. When Int. three does conclude the market should have its biggest pullback since Int. wave two (35 points) for Int. four. Then higher highs should follow for Int. five. Short term support is at the 2131 and 2085 pivots, with resistance at the 2177 and 2212 pivots. Short term momentum ended the week slightly below overbought.
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