Tony Caldaro | Jul 01, 2012 03:41AM ET
REVIEW
Another wild week on Wall Street as the market had gap openings on four of the five days. In the end it was a positive week as there was a gap up opening on friday which took the market to its highest levels of the week. Even the economic news improved somewhat to a balance between positive and negative reports. On the uptick: new/pending home sales, Case-Shiller home prices, durable goods orders, the Chicago PMI and weekly jobless claims ticked down. On the downtick: consumer confidence/sentiment, personal spending, new home prices, the monetary base and the WLEI. For the week the SPX/DOW were +1.95%, and the NDX/NAZ were +1.35%. Asian markets rallied 1.3%, European markets rose 2.8%, and the DJ World index gained 2.4%. Next week we have a mid-week holiday with reports on ISM, and on friday the monthly Payrolls report.
BIG PICTURE
We thought it would be best this week to start off with the big picture in a few of the world’s asset classes. As we all know, medium term trend changes can sometimes be mistaken for long term changes. Therefore it is a good practice, as the saying goes, to keep a sharp eye on the forest before examining its trees.
In conclusion. Commodities, precious metals, worldwide stock indices, and US government bonds are either in, or entering, bear markets. There are, however, selected sectors within these bear markets that are still in bull markets. For example, the US stock market and possibly England’s and Switzerland’s equity market should make new bull market highs into 2013. These new highs may coincide with the expected USD low in 2013. After that, it would appear the USD and short term US Treasury bills will be the place to be for a couple of years. Plus, US real estate.
LONG TERM: bull market
The US bull market we have been tracking now for three years is still underway. This market has had its share of disappointments and surprises but it continues to unfold. The count we have been carrying is different than the one presented above for the world market indices. While we believe world equity markets generally topped in 2011 the US market remains bullish and in a slightly different pattern.
Our count suggests a Supercycle wave [2] low occurred in 2009, and a Cycle wave [1] bull market is underway. The Cycle wave bull market should unfold in five Primary waves. Primary waves I and II completed in Apr11 and Oct11 respectively. Primary wave III has been underway since then. Within at least two of the rising Primary waves there should be five clearly defined Major waves. Primary wave I displays five Major waves with a subdividing Major wave 1. Primary wave III is also starting off with the same pattern. A Major wave 1 that subdivided into five Intermediate waves.
MEDIUM TERM: uptrend confirmation pending
After a thorough review of all the charts and indicators it is quite clear markets worldwide had an impressive week. Even though it did not show up in the final weekly numbers. In fact, 80% of the world’s indices are in confirmed uptrends or nearing one. This is quite a shift from last week when not one international index was in a confirmed uptrend. In the currency markets the USD joined the JPY in a confirmed downtrend, while the EUR and CHF are now in uptrends. In fact, friday’s 1.7% surge in the EUR can be categorized as a rare event. A surge like this occurs only two to three times a year, and is usually at the beginning, or early part, of a stock market uptrend.
Support for the SPX remains at the 1313 and 1303 pivots, with resistance at the 1363 and 1372 pivots. Short term momentum hit extremely overbought on friday and closed there. The initial rally from the early June low at SPX 1267 rose to 1363. A pullback followed to SPX 1309 by monday, a retest on tuesday at 1310, then another retest on thursday at 1313 when the DOW made a lower low. Late on thursday the market started to rally, and continued that rally into friday ending at SPX 1362. The entire seven trading day pullback was nearly recaptured in one day. Quite impressive!
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