2009-05-07 Market Watch

ESM9 2-h: downtrend confirmed.

wave counting  

Market breadth:

Market Update for May 5th 2009

Today the market made a higher high, broken out of the triangle, both with increased volume.  Simply speaking, the market is currently trending up and there is no obvious sign of weakening.

Wave counting update: the preferred scenario turned out to be valid which are on the following ESM9 (S&P 500 Index Futures, Jun 2009) 2-hour chart, the other two are not shown here.  Take a closer view, we can see that ES has hit the upper edge of the original ascending channel and formed a steeper for this impulsive wave, and possibly it has reached a level where a pullback is needed.  However considering the current market sentiment and bullish movement from other parts of the worlds as well as the forex/commodities, the pullback might be quite shallow.  From waves’ perspective, we cannot rule out the possibility of extended wave 5, and the pullback target will be the top of wave 3, which will be 50% retracement and also a support level.. and EMA50 too. Note that falling below 880 will negate this scenario.

ESM9 2-h wave counting zoom in

Crude oil: on the hourly chart of the crude oil futures, it has broken out the overhead resistance.  However RSI gets overbought, and a bit of negative divergence can be seen on both MACD and RSI.  A pullback to breakout level 53.5~53.8 will be very healthy.  Note that the pullback may be done during the midnight, tomorrow morning the technical indicator may likely be corrected.

EUR/USD: Today Euro was extremely bullish, and US dollar is the opposite.  The pattern on the chart looks like a bull flag although it looks too big.  The rising of Euro is bullish to the stock market especially the financial sector.

Financials: XLF has broken out from the ascending triangle and made a new high.  From waves’ perspective, intermediate wave (A) and (B) have completed and a new upward wave is unfolding.  Wave counting will be adjusted later.

XLF hourly

Market Breadths: today is a major accumulation day, typically tomorrow’s high will be higher than today’s close, and a consolidation or small pullback is expected.  Note that CPCI:CPCE is at a high level which means institutional investors are holding long positions and hedging using index put options.

CPCI:CPCE

2009-05-01 Market Watch: weekly analysis

[ Last weekly analysis]  The eighth week of rally, the market is truly like a mad bull.  The market has entered into the consolidation region and will meet substantial resistance at this level.  The final target should be 900.

SPX weekly

Overview of World Markets and Sectors

Still the uptrend, the emerging market is leading, while Chinese and Japanese markets are relatively weakening.

world markets relative strength

The next chart shows the MSCI World/EAFE/Emerging Market, Shanghai Stock Exchange Composite Index, Hang Seng Index, and Nikkei 225 index.  Note the Asian markets are pulling back.

Major indices, commodities, and US dollar are shown in the next chart.  Still very bullish.

Sector overview chart.  Same as last week: Industrials, materials, and technology are bullish.  There is no obvious sign of weakness.

SPX/ES Wave counting

Primary and intermediate waves:  Oct 11th 2007 SPX 1576.09 is the end of bear market cycle wave b (in the form of “bull market”) and start of cycle wave c which is in turn another 5 wave down (①,②,③,④,⑤).  The first bear market sell off lasted 512 calendar days and ended with the primary wave ① on Mar 6th 2009 at SPX 666.79.  In the primary wave ① we can recognize 5 intermediate waves although the last one looks not clear enough.  Currently SPX is forming primary wave ② in the form of (A) (B) (C) up.

Intermediate and minor waves: primary wave ② is still unfolding, now it has reached Fibonacci 23.6% retracement level of primary wave ①.  On ES, the possible scenario is shown on the following right chart (bullish scenario presented on the last market watch).

big context ESM9 2-h

A less likely scenario is: intermediate wave (A) ended on Apr 17th at 872; Intermediate wave (B) is either deformed expanding triangle or running flat.  Note in this scenario, the wave C should be composed of five waves.  Difference between this scenario and previous one: In the previous scenario ES should rise immediately and not fall below Friday low ~862.5, in this scenario ES should just do the opposite.

Scenario C from another EW theorist: in this scenario primary wave ② should finish very soon.  In the near term, ES should fall below Friday low to form wave 4.

scenario B  scenario C

Lastly take a look at the P&F chart: the market has broken out the resistance at 875; the uptrend line has never been broken; if the current breakout can be confirmed, the next target will be 935.

XLF and SKF

Keep the wave counting in the last week unless it makes a new high.  The pullback is not over yet.  Upon Monday market opening, keep an eye on the very short term movement of SKF/FAZ.  If it cannot go up immediately, the bearish setup will still hold.

XLF daily XLF hourly $BKX hourly

SKF hourly FAZ hourly (cannot break EMA50)

Currency Futures and Forex

US dollar: the trend is still down.  The sell signal has not been challenged.

USD/SGD: still the down trend, no change compared with last week.

 

EUR/USD: the wave counting tells the different thing from chart pattern and technical indicators.  To be safe, I assume the trend is still up.

eur/usd daily waves

Commodities

Crude oil: should go up to form wave C after a minor pullback.  No update to the chart.

Gold: It hasn’t broken out from the descending channel, so the uptrend is not confirmed.

Gold daily