Market Summary

Not a pretty picture in the markets this past week. Financials were hardest hit down over 15% for the week. Bank of America made new lows at 2.53 and Citigroup made new lows at 1.61. XLF, the financial sector etf, made new lows of 6.85. Gold, on the other hand, sparkled. Closing at 1002.20 gold is quickly approaching its March 2008 high. Back then because of financial concerns it rose to an all-time trading high of $1,014.60 an ounce on March 17, 2008.

This past week President Obama signed into law the $787 billion stimulus plan, the American Recovery and Reinvestment Act. He also revealed his housing plan to stop foreclosures. While the markets did not rally it is hard to imagine that all this stimulus will not have some effect. Friday saw a key reversal day in the US dollar which closed at 86.49. The dollar has been rallying since the 2008 lows at the 70 area but has made a double top at the 88 area. Since the stock market and the Euro have moved in the same direction in the past a decline in the dollar may signal a move higher in the stock market.

We are at critical areas and if we consider the November lows to be 3rd wave lows and the rally off those lows to be the 4th wave in the Elliott wave pattern then the 5th wave can be considered to have begun with the highs made in early January 2009. The 5th wave lows, then, will be the bottom of the cycle and should come in very close to the 3rd wave (November 2008) lows. We are at that level in the Dow and testing that level in many other markets. My feeling is that we could see a significant rally soon once we have made the lows and this will be accompanied by a fall in gold and the dollar. And while I feel the rally could be significant it would still be an intermediate term trend move against a larger bear market and as such would be a bear market rally. Which way the markets go we will just have to wait and see. Click on table to enlarge.

I am including a view of the performance of the sectors for this past week. As noted above financials were the worst performers down over 15% and Conglomerates also did poorly. Click on image to enlarge.

I am also including a view of the Dow showing the wave count as I see it for the last 6 months. As can be seen the Dow made new lows below the November 2008 lows and is thus in an area I would call a 5th wave zone. Click on chart to enlarge.