Market Summary

The markets had a good week showing green across the screen, except for gold and oil which came slightly off their highs. The big winners were the RUT, the Russell 2000 small cap index, up 7.22% and the EEM, the Emerging Markets iShares ETF, up 7.11%. We have come up off the March 6 lows by more than 20% and are therefore technically in a bull market. Is it just a bear market rally or the real thing? Click on table to enlarge.
The Sector graph shows the Basic Materials continue to be in the lead in the race to positive territory with Technology not far behind. Comparing this graph with last weeks shows how the sectors are performing in this rally. Click on graph to enlarge

While I have been calling the current move up a 4th wave on the hourly chart the Elliott wave count on the S&P 500 looks like a bullish wave 1. If that is the case then we have completed the longer term 5th wave count to the downside on the daily chart and should see a wave 2 pullback on the hourly chart. Bull markets have strong up legs and weak down legs so any pull can be seen as a buying opportunity. Because the retracement of the 3rd wave on the hourly to the downside was more than the fibonacci 61.8% it makes it more likely we have begun a new wave count to the upside. We will just have to wait and see.

Market Summary

It was a good week in the markets with all the markets being in the green. Oil was up the most and the Dow was up the least. For the year, gas is up the most followed by gold while the Russell 2000 small cap index is down the most. We are seeing some green columns being put in on the table below, mostly in the middle of the table. The far right of the table is the long term trend and the far left is the short term trend. As green columns move to the right we can say the market has come off the bottom. Click on table to enlarge.
The sector graph below shows a decline in the red compared to last week most notably in the Basic Materials to the Financials area while the Conglomerates actually showed a slightly worse performance. Click on graph to enlarge.
What is most remarkable is the wave count of the S&P 500 shown below. Since the beginning of the year we have been in a 5th wave decline on a daily time frame as shown by the tan line. This 5th wave is made up of a sub-wave fractal pattern shown with blue arrows on the hourly time frame chart below. While this is my subjective interpretation I believe the next turn up in the markets will be explosive to the upside and crash through the 50 day moving average shown in red. Indeed we have seen a 20% rally to the upside in the S&P 500 just in the last two weeks as we came off that 3rd wave low on the hourly chart at 666.79 to the recent 803 high we made on Wednesday. How far down this last wave we will go is uncertain as I am less inclined to believe we will take out the recent 666.79 low and therefore view this pull back as a buying opportunity. We will just have to wait and see. Click on chart to enlarge.

Market Summary

It was a wonderful week in the markets. We made a low the prior week on Friday at 666.79 and all week long this last week we saw the march higher. The biggest gainer for the week was the Russell 2000 small cap index, the riskiest of the indexes, indicating that risk appetite is back. The biggest loser for the week was the USO oil ETF followed by a sell off in GLD. While I mention the weekly performance above the table below ranks market performance by Year To Date column and clearly GLD has outperformed the other markets. However, as I mentioned on my last post, what was going up will go down and what was going down will go up. Click on table to enlarge.

There is a relationship between an uptick in the economy and the demand for copper. While it may be early it would appear the the copper ETF JJC has made a bottom and is moving to the upside. I will be including a sector performance graph in the market summaries as when trading being in the right sector makes all the difference and can cushion a bad pick of a stock or ETF. Here we see the Basic Materials sector has taken the lead from Technology. A link to the Basic Materials Sector Industry browser on Yahoo can be found here. Click on graph to enlarge.

Continuing from last week I am including an hourly chart of the S&P 500.
My wave count is that we are in the 5th wave down as shown by the Tan line. The blue lines represent my wave count based on the hourly chart and show a 4th wave as a sub-wave of the 5th wave. I believe we still need to complete a 5th wave as a sub-wave of the larger 5th wave to complete the cycle of 5 waves down. This would take us below the prior 666.79 low to somewhere near the 650 area for a final bottom. However, we will just have to wait and see. Click on chart to enlarge.

Market Summary

Not a pretty week in the markets. On the down side the Russell 2000 small cap index was down 9.76% for the week. Not a small decline by anyone’s measure. On the upside USO managed to make a 3.48% gain. I believe the upside gain in oil was due in part to being oversold and also to a decline in the US dollar. This Friday’s jobs report showed a loss of 651,000 jobs last month and as a result the dollar fell. I believe any sustainable rally in the market will be accompanied by a decline in the dollar and a rise in oil. What was going down will turn up and what was going up will turn down. This is the nature of cyclical markets and their relationships with each other. Click on table to enlarge.

Will the markets continue to decline? I think we are certainly closer to the bottom than to the top so while the market may decline more the upside potential is greater than the downside potential. GM closed the week at $1.45 a share and at prices that have not been seen since 1933. Will GM get back to the $90 range it saw in 2000? I think not, at least not anytime soon, but if it does survive it will have to raise its value above that of a penny stock. I do not expect a complete collapse of the markets. The graph below shows the performance of each of the sectors year to date. The fact that Technology is the strongest sector is a positive for the markets and especially for the Nasdaq which is heavily weighted in technology. Click on graph to enlarge.

The Elliott wave count of the markets is extremely interesting. While counting waves is subjective there are rules for guidance and waves do seem to create observable patterns. My wave count is that we are in the 5th wave on the daily time frame. The 4th wave began with the November lows and ended with the January highs back in the beginning of January. The current 5th wave began then and we are very close to its bottom. This 5th wave can be broken down into 5 sub waves. My wave count of the sub waves is that we are at the completion of the 3rd sub wave down of wave 5. This would indicate we can expect a 4th wave rally next week and a finally 5th sub wave finish to wash all the bulls out of the market with a decline to about 650. Alternatively, we could have made the bottom last week at the 666 level and any breakout, especially above 700, would be very bullish. We will just have to wait and see. Click on chart to enlarge.