Another wave to the upside

My target for the SPY is in the area of 123.30 which is the 61.8% retracement of the entire move down from the high in October 2007 to the low in March 2009. That is approximately 2% higher from where we are now and certainly is a possibility this week. We still have a weekly 5th wave pattern. Sentiment has again turned bullish and a break above 122 would be very bullish. Click on image to enlarge.

For the "IF" in life

As can be seen in the image below the there was a corrective sell off today that began with a gap to the downside and did not stop but kept on going down. Several areas of support were broken and the sell off was hard enough to change the sentiment of both the short and intermediate term sentiment to bearish as seen by the background color of pink on the 60 min, 240 min, and Daily charts. As mentioned in my previous post we had got to a weekly 5th wave high in the charts and the outlook is for a corrective move of either A) consolidation, or B) a trend reversal. We are not alone in the world and global conditions can influence our markets. Click on image to enlarge.

Applying the same methodology for trend analysis as I have done in the SPY image above I applied it to the FXI below which I use as a proxy for China. As can be seen by the background color of pink in the 60 min, 240 min, Daily, and Weekly charts China is bearish in all time frames and that is a bad sign. This chart was actually leading to the downside by about a week before the SPY began its move to the downside. Click on image to enlarge.

Weekly 5th Wave Pattern

A weekly 5th wave pattern is noted on the SPY as drawn on the chart below. Does this mean the market has reached a top? Elliott Wave theory teaches that the market moves in 5 waves of 3 steps forward and 2 steps back and this is what we see here. While the market continues to show strength a reversal here could mean we could expect either A) an A-B-C correction pattern which is a sign of consolidation for further expansion and the start of a new wave count to the upside or B) a new wave count reversal to the downside. While these are only two of the possible ways the market could move they are the patterns that I will be looking for "IF" there is a corrective sell off to the downside. We live in a global economy and while the US economy shows signs of growth and expansion what happens in other parts of the world can affect us as well and we should expect this type of wave pattern to continue as it has in the past. However good Elliott Wave theory may be at describing predictive models of the market we still let the market make the decision as to the timing of reversal patterns. Market sentiment remains bullish. Click on the chart to enlarge.

Market Summary

The rally continues once again another strong week to the upside. Market sentiment remains bullish in all time frames as noted by the green background color on the image below. Click on image to enlarge.

For the YTD period the small cap index $RUT remains the leader to the upside up 15.91% and for the week was on fire up 3.82%. Although UNG is the biggest loser for the YTD period it had a very strong week up 5.57%. EFA and FXI were flat for the week. Click on table to enlarge.

Market Summary

The rally continued up to Friday when the SEC brought charges against Goldman Sachs (GS) for fraud for failure to disclose Paulson & Company short positions in mortgage backed securities. John Paulson profited by 1 billion dollars and is now willing to testify against GS. But wait, is there more to the story? Could the GS charge of fraud be political, so as to make the banking lobby back off the financial reforms being pushed by the White House and Congress? It is unlikely that any high level bankers will go to jail but this news was enough to tip the market. Monday will be a telling day as to the strength of the sell off.

We had Reversal Week to the downside for the SPY where we went above last weeks high and closed below last weeks close. This is just the beginning of a move to the downside. Will the market break down? When will the market turn? No one knows but it is important to have lines in the sand which tell you when to accelerate and decelerate your portfolio. The lines are support and resistance lines and technical indicators.

The image below show that the short term sentiment has turn bearish as noted by the pink background on the 240 Min chart. Intermediate and Long term sentiment remains bullish. Click on image to enlarge.

For the YTD period the small cap index is up the most up 11.64% followed by the Nasdaq up 7.49% and the SPY up 5.32%. For the week the small cap index was up the most up 1.66% while the FXI, EEM, and GLD were all down with the FXI down the most off -5.11%. Click on table to enlarge.

Market Summary

Market sentiment remains bullish in all time frames. There is green on the screen. Click on image to enlarge.

For the YTD period the small cap index is doing the best up 9.82%. For the week gold via the GLD did the best followed closely by the China fund FXI while the US Dollar via the UUP was off the most down -0.75%. It is interesting to note that the weekly chart of the UUP shows a 5th wave top pattern. Should the issue with the sovereign debt of Greece be resolve in Europe the flight to the US Dollar and US Treasuries may end with a change in trend as the Euro Dollar strengthens. Click on table to enlarge.

Market Summary

Market sentiment remains bullish in the short, intermediate, and long-term time frames. Click on image to enlarge.

For the YTD period the Russell Small cap index is up the most and the natural gas ETF UNG is down the most. For the week the China ETF FXI was up the most up 8.12% while the US Dollar ETF UUP was down the most off -1.95% Click on table to enlarge.