Market Summary

The weekly chart in the image below shows that we have made a lower low and a lower high than the week before but more importantly we made a low below the March 6 low and the candlestick is somewhat that of a hammer. The market held the 50-week moving average as noted by the red line. We also filled the gap noted in my last post and that is prerequisite to moving higher. However, sentiment remains bearish. Click on image to enlarge.

As I mentioned in a previous post I was looking to determine if we were moving into an 1) A-B-C consolidation correction pattern or a 2) 5 wave count to the downside. It appears that the answer to the wave 3 or wave C question was settled in favor of wave 3 and we have now moved into a wave 4 pattern implying that we should look for a 5th wave low. Wave 4s are often very volatile. While we could have put in a low last week and move up from here overhead resistance and institutional sellers are likely to at least test the recent lows. Click on chart to enlarge.

YTD the UUP is up the most followed by the GLD and $RUT while oil and natural gas are down the most. For the week, the commodity ETFs UNG, USO, UGA, and GLD were up the most. Click on table to enlarge.

What is interesting to note is the ETF FXI which reflects the Chinese economy and the Shanghai index. It appears to have put in a bottom and is moving higher in the short and intermediate term. Click on image to enlarge.

Finally, gold is clearly in the green and manages to continue moving higher as noted by the ETF GLD. Note the CCI(50) on the hourly chart at 96.14. Click on image to enlarge.

Mid Week Review

Market sentiment remains bearish and while there was a gap open higher this morning it was right into an area of resistance marked by the dot on the chart at the former gap lower from which prices retreated completely filling the gap. This action is setting up a low base formation or a bear flag. Tomorrows GDP report and the jobs picture will very likely move the markets one way or the other and how the markets close this week will be very telling. Click on image to enlarge.

Market Summary

I use Elliott Wave analysis to study the markets and as I noted here on April 25 the day before the top we were in a weekly 5th wave pattern and I would be looking for either 1) an A-B-C correction pattern to follow the 5th wave top which is a 3 wave consolidation patten, or 2) a reversal 5 wave count pattern to the downside. This is the decision that has to be made as I understand Elliott Wave. If we count the May 6 flash crash as wave 1 or wave A and the bounce back higher on May 13 as wave 2 or wave B, then we could be in either 1) wave 3 which is the strongest wave in whichever direction it is pointing. A wave 3 to the downside would take us below the February lows. Or 2) wave C which would be the low from which we go to a new wave count to the upside. While I am an optimist and hope that Friday was a C-wave low which way the markets decide to go we will just have to wait and see. Sentiment is very bearish. Overhead resistance is in the area of former support the 110-111 gap noted on the chart. Click on image to enlarge.

For the YTD period the US Dollar is up the most up 8.99% just off its best levels and a good time to be in cash. With credit contracting we have deflationary pressures that raise the value of money. It is followed by GLD and the small cap index which was doing the best and which remains just barely positive for the year. The EEM is down -12.57% for the year, the darling ETF last year, as China puts the breaks on its economy. The underdog for the year remains the UNG natural gas index. For the week all markets were down with the US Dollar down the least and the small cap index, oil, and gas down the most. Click on table to enlarge.

Mid Week Review

Fibonacci Retracement lines act as support when measured against the major trend and represent an area of approximately 1/3 to 2/3 of the previous wave. When measured as a percent of the previous wave the Fibonacci Retracement lines are 38.2% 115.40 (green line), 50.0% 113.35 (blue line), and 61.8% 111.29 (red line) when measured from the February low to the April high. Should we have a close below the red line this pull back would be considered a failure and we could expect to go lower in my opinion. Sentiment remains bearish. Click on chart to enlarge.

Market Summary

I have taken the liberty to draw two pink ovals on the chart below showing the two gaps that occurred last week. They formed an Island Top which I have highlighted in blue and is a technical sign of exhaustion in the market. The first gap was a gap open higher last Monday morning after the European Union et al announced "Le TARP", the european version of TARP to stimulate their economies and support the euro. By the last half of Thursday selling pressure increased and a gap open lower on Friday, marked by the second pink oval, completed the Island Top formation. Sentiment is bearish on the short and intermediate term but bearly holding on to bullish for the long term. It appears the market is heading lower and will have to look to support levels to find a bottom. Click on image to enlarge.

For the YTD period the US Dollar is up the most followed by gold represented by the GLD and the small cap index is close in third place. The losers are UNG, USO, EFA, and FXI. For the week, all the indexes were up except USO due to the large gap open higher on Monday. Click on table to enlarge.

Short term sentiment turns bearish

It looks like we have a failure here as price was unable to hold above the moving average and appears to be making a bounce lower. The futures markets for Friday morning show we are headed for a lower opening. If there is a gap open lower that would leave a four day Island top which would be very bearish. Click on chart to enlarge.

Adjusting my indicators

My Market Summary SPY charts that I post here are composite images of four charts reflecting four time frames: Weekly, Daily, 240 minutes, and 60 minutes. To me these represent the four time frames of Long term, Intermediate term, Short term, and very short term. To these charts I have added my own proprietary indicator that changes the background color from green to pink as price crosses a trigger line. This trigger line is a moving average and depending on which moving average is selected will determine how sensitive the chart is to changing background colors. The weekly chart is my long term time frame and is set to SMA 7 on the first chart below and 12 on the second chart. Seeing how the markets have reacted recently I have changed the settings to reflect a less sensitive more conservative setting as seen in the second chart. This second chart reflects a long term bullish sentiment, an intermediate term bearish sentiment, and a short term and very short term bullish sentiment as reflected by the background colors. These settings seem more appropriate for the current market conditions. That said I see us going higher and testing the recent market highs, Click on charts to enlarge.

Market Summary

Market sentiment has turned distinctly bearish in all time frames as the market found support at the 61.8% retracement (red line on daily chart) of the entire move from the February lows to the recent highs. Look for a bounce up from here but just how high the markets can go is questionable. I will be watching the markets carefully for the development of a new wave count. Click on chart to enlarge.

Compare the prior table posted on May 1 with the one below. It is amazing how the numbers can change so radically and so fast. The small cap index, which on May 1 was top of the list and up nearly 12% for the year has today, 6 market days later, dropped to just over 2% positive for the year. But what is really amazing is that the dollar is up the most and now tops the list followed by gold via the GLD which is number two for the year. For the week most markets took a hit while the dollar and gold did well. Click on table to enlarge.

Sell in May and go away?

That is a familiar jingle of Wall St. and Main St. and all have heard it. But is it true this time? We got a sell signal yesterday as can be seen on the daily SPY chart below where the background color on the chart turned pink. There is some support at the 116 level where we got down to at the lows today and below that at the big gap that occurred in early March around 114. Fibonacci Retracement lines have been drawn against the latest up wave. A 10% correction would take us to about 110 and anything below that we will have to evaluate at that time and so we will just have to wait and see. Click on chart to enlarge.

Market Summary

Another hard sell off and market sentiment has again turned bearish on the short and intermediate term. A topping pattern is occurring where the bulls and bears are fighting it out and reducing upward momentum. GS lost 9% just on Friday alone putting downward pressure on the financial sector. While the first few days of May may bring in buying pressure how long that lasts and where the market heads we will just have to wait and see. Note the bullish and bearish Harami pattern on the 240 min chart. Click on image to enlarge.

For the YTD period the small cap index is up the most up 11.95% and the UNG remains down the most. For the week GLD did the best up 1.92% followed by UGA and USO while UNG was off the most down -9.50%. Click on table to enlarge.