After a gap up Monday to SPX 1627, the market pulled back to 1605 on Wednesday, then gapped up again Friday and hit 1632. For the week the SPX/DOW were +1.55%, the NDX/NAZ were +2.00%, and the DJ World index was +0.70%. On the economic front positive reports continued to lead negative ones. On the uptick: ISM manufacturing, factory orders, the ADP, the Payrolls report and weekly jobless claims improved. On the downtick: ISM services, the WLEI, the M1 multiplier and the trade deficit widened. Next week we get the FOMC minutes, the PPI and Consumer sentiment.

LONG TERM: bull market

We continue to count this bull market as Cycle wave [1] of a multi-decade Super cycle bull market. Cycle wave bull markets are created by five Primary waves. Primary waves I and II ended in 2011, Primary III has been underway since then. Primary I divided into five Major waves, with a subdividing Major wave 1. Primary III is also dividing into five Major waves, but both Major waves 1 and 3 are subdividing into five Intermediate waves. Major waves 1 and 2 of Primary III completed by mid-2012, Major wave 3 has been underway since then.

Intermediate waves i and ii, of Major 3, completed by late-2012. Intermediate iii just completed in May, and Intermediate wave iv probably completed in June. It appears, although not confirmed, Intermediate wave v is underway to complete Major wave 3. When Major 3 ends, a Major wave 4 correction will follow. Then a Major wave 5 uptrend to new highs will end Primary wave III. After a Primary IV correction, a Primary wave V uptrend will likely end the bull market. We have been expecting the completion of this bull market pattern by late-winter to early-spring 2014.

MEDIUM TERM: downtrend probably bottomed

We were expecting an Intermediate wave iii uptrend high in May, then an Intermediate wave iv downtrend low in June. The uptrend had a price peak around mid-May at SPX 1687, then corrected in a complex abc pattern down to 1560 by late June. The entire downtrend declined 7.5%, which was in between the 4.5% to 9% correction range of previous Intermediate wave iv’s. Since that low we have counted a five wave pattern into Monday’s SPX 1627 high, then a pullback to 1605 by Wednesday. We had labeled the rally Minor wave 1 of Intermediate wave v, and the pullback Minor wave 2. With the rally off that low, to a higher high on Friday (SPX 1632), we have anticipated Minor wave 3 has been underway.

Technically we have observed a rise off a very slight positive divergence on the daily RSI, and the MACD cross higher for the first time since May. The SOX and R2K continue to uptrend from April, the SPX sector XLY has confirmed an uptrend, and the VIX confirmed a downtrend. The general market appears to be gathering upside momentum. With Minor wave 1 reaching our target of the OEW 1628 pivot, and Minor 2 bottoming higher than our projected SPX 1593-1599 range. We now expect Minor 3 to challenge the OEW 1680 pivot during July. Medium term support is at the 1628 and 1614 pivots, with resistance at the 1680 and 1699 pivots.

SHORT TERM

Short term support is at the 1628 and 1614 pivots, with resistance at SPX 1636-1640 and SPX 1648-1649. Short term momentum ended the week quite overbought. The short term OEW charts remain positive with the reversal level now at SPX 1615.

After counting a potential Intermediate wave iv low at SPX 1560 we counted a five wave structure for Minor wave 1 SPX: 1586-1573-1620-1606-1627. Then the market produced an abc structure for Minor 2 SPX: 1613-1624-1605. Now we are seeing another potential five wave structure underway for Minor 3 SPX: 1627-1615-1632 so far. The advance from the SPX 1560 low continues to look impulsive. Which is what we would expect during a new uptrend. At this point, only a drop below SPX 1605 would force a change in our short term wave count. Best to your trading!

FOREIGN MARKETS

The Asian markets were mixed on the week for a net gain of 0.1%. Only Japan is in a confirmed uptrend.

The European markets were mixed as well for a net gain of 0.6%. No uptrend confirmations yet.

The Commodity equity group was mostly lower on the week for a net loss of 1.6%. No uptrend confirmations here either.

The DJ World index is still in a downtrend, but gained 0.7% on the week.

COMMODITIES

Bonds are still downtrending and lost 0.8% on the week.

Crude is still uptrending and gained 7.3% on the week.

Gold continues to downtrend losing 1.6% on the week.

The USD continues to uptrend gaining 1.6% on the week.

NEXT WEEK

Monday: Consumer credit at 3:00. Wednesday: Wholesale inventories at 10:00, then the FOMC minutes at 2:00. Thursday: weekly Jobless claims and Export/Import prices at 8:30, then the Budget deficit at 2:00. Friday: the PPI at 8:30, then Consumer sentiment just before 10:00. FED chairman Bernanke gives a speech on Wednesday just after the market closes. Then FED governor Tarullo gives Senate testimony on Thursday at 11:00. Best to your weekend and week!

CHARTS: http://stockcharts.com/public/1269446/tenpp

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After about 40 years of investing in the markets one learns that the markets are constantly changing, not only in price, but in what drives the markets. In the 1960s, the Nifty Fifty were the leaders of the stock market. In the 1970s, stock selection using Technical Analysis was important, as the market stayed with a trading range for the entire decade. In the 1980s, the market finally broke out of it doldrums, as the DOW broke through 1100 in 1982, and launched the greatest bull market on record.

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Copyright © 2013 Tony Caldaro - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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