Potential Elliott Wave ideas if equities and oil haven't finished their rallies

The futures are suggesting that we don't yet a reversal pattern yet presenting for equities or for oil, so here are some thoughts on what we might see for upside. I've marked a suggested Elliott Wave count on the Nasdaq 100 (NDX) chart below, and I think it would count the same or extremely similar for the S&P 500 (SPX) and perhaps for the Dow Jones Industrial Average too. I've also placed a chart of crude oil (using WTIC) that contains Fibonacci levels with additional notes. For the SPX, a number that has popped up in a number of Fibonacci calculations I've run over the past few weeks has been 953, or actually a range from 950 to 960, in the SPX. That would also "fit" with the suggested count in the NDX chart below.

I'm aware that Andre Gratian has presented a view of a fourth and fifth wave pattern for equities in his weekend update, and I think that this count may be consistent. I don't know if he counts the internal subwaves as I do here, and that's about the real reason why I wanted to present this. It's a count I've been mulling over the past several days. I think that the idea of a triangle in the equities markets has problems, which I notice other technicians also have pointed out. I don't want to wrangle with the details too much - here are just a couple of alternate suggestions. One is that we're seeing the small "b" wave of a flat for the 4th wave, with the "c" that would break under those trendlines I marked on the chart; followed by wave 5 up. I think that would cause the whole 4th wave to be "too large" though - unless the flat truncated .... or unless the flat formed a Major B wave pullback, setting the stage for a Major C wave upward that would either become Tony Caldaro's Primary B up, or "wave 2 up" as other Elliotticians believe. (This latter idea would mean that instead of waves 1,2,3 as I marked, it would be ABC. In that case, frankly - instead of simply replacing 1 with A, I'd place A where the "i" is, and place C where the "3" is.)

One might argue that if the count I marked on the chart below is right, then the 4th wave may already have completed and we are seeing some stage of the 5th wave already - either a diagonal triangle or an impulse. I think Andre's view of it would be better than that. I should have drawn another trendline, parallel to those I drew across the highs and under the lows, originating from the early March low, and that could form a support line too.

Yes, I became skeptical of the rally and suggested that we should be very cautious on this market. I still believe that. But when the market demonstrates that it may want to push to higher levels, that must be respected and it becomes a good idea to go with it, never against it. I haven't abandoned my bigger picture views that the market has lower levels to visit in the future. It's just a matter of when - in price and time - the market wants the rally to be finished first. Maybe this will be a time when the Bradley model showing high swing points in June and July will be right (check my posts under the "Cycles on Bradley model" label to see that). If so, then enjoy it while it lasts but just remember two things: (1) even the Bradley model doesn't say the turning dates must be highs or lows, they can invert and it's the date that matters; (2) that model shows the market declining substantially after July, into approximately October/November this year.

A few comments on the oil chart (WTIC) below as well - since the futures do not currently show a movement under Friday's candle bar, this suggests that we may not see a reversal from the symmetry and Fibonacci levels oil went to at the end of last week. There can be an alternative symmetry level above $67, and then there are Fibonacci levels at $72.80 and $78.21. Don't forget there remains a potential for oil to get to $81.69 or even $91.51. The $91.51 level would be very interesting because it's the 50% retrace to the "all-time" highs. (Still, check my posts under the "Oil" label for some additional views on oil - which do include bullish price targets based on point & figure charts, but also bearish considerations.) I don't really think that oil is ready to work on the next leg up to new highs, before a retest of its lows. Another risk is a diagonal triangle structure. So we'll continue to keep an eye on it, and I'll take a closer look at Elliott Wave count for it in several days.

Technical Analysis of the S&P 500 including projections, channels and indicators with Turning Points by Andre Gratian

Andre Gratian has provided his weekly newsletter update (his daily updates available via subscription, information available from his website in the "other sites" listed at right or using his email indicated below) (click on any of the images to see it full size):
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May 31, 2009
Turning Points
By Andre Gratian

A 3-dimensional approach to technical analysis
Cycles - Breadth - Price projections

“By the Law of Periodical Repetition, everything which has happened once must happen again, and again, and again -- and not capriciously, but at regular periods, and each thing in its own period, not another’s, and each obeying its own law … The same Nature which delights in periodical repetition in the sky is the Nature which orders the affairs of the earth. Let us not underrate the value of that hint." -- Mark Twain

Current position of the market

Long-term trend - Down! The very-long-term cycles have taken over and if they make their lows when expected, the bear market which started in October 2007 should continue until 2012-2014. This would imply that much lower prices lie ahead.

SPX: Intermediate trend - Sideways! The counter-trend rally which started on March 6 is undergoing a consolidation which could last two or three more weeks, after which the bear market rally will continue.

Analysis of the short-term trend is done on a daily basis with the help of hourly charts. It is an important adjunct to the analysis of daily and weekly charts which discusses the course of longer market trends.

Daily market analysis of the short term trend is reserved for subscribers. If you would like to sign up for a FREE 4-week trial period of daily comments, please let me know at ajg@cybertrails.com

Overview:

The rally which started on March 6 is turning out to be much stronger than most had expected. Not only did the SPX go up uninterrupted for over two months and 263 points, but we can’t even get a decent correction after all this! Last Friday, the index closed only 11 points from its high and, by closing on its high of the day, looks ready to go higher. Well, don’t get fooled by looks. It’s more than likely that the correction is not over, and the next couple of weeks will be down. After that, the bear market rally will continue and find a more decent top which will bring about a real correction or, to be more exact, will bring about the return of the bear market and a new SPX low.

On Friday, the NDX made a new recovery high, which would also seem to intimate that we are ready to extend the rally. The problem is that the internals were not supportive of the move, and that neither the Russell nor the Value line appear ready to follow. Now, if we should explode upward on Monday morning, I will be ready to change my mind, but until I see some more evidence that we are ready to go forward, I think it’s more probable that we will retrace.

Other signs of market readiness that we look for, such as the sentiment indicator, is still more bearish than bullish, and the daily momentum indicators are not making a convincing “buy” pattern. Conclusion: more consolidation is ahead.

More often than not, lows tend to coincide with an important cycle making its low. There are none directly ahead. Those that could have brought the market down and that were mentioned repeatedly in the past few weeks are now behind us after disappointing the bears, and with the possibility that at least one or two may have inverted. There are only a couple of short-term cycles bottoming in mid-June. They could be the ones that will end this consolidation. Let’s keep June 16 and 17 in mind.

What's ahead?

Chart Pattern and Momentum
The two brown lines represent a secondary trend channel. The index is consolidating under the top trend line and will probably go through it after the consolidation is over. This will not signal that we are in a new bull market. The primary trend channel is much higher around 1200 and I sincerely doubt that the rally from 667 will continue long enough to come even close to it.

Since I expect Friday’s move to have reached its peak at the close, or early on Monday, I have made certain assumptions about the end of the consolidation which I have noted on the chart. These assumptions would be invalidated if Friday’s move continued and closed higher than 925 on an hourly basis. There are several other factors which could nullify or modify that scenario, even if we found a top at 919.

Both oscillators are close enough to give a buy signal so I think that we won’t have long to wait and should know by Monday’s close whether or not we have a buy signal or if additional consolidation is needed.

Next, I want to show you the divergence which exists between the SPX (top chart ) and the NDX (bottom). Historically, the NDX has led the SPX in intermediate moves. On the charts below, you can see that the NDX refused to make a new low in March while the SPX did, by a good margin. This was a clue that we were near a reversal which subsequently turned out to be of intermediate nature That was confirmed when the NDX went above a resistance level which the SPX only approached 3 weeks ago at the beginning of the current consolidation.

The NDX is still leading, on Friday, it closed 23 cents below its early May high, while the SPX is 21 points below its comparable high. If the NDX shoots decisively above its former high on Monday, and continues the rally, we can pretty much assume that the SPX will not be far behind.

Something to watch for farther down the line will be when this relative strength begins to wane because it should signal the end of the “C” wave from 667 and, hopefully, the end of wave (4) and the beginning of wave (5).


But since we are still trying to determine if we have ended the consolidation or if there is more to go, let‘s see if we can get some clues by turning to the hourly chart and do some micro analysis.

Unfortunately, even the hourly chart does not give us a clear picture, and all we can do is to point out a few negatives about Friday’s action which could be wiped out by the wink of an eye if we have a strong opening on Monday.

The A/D and the volume did not support the closing spike, and there was no follow-through after the close which would lead one to believe that it was for real! I had given my subscribers a projection of 917 if we could not break below 903 before the close. We went to 919 instead! That’s not enough to invalidate the 917 projection, especially when you consider that the spike was probably mostly short-covering. But it does open the possibility of a follow through to 923-927.

If we have a strong opening on Monday morning and keep going beyond the above projection, I would have to consider going back to the drawing board.

Cycles:
The two cycles mentioned in the opening section are the 6-wk which should bottom on June 16, and the 8-wk, which is due on the next day.

The 20-wk cycle is due in early July.

Projections:
The next projection above 917 is 923-927. Should this turn out to be a genuine break-out and we keep on going, there would be resistance at the former top of 930 and the January top of 943.85 which would approximately coincide with meeting the top trend line of the down channel.

866 would be the best estimate for the low of the consolidation if we do not break out.

Breadth

The NYSE Summation index (courtesy of StockCharts) which is shown at left, remains overbought.

And like the market which has only managed a shallow, sideways correction after its impressive rise, is a display of strength.

The daily indicator which was overbought, has corrected itself and is back to neutral. Its current position does not have any predictive value.

The latest readings of the hourly chart are ones of negative divergence to price, and if this is not changed on Monday morning, it will have signaled an extension to the correction.


Market Leaders and Sentiment

The Sentiment indicator (at left, courtesy of Sentimentrader), shows the market to be slightly vulnerable in the short-term.

And, after the consolidation we have experienced, a little less so than it was on the longer term.

Summary

After becoming overbought by its relentless rise, the market has been consolidating for the past three weeks.

On Friday, the SPX had a closing surge which made it appear as if the consolidation was over. Since this was not really supported by internal data, one should be wary and wait for confirmation provided by the follow-through of additional strength on Monday.

Andre

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The above comments about the financial markets are based purely on what I consider to be sound technical analysis principles. They represent my own opinion and are not meant to be construed as trading or investment advice, but are offered as an analytical point of view which might be of interest to those who follow stock market cycles and technical analysis.

What's ahead for equities markets and gold this week: ChartsEdge cycle forecasts

Here are cycle forecasts for equities and gold for the upcoming week, provided by Mike Korell of Chartsedge (information on longer-term forecasts can be obtained at that website):

Cycles review, Part XII: Solar (Sunspot) cycle (eeriely similar to the popular Dow/gold chart!) - or, if it's in our stars, why not the closest one?!

NASA has published an update to the Solar (sunspot) Cycle that almost makes me wonder - why work away at all this chart analysis, if the answers to equities and other markets are just in our stars?! Our nearest star, the sun, to be specific! Look at the data and charts below - you'll be impressed with the eye-opening correlations. NASA's article with the Solar Cycle update is at http://science.nasa.gov/headlines/y2009/29may_noaaprediction.htm. This is so interesting that it definitely warrants its own place as Part XII of my ongoing "Cycles review" here. Let's start with a look at some of what NASA is saying:

New Solar Cycle Prediction - May 29, 2009
An international panel of experts led by NOAA and sponsored by NASA has released a new prediction for the next solar cycle. Solar Cycle 24 will peak, they say, in May 2013 with a below-average number of sunspots. ""If our prediction is correct, Solar Cycle 24 will have a peak sunspot number of 90, the lowest of any cycle since 1928 when Solar Cycle 16 peaked at 78," says panel chairman Doug Biesecker of the NOAA Space Weather Prediction Center."

[Below is a view of NASA's page at http://science.nasa.gov/headlines/y2009/29may_noaaprediction.htm (with the above quote encircled)]

(Upper right: A solar flare observed in Dec. 2006 by NOAA's GOES-13 satellite. (Click on any image to see it larger))

More from the NASA article:
"Even a below-average cycle is capable of producing severe space weather," points out Biesecker. "The great geomagnetic storm of 1859, for instance, occurred during a solar cycle of about the same size we’re predicting for 2013."
....
Above: This plot of sunspot numbers shows the measured peak of the last solar cycle in blue and the predicted peak of the next solar cycle in red. Credit: NOAA/Space Weather Prediction Center.

The latest forecast revises an earlier prediction issued in 2007. At that time, a sharply divided panel believed solar minimum would come in March 2008 followed by either a strong solar maximum in 2011 or a weak solar maximum in 2012. Competing models gave different answers, and researchers were eager for the sun to reveal which was correct.

"It turns out that none of our models were totally correct," says Dean Pesnell of the Goddard Space Flight Center, NASA's lead representative on the panel. "The sun is behaving in an unexpected and very interesting way."

Researchers have known about the solar cycle since the mid-1800s. Graphs of sunspot numbers resemble a roller coaster, going up and down with an approximately 11-year period. At first glance, it looks like a regular pattern, but predicting the peaks and valleys has proven troublesome. Cycles vary in length from about 9 to 14 years. Some peaks are high, others low. The valleys are usually brief, lasting only a couple of years, but sometimes they stretch out much longer. In the 17th century the sun plunged into a 70-year period of spotlessness known as the Maunder Minimum that still baffles scientists.

Above: Yearly-averaged sunspot numbers from 1610 to 2008. Researchers believe upcoming Solar Cycle 24 will be similar to the cycle that peaked in 1928, marked by a red arrow. Credit: NASA/MSFC

Right now, the solar cycle is in a valley--the deepest of the past century. In 2008 and 2009, the sun set Space Age records for low sunspot counts, weak solar wind, and low solar irradiance. The sun has gone more than two years without a significant solar flare.

"In our professional careers, we've never seen anything quite like it," says Pesnell. "Solar minimum has lasted far beyond the date we predicted in 2007."

In recent months, however, the sun has begun to show timorous signs of life. Small sunspots and "proto-sunspots" are popping up with increasing frequency. Enormous currents of plasma on the sun’s surface ("zonal flows") are gaining strength and slowly drifting toward the sun’s equator. Radio astronomers have detected a tiny but significant uptick in solar radio emissions. All these things are precursors of an awakening Solar Cycle 24 and form the basis for the panel's new, almost unanimous forecast.

According to the forecast, the sun should remain generally calm for at least another year. From a research point of view, that's good news because solar minimum has proven to be more interesting than anyone imagined. ...

Meanwhile, the sun pays little heed to human committees. There could be more surprises, panelists acknowledge, and more revisions to the forecast.

"Go ahead and mark your calendar for May 2013," says Pesnell. "But use a pencil."

I do recommend readers check out the full article at NASA's webpage, at the link above. For purposes of this particular post, I want to zero in on their chart showing sunspot activity since the year 2000. (At some point for longer-term studies of the market's long-wave cycles over the centuries, we might want to refer back to that lower-term chart showing the Maunder Minimum.)

Here's where it gets really interesting. After you see the sunspot cycle pattern in NASA's chart above, compare that with a chart of the Dow Jones Industrial Average. But not the one you're used to seeing that bottoms in 2002 and rises into 2007. I'm thinking of the inflation-adjusted version that screens out the effects of the greatly devalued dollar (which has 'conveniently' masked the great drop in asset values the U.S. has experienced over the past decade). Below is the Dow/gold ratio chart circulated publicly from time to time by "Chart of the Day," most recently several weeks ago which I posted along with their commentary at If the Dow-Gold ratio bounced up higher, will it be from the Dow rising or gold falling (or both)? Checking gold in 3 time frames (5/9/09) - this is the chart most commonly considered to show the inflation-adjusted Dow Jones Industrial Average. Below is just that portion of the post, with their chart and commentary:

Chart of the Day
"Today's chart [5/9/09] presents the Dow divided by the price of one ounce of gold. This results in what is referred to as the Dow / gold ratio or the cost of the Dow in ounces of gold. For example, it currently takes 9.2 ounces of gold to “buy the Dow.” This is considerably less that the 44.8 ounces it took back in 1999. When priced in gold, the Dow is down 79% from its 1999 peak and the scale of the current two-month rally has not distinguished it from the many bear market rallies that have occurred over the past decade."

"Webmasters, journalists, and bloggers may post an occasional free Chart of the Day on their website as long as the chart is unedited and full credit is given with a live link to Chart of the Day at http://www.chartoftheday.com."

It would be fascinating to really track out the correlations (time doesn't permit me to do so). I understand that some others may have done that but I don't know that there's a public version to post or quote. Still, any student of the markets who knows major high and low points of the past few hundred years cannot help but find the NASA information intriguing. And even a casual review of "Chart of the Day"'s Dow/gold chart shows a startling similarity to the sunspot cycle since the year 2000.

Another area to consider would be the correlations to the ancient calendar systems that incorporated solar, lunar and planetary cycles with agricultural, commodity and market cycles. One example being of course the traditional Chinese calendar with its 10 "heavenly stems," 12 "terrestrial branches," and the pairing of these which yield confluences of 60-day patterns and 60-year cycles. Something I've referenced previously in this cycles review series of posts, and also at my Tao of Trading site.

Many equities analysts are projecting that the equities markets move into bear-market lows in the time frame around 2011-2015, and I don't reject those ideas out-of-hand. But my own work is showing that there remains a possibility that the equities markets can make a significant low, either later this year (perhaps September or later in the fall) or about mid-year in 2010. To be followed by a much more substantial rally, even with a theoretical new high (but don't get excited - can be a bear-market rally but much better than the one we've seen so far). Therefore, it's only natural that I find it personally interesting to see NASA's projected sunspot cycle dropping into a low perhaps this year, with a good bounce into 2013.

Below are my hypothesis or working analysis big-picture charts of the Dow Jones Industrial Average and the S&P 500 indices. If you look at this post, Long-term channel (5/22/09) that I posted at my UBTNB3 blogspot (link to that always at right), you'll also see a long-term price channel chart as located at Insights from Jeremy Siegel: 3 Reasons Why The Dow Will Hit 10,000 in 2009 (InvestmentU.com, 5/18/09). To accomplish the price targets I've mentioned in my long-term charts below, price would fall somewhat lower under Jeremy Siegel's long-term channel trendline that it already did. But when you look at his chart, you see that price already did poke under it during the lows of the 1970's/1980's - which can set up an outside and lower but still parallel trendline providing support for a poke lower presently. For that matter, breaking under but retaining a channel trendline would be consistent with such Elliott Wave views as a large expanded flat that can set the stage for a fifth-wave diagonal; or, that corrects the movement up from 1932 or so. (Depending on which it is, Jeremy Siegel may end up being right that the Dow will hit higher levels that people don't expect - even higher levels than Dow 10,000 but not in 2009. Although it's also possible for a sharp rally to test up to that level, probably along with SPX 950/960, before new lows later this year or into mid-2010, so we'll stay alert.) But also note that the potential projections I've noted on the charts below, can remain within the long-term price channel as it's marked on a different version of the big-picture chart, which I posted at Big-pic alternatives-equities (5/16/09) at my Unbiased Trading - No Bull, No Bear, No Bias (tm) (UBTNB3) site.





For those particularly interested in tracking the gold market, and if you haven't been reading my posts tracking it (use the "Gold" label in the labels list at right), I've been continuing to track the bull vs. bear cases for gold in terms of chart and technical analysis. Recently, gold moved up quite well in dollar-denominated terms, but that's partly because of the dollar's drop, This rally is much more muted in other currencies (although it made a new all-time high in other currencies, when gold made the $1007.70 intermediate swing high that hasn't yet been bettered). Frankly the odds would normally favor gold cycling downward right now, but it has not violated chart support so I'm remaining open to the possibility it may actually rally higher. In any event, moving to $1008 (not to mention $1034) will be most significant from a chart basis. In both the dollar and in other currencies, gold's recent rally has not yet confirmed the idea of a large third wave higher. So even though I do have a price objective at $1192, don't get gold fever before it breaks above those key levels, because if it fails to do that and loses support then I've got lower price projections including to $550.

I've included the Solar Cycle in my "Cycles review" here because it's looking apparent to me that the Solar Cycle being tracked by NASA may have correlation to financial market activity, even though I'm not prepared to discuss reasons why. I know that there are others who track natural phenomena to financial markets - not just Raymond Merriman from the financial astrology point of view, but also those who show correlations with geomagnetic storms, and Chris Carolan with his "Solunar" model that correlates with solar and lunar cycles, and even Mike Korell's work at ChartsEdge with the daily maps based on VLF signals. I also know that Mike has done mathematical work examining those down to fractal measurements that may relate to "phi", and there are others working with such mathematical methods including Martin Armstrong and those involved with Gann analysis (such as Andy Askey at his PTV Investing blog). You can locate some background information on these using the labels list here, and of course by visiting the pertinent websites included in my list of "other sites of interest" at the right side of the page here.

Well this has been a time-consuming post on a pretty, sunny morning, so I offer this set of information for your consideration. And now I'm off to enjoy the sun in a more direct way! Hope you're enjoying your weekend; and I'll return later in the day with the forecast charts provided by ChartsEdge, as well as Andre Gratian's Turning Points weekend newsletter update.

Euro's path out of triangle - or triangle trap - likely to surprise most investors; don't let it hurt your portfolio

The euro moved up sharply this week, as the dollar again poked a new low especially yesterday. I've been watching this closely for signs of a trend reversal back down. A few weeks ago, it looked like it might be in a triangle that would send it back down, but it broke above including above its 200-day moving average. Triangle, or triangle trap? If it's a trap, then it will send the euro moving sharply in a direction that no one expects. But - just which direction would that be right now - does everyone expect it to fly higher? or to drop? There's a lot of bullish sentiment on the euro, so many would be surprised by a steep drop. But I don't know that many really expect it to "defy gravity" from here - so that could be the surprise. One thing seems certain - given that the euro is close to the juncture of the inflation vs. deflation paradigm, affecting other currencies, commodities and equities - being on the wrong side of the euro's movement from here could be very detrimental to many portfolios.

The euro won't officially break to the upside out of the triangle - or triangle trap - unless it exceeds 145.04. It's jumped closer to that, but has entered another area of chart resistance (which I discuss in more particular, with my charts at the bottom of this post. Given the significance of its relationship with the dollar, and implications extending to equities markets, precious metals and probably certain commodities, this seems a good time to conduct a more indepth review. And in any event, to keep a close eye on it even if not trading it, because its movement will signal the movement of other assets you probably are investing in or trading.

To add more dimension to my own chart reviews, I thought it would be interesting to adduce the views of Martin Armstrong who included a review of various currencies in a "Market Outlook" newsletter that he apparently wrote, on the topic of "One World Currency" dated May 1, 2009 (available at http://www.scribd.com/mobile/documents/15095650). His views on the euro should of course be taken in context with his comments about currencies generally. At a minimum, given the relationship with the dollar, readers should also read my post from last week, Cycles review, Part XI: Economic Confidence Model - and what about the U.S. dollar?! with review from Martin Armstrong (5/23/09) which looked at the dollar along with Armstrong's comments about it in that newsletter.

So before my thoughts on my charts (below), here's a quote from pages 1 and 22 Armstrong's May 1 newsletter along with a copy of one of his charts that he references in it (at page 22):

Until 1971, the world for the most part, relied upon gold as money. It was the neutral store of wealth that was recognized around the world. ...

The Monetary Crisis Cycle of 37.33 years has come on target - 2008 as calculated from 1971 turning point when the gold standard died. ...

There is a rising discontent politically behind closed doors where some of the noise is filtering out through the cracks. Both China and Russia are raising the question about the dollar and its global reserve currency status. ...

The EURO has fallen significantly from the 2008 high. We must face the strong possibility that since this high came on the 37 year monetary crisis cycle calculated from the 1971 collapse of the gold standard, we could still face a major serious change in trend. ...

The main channel is constructed by taking the low of 1997 and connecting that to the high of December 2004. This Breakout Line #1 forms the broadest trend for the Euro. We can see that in 2008, the top was exceeded, but not sustained. Once the Euro closed back below this line, it was all over. I have provided 4 parallels P#1a-d that form the key points within the channel. If we now come out of the bottom, it is all over. The Euro will retest par and possibly even retest the 1985 lows.

The Breakout Line #2 is constructed over the major 2000 low taking the low of early 2000 and connecting it to the immediate first high of January 2001. This provided resistance for the highs of 2004. A parallel from the Nov. '05 low, provided a nice support line for the rally and once broken, it's been a sharp drop.

The Break Line #3 takes the high of Feb. 2004 connecting it to the Nov. 2005 low. A parallel from the Dec. '04 high gives a nice target for support if Channel #1 breaks.

Breaking the 2008 low in 2009, will warn that we may see the collapse of the Euro into 2011 making this a 3 year correction. Just keep in mind that a strong dollar will confuse everyone. But the rise in the value of the dollar may be very bearish economically as it was during the 1930s.

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Update note, 6/6/09, as I see Martin Armstrong also addressed the euro in his Feb. 19, 2009 newsletter (as posted at ContraHour), stating: "In order for the Euro to show some sign of strength, it must first accomplish a monthly closing back above $1.4215. This is the minimum threshold level from a technical perspective to show same sign of survivability. The next level of key monthly closing resistance will be at $1.4315. As long as the Euro remains below this level on a monthly closing basis, then a test of the major long-term support is still possible at $1. 1680. A monthly closing below that area and it will be very unlikely that the Euro will survive in its current form."

And here are daily, weekly and monthly charts of the euro ($XEU) - the monthly having my annotations on it. (My trendlines and annotations predate any reference to Armstrong, by the way - my trendlines are based on my own view of a price channel on the monthly chart. Use of logarithmic scale influences the lines too.) The euro is running into an area of resistance that's partly based on standard chart resistance at prior swing points, and also Fibonacci levels. It just gapped up and moved above 140.75 yesterday - IF it triggers down from there (no guarantees that it does), that might be an exhaustion gap. It's also possible on an Elliott Wave basis that the gap was part of a small third wave (that's where gaps usually occur - in third waves and in C waves (which are actually considered a "type of third wave" according to the EWP book). Which could point to another Fibonacci level, at 142.60 being the 50% retrace to the peak (but I'd have thought that level already tested by the swing high around 145). And there's the Bollinger Band midline on the monthly chart just a bit higher, right about at 143 (143.18 to be exact as of yesterday).

The indicators do look strong - there might be just a small hint of negative divergence but it's slight on the daily; while the weekly chart's indicators look quite strong. Then again, the monthly chart's indicators remain well down, which can be interpreted as oversold but then again they have not totally confirmed a movement into bullish territory. The best one there is the StochRSI, which does move fast and it can also turn down again before the others move into bullish position. So I read the indicators overall as generally positive, but not in position where they would render a turn-around and movement down again as being improbable.

On the hourly charts, it looked like the euro might have been working out a trap door reversal pattern in the few days before Friday. As that broke to the upside yesterday, it became possible that the hourly chart's pattern might have been a small fourth-wave correction. So it remains possible for the euro to have completed, or be working to completion of, this rally leg. I cannot help but remember the weekly preview comments of Raymond Merriman for this weekend (posted yesterday here, Comments on financial markets for the week of June 1: Raymond Merriman (5/29/09) and available at his MMA website always included in the "other sites of interest" listed at the right side of the page here) - about being at a point now where these currency and commodity prices may continue higher into "anti-gravity" prices for a while. Indeed, that we may see "either a huge blow-off upwards in stock and/or commodity prices in the next few weeks, or a huge collapse." It's interesting that Merriman doesn't see any middle ground there - but from a chart perspective, that's how it's looking to me too.

I can state that I lean to the idea that the euro cools off and the dollar strengthens, but I definitely see the chart potential either way .... so I have to echo Merriman's comments and suggest to readers that they do what I'll be doing from here - keeping a close eye on it!

Markets update with Objective Elliott Wave analysis from Tony Caldaro

This is Tony Caldaro's weekend update - you can always find his updates (including daily) and public charts link, at his website Elliott Wave Lives On (included in the "other sites of interest") at the right side of the page here:
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the ELLIOTT WAVE lives on
Market analysis using proprietary Objective Elliott Wave techniques

May 30
weekend update

REVIEW
Economic reports for the week continue to display a moderation in the decline in economic activity. Case-Shiller home prices were reported at -18.7% v -18.6%, Existing home sales 4.68 million v 4.55 million, and New home sales 352K v 351K. Q1 GDP was revised upward but still sharply negative, -5.7% v -6.1%, the Chicago PMI was 34.9% v 40.1%, and the weekly Jobless claims were 623K v 631K. Consumer confidence jumped on one reading 54.9% v 40.8%, but was only moderately higher on a another 68.7% v 67.9%. The economy is no longer in free fall. But with home prices continuing to decline, and jobless claims remaining over 600K, it's not improving either. The equity markets rallied late in the week to post good gains. The SPX/DOW were +3.2%, and the NDX/NAZ +5.1%. Europe was +0.9%, Asia +3.6%, and the Commodity equity market were +4.5%. Overall it was a good week for stocks, commodities and gold, but a bad week for Bonds and the USD.

LONG TERM: bear market
For the past three months the market has staged its best rally of the entire bear market in terms of price (+263 points) and percentage (+39%). It was expected. In fact, at the March 2009 low (SPX 667) we originally expected a rally to SPX 1107. This target was later lowered to a range between SPX 1001 (a 50% rally) and SPX 1107 (a 50% retracement). The reason for this projection was the current wave structure and historical wave relationships in cyclical bear markets. Historically bear markets have unfolded in ABC patterns. They are corrective in nature, not impulsive like bull markets. In Supercycle/Cyclical bear markets the ABC pattern is comprised of three Primary waves. When the first down wave, Primary wave A ends, it has typically been followed by a strong counter trend Primary wave B rally. This rally usually retraces either 50% of the entire decline, or rallies 50% from the lows. When Primary wave B concludes, the often dreaded Primary wave C takes the market lower to end the bear market.

MEDIUM TERM: uptrend, but cautious
From the October 2007 high (SPX 1576) to the March 2009 low (SPX 667) the market declined in three Major waves. The three Major waves, (Mar08 SPX 1257, May08 SPX 1440, and Mar09 SPX 667) completed Primary wave A. Each of the declining Major waves, A and C, were comprised of five Intermediate waves. In basic Elliott Wave terms this was a simple 5-3-5 zigzag. When the market bottomed in March at SPX 667 and then started to edge higher, we acknowledged the completed wave pattern and projected the above target(s). Now that the market has rallied 39% from the lows and appears to be stalling, we posted a cautionary note in last weekends update. Thus far the uptrend has not violated any important support levels. But it has remained in a narrow trading range (SPX 879 - 930) for nearly the entire month. During the bear market this type of consolidation, after an uptrend, has often led to a reversal within the first week of the following month. We remain cautious medium term, and bearish long term.

SHORT TERM:
Support for the SPX is at 912 and then 848, with resistance at 935 and then 961. Short term momentum was slightly overbought at the close on Friday. With the lengthy consolidation, and the constant successful retesting of SPX 880 for the past three weeks. We can now see a potential count for moderate new highs. Intermediate wave 4 may have just completed a flat, alternating with the Intermediate wave 2 zigzag. The Fibonacci resistance zones, posted a few weeks ago remain in play: SPX 937 - 946, SPX 975 - 982 and SPX 1034 - 1049. The key level to watch on the downside is SPX 876. The market has successfully dodged this level this far. When it fails to do so the uptrend will most likely be over.

FOREIGN MARKETS: Asian markets rallied 3.6% on the week. All remain in uptrends with India and Hong Kong the week's best performers. European markets lagged +0.9%. Their uptrends continue with Germany leading. Commodity equity markets rallied 4.5%. Both Canada and leader Brazil remain in uptrends.

COMMODITIES: Bonds lost 0.5% this week and remain in a downtrend with rates rising. The evidence is now convincing that Bonds have entered a new Cyclical bear market. This is quite a reversal considering that Bonds had been in a Cyclical bull market for nearly three decades. Bearish on Bonds long term and medium term.
Crude rallied 7.5% on the week as its uptrend continues. Still expecting Crude to retest its lows later this year.
Gold gained 2.3% on the week and is now approaching the $1,000 level again. Uptrend remains intact in this long term bull market.
The USD broke to new downtrend lows -0.9% on the week. The USD is now again in a bear market. The Euro (+1.2%) and Yen (-0.7%) uptrends remain intact.

NEXT WEEK
Economic schedule unavailable. FED chairman Bernanke testifies before Congress on Wednesday at 10:00. Then on Thursday Bernanke gives a speech at the FED headquarters at 8:45. Expecting non-farm payrolls to be released on Friday. Will update with the economic schedule on Monday. Best to your week!

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987

Markets commentary from a sailor's point of view: May's handoff to June

Some commentary across the markets as we reflect on May and look to June. This will be without charts for now, as I'm using my iPhone from our sailboat - great attitude adjustor, by the way! Also good practice in appreciating waves, and wind shifts. Which seems important across the markets now. After the early May highs, the markets have consolidated - or churned, if you're feeling bearish. That poke up Friday afternoon looks like a small 5th-wave thrust from a small triangle. As many are discussing it, including the EW significance, I'd like to focus on the slightly bigger picture: I can see about 950-960 if the SPX moves higher, but I and others have shown the resistance that's stalled equities indices since early May. Now the potential reversal time windows are pressing closer.

In my reading today I came across this blog, http://kennystechnicalanalysisblog.blogspot.com/. Kenny there has some good points about the technicals that my readers should appreciate. And he includes a link to an analysis by Carl Swenlin about gold, that I believe is important. I've known for a long time that gold's $1007.70 high was a new all-time high measured in other currencies. One of the reasons I've pointed out that the (B) wave scenario cannot be ruled out. Couple that with our recent observations about possible reversals in the dollar and euro - and possibly oil, and the thin ice equities are on - and perhaps support for Treasuries, now or soon - and the juncture markets are tracing is coming into starker contrast.* Sure, I've made similar comments for about a week - the markets have just continued to edge closer to their limits. For example, yesterday both oil and the euro flew just above key Fibonacci levels. My experience trading Fibonacci patterns is, that's precisely when to look for trend reversal. Gotta wait until early next week to see whether or not that shows up.

Notice this juncture about currencies, gold, oil, bonds, and equities points to the center of the inflation/reflation versus deflation see-saw. And we may experience that moving one way, before a longer-term movement kicks in. I suggest investors and traders adopt the "show me" attitude I recommended when the banks seemed ready to break out. The banks failed to do so (unlike GS, but it's got to be watched as in a potential Fibonacci resistance zone on its own chart now) - so I sure hope my readers didn't get stuck in that propaganda trade. All these markets appear close to having to choose soon. I might hypothesize that the dollar and bonds soon get the upper hand over the euro, equities and maybe oil and gold ... but I'll do my best to keep that "show me" attitude too!

*update - saw this too: U.S. Dollar Looks in the Mirror at U.S. Stocks (EWI, 5/28/2009) - nice depiction of this, although they didn't manage to catch the right target for that (c) wave down in the dollar which we got at symmetry, or actually likely tagged that downtrend line yesterday (and I would hope my readers can fill in the blanks in that redacted version Hochberg discusses, either based on the channel lines or using what I've posted recently on euro!).

Quote from Latitudes & Attitudes magazine (June 2009 issue #109): "Not one shred of evidence supports the notion that life is serious."
If that doesn't give you a laugh, get on a boat this weekend!

More weekend reading about markets, the dollar, gold, technical analysis, and news/views about banking

Here's a start for those interested in some weekend reading and/or viewing:

For those interested in Elliott Wave - One set of views about the markets - Bob Prechter interviewed on Bloomberg TV: mms://media2.bloomberg.com/cache/voiYckQWJmpw.asf. I do not necessarily agree with his organization's Elliott Wave counts, but - contrary to what they assert - it isn't simple. That's why I prefer to align my default "Elliott Wave" label here, with Tony Caldaro's Objective Elliott Wave. Still, for pure theoretical ideas, Bob does a good job. He's talking about the markets having a lot more downside work to do in the future, but he's thinking that the summer months just ahead should see more upside to the bear-market rally. (Okay if you say so, Bob; I'll just adopt a wait-and-see attitude on that.)

Those interested in the dollar - his presentation includes a chart of the dollar in which they've obviously adjusted their EW count of it. Looks a lot more plausible than the one I saw from that organization a month ago. Bob seems to think the dollar can go lower - based on that chart showing the dollar doing the C wave of a wave 2, that can fit with what I posted earlier, about the Fibonacci retracements that can go down to .618 retrace to the 70.70 low. Bob may be right about that; but, I'm going to adopt a wait-and-see attitude on that too (especially with the euro at that .786 retrace level of its own right now).

Tim Wood as part of the lineup in FinancialSense's Saturday, May 30 audio presentation. And/or, read Tim's article at that site today, Warning! Counter-Trend Moves Spark False Hopes (5/29/09). I know there are others who post at that site - Tim's the one I can confidently recommend.

Another set of views about markets, including perhaps different ideas about the market's likely path over the coming months and years - Martin Armstrong has apparently done another newsletter, "Understanding the Real Economy" dated May 15, 2009. Here is where I found it via a Google search, at http://economicedge.blogspot.com/2009/05/martin-armstrong-understanding-real.html (post there dated 5/15/09). About 20 pages chock full of everything you wanted to know about his Economic Confidence Model, wave timing, and ideas about how to project the timing of a low for this equities bear market.

Now, if you read this one, remember that we don't trade "news" but we like to stay informed! (But if you read Armstrong's newsletter, think about that "waterfall" idea, and look at a yearly chart of the banking index ($BKX), you might start really wondering about the banks, as I've been doing that - works well with monthly/yearly charts.) - NY Times article - OFF THE CHARTS: TROUBLED BANK LOANS HIT A RECORD HIGH, By FLOYD NORRIS, Published: May 29, 2009 http://www.nytimes.com/2009/05/30/business/economy/30charts.html?ref=business ("OVERALL loan quality at American banks is the worst in at least a quarter century, and the quality of loans is deteriorating at the fastest pace ever, according to statistics released this week by the Federal Deposit Insurance Corporation.").

Speaking of the banking sector, check out some daily/weekly chart views and technical analysis of the banks, including discussions of the regional banks looking weaker than the BKX, in this post - Financials: Charts Say "Decision Time" today at Financial Ninja.

And further on the financials, there's another thought-provoking article, Guest Post: Goldman Sachs Principal Transactions Update: Collapse In Agency Program Trading Volume by Tyler Durden at nakedcapitalism today. Including some peeks behind the curtain of what's happening with trading in the equities markets these days. (Yes, that spike in the last 5-10 minutes of the day today - maybe it was a precursor to a breakout from a triangle or trading range, or maybe it was like something that happened in February, right before the slide down into the March lows ... this is why all traders should be from Missouri, the "show-me" state - don't guess, let price make the move which we won't see until next week at the earliest!)

Further insight into today's late-afternoon action in Late Day Rallies, the SPX and the VIX
(5/29/09) by Bill Luby - and if you scroll his site, numerous other interesting posts, at Bill's VixandMore.blogspot.com.

And, I cannot resist the Gold Contract COT (commitments of traders) chart data for the week (among those at COT (Commitments of Traders)) - didn't someone tell those commercial traders they should be buying gold coins from those TV advertisers?! LOL Well, gold certainly moved but still not above $1008 let along $1034 so will see ... Maybe Allan at his AllAllan.blogspot.com (also using Elliott Wave methods) is seeing something similar in precious metals, with his articles today - Silver - update - and yesterday, A look at Silver. If the idea is to give credence to resistance unless and until going higher is screamingly obvious, that might be the idea these commercial traders have - chart below:

Comments on financial markets for the week of June 1: Raymond Merriman

Folks, here are Raymond Merriman's public comments for the week ahead, which you can always find at his Merriman Market Analyst Weekly Comments webpage:
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Comments for the Week Beginning June 1, 2009
Written by Raymond Merriman

Note: There will be no weekly column next week, due to speaking engagements in Moscow, Russia. For more information on these presentations, please contact [e-mail address is being protected from spam bots, please see in the article at Comments for the Week Beginning June 1, 2009 (you'll need JavaScript enabled to view it on that page)]. The next column will be released in two weeks, for the week beginning June 15.

Review and Preview
Heliocentric Mercury in Sagittarius, combined with the first passage of the 13-year Jupiter-Neptune conjunction cycle, continued to power many financial and stock markets to new multi-month highs last week. However, many stock indices around the world also continued to exhibit intermarket bearish divergence, as not all made new highs. This is important because we are now in another geocosmic critical reversal zone that will last through next week. If the bearish divergence pattern is not resolved this week, it could portend trouble for stocks throughout the world. If it is resolved, it could portend an escalation of “irrational exuberance,” propelling these markets to much higher levels over the next few weeks. After all, one of the themes of Jupiter and Neptune in conjunction is “no boundaries.” Anything and everything goes. If euphoria and hope sweep the investment community, everyone jumps on the rocket and the sky is the limit. If reality and worry start to emerge, then everyone jumps off the ship at the same time, and a panic ensues. This is not a case where the market climbs the ‘proverbial wall of worry.” Instead, it is a case where the wall becomes a launching pad with no gravity to pull things down, or a perch from which investors fall off, only to discover there is no safety net below. No boundaries. No nets. And the sky (or the abyss) is the limit. You better think or swim.

In Europe, none of the indices we track made new highs on last week’s rally. In Asia and the Pacific Rim, however, the Japanese Nikkei and Hang Seng index of Hong Kong did soar to their highest level in several months. India’s Nifty Index is not far behind and may do the same this week. Australia’s All Ordinaries index, on the other hand, fell far short of its recent high recorded on May 11. In South America, both Brazil’s Bovespa and Argentina’s Merval stock indices made new highs last week for this year. In North America, the NASDAQ Composite did too in the last minute of trading on Friday. But the Dow Jones Industrial Average fell well short of its May 20 high. Thus is the case for intermarket bearish divergence as we enter this current geocosmic critical reversal period. By the way, who do you think bought all those stocks in the last 5 minutes of trading on Friday, driving the DJIA up 70+ points? And why? There may be a clue in the “Longer-Term Thoughts” section. But with Neptune signatures (the master of disguise) in such abundance that answer may never be correctly revealed (or admitted).

There was no divergence in crude oil and precious metals last week. Each of these commodities accelerated their torrid advance as heliocentric Mercury continued its passage through Sagittarius, typically a time when many commodities and currencies explode upwards. They did so in this instance too, but its effective time band of May 19-30 now comes to an end.

Short-Term Geocosmics
Was the huge run up in precious metals, crude oil, and currencies against the U.S. Dollar a function of heliocentric Mercury in Sagittarius, or Jupiter conjunct Neptune? We shall see the answer to this question within the next few days.

If the correlation to this strong surge was heliocentric Mercury in Sagittarius, then any market that has rallied sharply since May 19 may be in for rude fall in the next ten days, as this planet will now enter the more sobering sign of Capricorn until June 9. Whereas the influence of Sagittarius can be very optimistic and speculative (some might say it is the sign of “the gambler”), Capricorn can be more demanding of hard evidence to support such sudden price increases. If there are sound and fundamental reasons to justify such a move, then it can continue.

If the astrological correlate to this rise in commodity and currency prices is more to do with the Jupiter-Neptune conjunction, then it is possible that this trip into “anti-gravity prices” will continue longer. Jupiter and Neptune will be close to one another through the middle of July, for Neptune also turned stationary retrograde on Thursday, and Jupiter will do the same on June 15. In retrograde motion, they will form their second exact conjunction on July 10. Since this is a longer-term 13-year planetary cycle, there is reason to think it will have greater influence than heliocentric Mercury transiting through Sagittarius and Capricorn.

But it is even more complicated than that. Next Friday, June 5, the transiting Sun will start its translation of a T-square to both Saturn and Uranus, lasting through June 17. This of course brings to the forefront the principles of the Saturn-Uranus opposition, which is the longer-term 45-year cycle that we associate with financial collapse and crisis, a condition that started in September 2008 and continues to worry investors even now. In fact, it is likely to worry investors well into 2010, when Jupiter and Mars will both translate the Saturn-Uranus opposition (July-August 2010).

I wish I could say that is the extent of this complicated geocosmic situation now in effect. But there is more. Two days after Jupiter goes retrograde (June 15), the Sun will transit in a trine to both Jupiter and Neptune, thus once again bringing to the forefront the Jupiter-Neptune conjunction principles. And then on July 1 and 6 respectively, first Venus and then Mars will square the Jupiter-Neptune conjunction, just a few days before their second passage on July 10. With so much Jupiter and Neptune in the picture, combined with the ongoing Saturn-Uranus opposition, perhaps financial astrologers can begin to understand why a case could be made for either a huge blow-off upwards in stock and/or commodity prices in the next few weeks, or a huge collapse. As you navigate through these uncharted waters, you must indeed learn to think or swim, float or croak. On a mundane level, these same aspects can correlate to extreme flooding conditions. On a political level, they can pertain to a great hoax, and the starting of false and sensational rumors that harm the reputation of others. It can be a time of alarmist announcements, perhaps as we see developing with North Korea this past week.

Longer-Term Thoughts
There is a saying we have here in Michigan that goes like this: “As General Motors goes, so goes the country and its economy.” On Monday, June 1, General Motors (GM) – now affectionately (or sadly) referred to as “Government Motors” – is expected to declare bankruptcy. The U.S. government will now own 72.5% of GM (hence “Government Motors”), and the United Auto Workers (UAW) will own either 17.5% or 27.5%, depending on whether or not GM’s bond holders will accept the government’s offer to swap their bonds for 10% stock ownership. The alternative to not accepting the offer is not very attractive for either these bondholders or current GM stockholders, who will likely be left with…. nothing. As stated before, we are in uncharted waters, both politically and in terms of traditional business models.

In Business Astrology, transiting Pluto, Neptune, or Uranus in hard aspect to one’s natal Venus or Jupiter is a classical bankruptcy aspect. It doesn’t mean you will go bankrupt, but if you spend or invest your money unwisely, you could suffer great loss, even to the point of bankruptcy. It is a time when one needs to pursue a frugal course of action, and not take financial risks where the outcome is unknown. In the chart of the United States (July 2, 1776, or even July 4, 1776), transiting Pluto and Uranus are indeed entering into hard aspects to the natal Venus and Jupiter of the United States, 2008-2011. Let’s hope these “investments” made on our behalf (yes, Americans, we will all now be the proud owners of GM), have been well thought out, and the risks are indeed minimal. Pardon me if I have some doubts. I am a Capricorn, which cosmically entitles me to have moments of doubt. Don’t be surprised if heliocentric Mercury entering Capricorn this week reveals that other investors begin to exhibit some doubts too.

Announcements
We are pleased to announce our new official Japanese web site at http://merriman.jp/. Here you can read our free weekly report in Japanese every week. You can purchase several of our books and subscription reports in Japanese, including or new weekly Gold report, Cash Currencies report, and both the MMA Cycles and MMA Japanese Markets Cycles reports. If you read Japanese, please feel free to check out this new site, created by Toshi Nippou Ltd. of Tokyo.
We are also pleased to announce the formation of our new Weekly Cash Currencies Report in English, to start the first week of June 2009. This report will cover our weekly analysis of cash Euro Currency, the Dollar-Yen, and the Euro-Dollar markets. For further in formation on this new subscription report, please visit http://www.blogger.com/, and look under SERVICES.
The monthly MMA Cycles and MMA Japanese Cycles Reports were issued last week. If you subscribe to this report, and did not receive it, please contact us at once. The “MMA Cycles Report” is our market advisory report for traders of the U.S. stock indices, T-Notes, Gold, Silver, Euro currency, Swiss Franc, Grains, and Crude Oil. The “MMA Japan Cycles Report” covers the Nikkei, Dollar/Yen, and JGB Bonds. For more information and subscription, go to http://www.mmacycles.com/weekly-preview/mma-comments-for-the-week/comments-for-the-week-beginning-june-1,-2009/services/.

The next SOS Report will be issued to subscribers on June 11. This SOS monthly report addresses the long- and intermediate-term cycles that affect all world markets, but specifically through the history of the U.S. stock market, and the Dow Jones Industrial Average. It is the “big picture” ahead, like where we are now in terms of the 72-, 18-, 4-year, and 50-week cycles. It also discusses the shorter cycles (primary and its phases) of the DJIA, German DAX, Netherlands AEX, the Australian All Ordinaries, Hang Seng of Hong Kong, the NASDAQ Composite Index, and the XAU Gold and Silver Mining index. The German edition also covers the Swiss Market Index (SMI). It also includes 3-star critical reversal dates for stock indices and a list of the major geocosmic signatures in effect for the following month, with their appropriate C/S values. For information, go to http://www.mmacycles.com/weekly-preview/mma-comments-for-the-week/comments-for-the-week-beginning-june-1,-2009/catalogue/services/the-sos-stock-market-cycles/.

This is a good time to sign up for the ISAR 2009 conference, as a window for a wonderful discount closes this weekend. For those interested in learning or improving your understanding of astrology, this fantastic conference in Astrology is going to take place August 19-24, 2009, at the luxurious Oakbrook Hills Marriot Resort, just outside of Chicago (not far from O’Hare Airport). This will be the ISAR (International Society for Astrological Research) 2009 conference, featuring over 80 professional astrologers from all over the world, including Jeff Jawer, Rick Levine, Michael Lutin, Claude Weiss, Nick Campion, Verena Bachmann, and several Financial Astrologers like Christeen Skinner, Robert Hitt, Grace Morris, Roy Gillett, and myself. There will be a whole track on Financial Astrology, and I will be giving a one-day workshop on Financial Astrology, specializing in the Stock and Gold markets, on Monday, August 24. For more information, and registration, please go to http://www.isar2009.com/.

If you are an active short-term trader, you may be interested in our Weekly or even Daily Market reports with short-term trading recommendations. It is the only way I keep in touch with traders on a daily or even weekly basis. These reports give in-depth analysis of the DJIA, S&P and NASDAQ futures, Euro currency (cash and futures), Swiss Franc, Dollar/Yen cash and Yen futures, T-Notes, Corn, Soybeans, Wheat, Gold and Silver. The daily reports cover all stock indices listed above, as well as futures in Euro, T-Notes, Soybeans, Gold and Silver. Subscription to the daily report also includes the weekly report. For more information, go to http://www.mmacycles.com/weekly-preview/mma-comments-for-the-week/comments-for-the-week-beginning-june-1,-2009/services, or call our offices at 1-248-626-3034. In the words of one of our subscribers: “I recently subscribed to your weekly report and am finding it to be excellent and a very useful companion to the MMA Cycles Report. I can't imagine now managing my investments without them.”

Please note that the English and German versions of Forecast 2009 book are all sold out now. We do have some Spanish translation copies available through our Buenos Aires affiliate, and Japanese copies might also still be available through our Tokyo affiliate. We understand there may be English copies available on Amazon.com at prices starting at $149. Pre-publication announcements for the 2010 edition will be announced in late July.

The German version of “Merriman on Market Cycles: The Basics” is now in print. It is also a revision of the earlier work in English. For more information on this book, please go to our German web site at http://www.mma-europe.ch/.

We have added a valuable new feature to our web site. Now, on the very front page, you can get a daily update on the weighted values of the Solar-Lunar cycles for the Dow Jones Industrial Average and the Silver market, via the studies conducted in “The Ultimate Book on Sock Market Timing Vol 4: Solar-Lunar Correlations to Trading Cycles,” and “The Sun, Moon and Silver Market: Secrets of a Silver Trader.” These are the studies I use personally for short-term trading of stock index futures, ETFs (like DIA and Silver fund), and Silver futures. Anything over 100 means it has an above-average correlation to reversing from an isolated high or low if it forms that day. The higher the value, the more probable the reversal. To see these daily values, please go to http://www.mmacycles.com/, and just check it out on the top of the page.

Disclaimer and statement of purpose:
The purpose of this column is not to predict the future movement of various financial markets. However, that is the purpose of the MMA (Merriman Market Analyst) subscription services. This column is not a subscription service. It is a free service, except in those cases where a fee may be assessed to cover the cost of translating this column from English into a non-English language.
This weekly report is written with the intent to educate the reader on the relationship between astrological factors and collective human activities as they are happening. In this regard, this report will oftentimes report what happened in various stock and financial markets throughout the world in the past week, and discuss that movement in light of the geocosmic signatures that were in effect. It will then identify the geocosmic factors that will be in effect in the next week, or even month, or even years, and the author’s understanding of how these signatures will likely affect human activity in the times to come. The author (Merriman) will do this from a perspective of a cycle’s analyst looking at the military, political, economic, and even financial markets of the world.
It is possible that some forecasts will be made based on these factors. However, the primary goal is to both educate and alert the reader as to the psychological climate we are in, from an astrological perspective. The hope is that it will help the reader understand these psychological dynamics that underlie (or coincide with) the news events and hence financial markets of the day.
No guarantee as to the accuracy of this report is being made here. Any decisions in financial markets are solely the responsibility of the reader, and neither the author nor the publishers assume any responsibility at all for those individual decisions. Reader should understand that futures and options trading are considered high risk.
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Treat the equities markets with great caution now - resistance here can signal test of the March lows

Folks, please treat the equities markets with great caution at this point. With the single exception of the Dow Jones Industrial Average which did a quick intraday poke higher recently, none of the major indices we track has exceeded its high of early May. My Fibonacci work presented here in posts at that time showed that the indices tested important levels that can serve as resistance - including a 1.382 extension for NDX, and the .786 retraces for the Dow (INDU) and Dow Transports. The indices look like they may be churning at or under 200-day moving average resistance. There are some cycles reasons to think that this time window of late May and early June may be an important one, which could mean a potential reversal time. In addition, my own little Fibonacci calculation of March 7 that showed that low to occur at the 1.382 year interval after the October 2007 highs, also showed that this time frame is the 1.618 year interval after that market peak. With the exception of the Nasdaq (which hasn't bettered that 1.382 Fibonacci level I described, that can be an Elliott Wave flat), the major indices have not bettered their January highs.

With other market "tells" like key levels being tested in oil, euro and the dollar, this is not a time to be complacent. Many are looking for the markets to simply pull back such as to the 50-day moving average, and form the right shoulder of a bullish reverse head and shoulders pattern pointing toward another, higher rally leg up. I don't disagree that may happen. But there are also more bearish scenarios that can have the S&P 500 testing the March lows and even lower such as to 600 or 578, even as soon as later this summer or into September (which is a 1.382 time extension based on the range from the 2002 lows to the 2007 highs). Again interestingly, we're getting somewhat close to 89/90 days from the March lows; and then another 89/90 days points to September - for those who like keeping track of numbers like 89/90 (as 4 times 90 yields a "circle" of 360). The point is, a potential re-test of the March lows down under 700. Bearish possibilities like that are nothing to be complacent about.

On technical indicators, notice that the On Balance Volume on the daily SPX chart (below) has fallen under its 30-day moving average. The combination of that, and a declining SlowStochastic on that special setting (just under the MACD indicator (which has also crossed under, by the way), normally points to a swift movement which in this case would be down.

Not saying that new lows are guaranteed ... just pointing out that another rally leg higher, before the March lows are tested, certainly isn't guaranteed either. The bearish possibility of testing 600 or 578 in the SPX is based on my hypothetical of a large Elliott Wave flat on the monthly/yearly charts, and so far the market has not done anything to rule that out.

Update notes at 12:54 pm - Andy Askey has done another fine job with posts at his PTV-Investing Blog: Churning Working Off Overbalance Of Price (5/28/09), and Commodity Charts Show Weak Bounce After Capitulation (5/29/09). I'm not surprised Andy beat me to noticing that we're getting into the 89/90 day time frame. (Not only is 90 one quarter of a circle (and I'm sure that means it relates to phi), but 89 is related to Fibonacci analysis.) Andy's comments about which way this breaks out, seems to go with mine - he may be rather expecting to the upside, while I'm more dour, but trying to remain Unbiased of course!
Also - thanks Andy for your comments about my blogspot - very much appreciated. And I heartily recommend to my readers that they regularly keep up with your analyses at your PTV-Investing Blog as well!

Euro spikes to defeat potential reversal pattern - or vaults into spider web?

The euro has spiked again and defeated the potential reversal pattern we noted earlier this week on the hourly charts. Here's one headline at Bloomberg: Dollar Slips to $1.41 per Euro as Economic Prospects Reduce Safety Demand. So having caused me that fit this morning (!), is the euro now in the clear to move higher? Well, not so fast ... The Fibonacci .786 retracement to the $1.45.04 spike in December 2008 is at $1.40.75, which the euro is testing today. If the euro, either on Monday or soon after, falls under today's lows, that can be the beginning of a Fibonacci reversal pattern called a Gartley. That's the "spider web" I refer to. There are other ways to assess where the euro goes from that level, but first it must go into a reversal pattern to be certain that this spike finishes the current rally.

We won't know of course until next week whether the euro goes into a reversal pattern. Readers here know that I've been tracking the euro for a while, looking for a potential reversal downward along with a commensurate move for the dollar to find support. I've been too early a couple of times in seeing a potential reversal in these currencies. At this point, if the euro doesn't get resistance from testing this .786 retracement, and if the dollar fails to find the key support we've described recently (use "US Dollar" label for prior posts on the dollar), then the paradigm really does shift in favor of a lot more weakness for the dollar and further movements up in the euro and related currencies against the dollar.

Today's low (so far anyway) in the Dollar Index is $79.30. The level that it must respect so far as the December 2008 swing low (important support) is concerned, is $77.69. Interestingly, the .618 retracement in the dollar to its early 2008 low of $70.70, is $77.92. So if the dollar is not wanting the symmetry target level (and 50% retracement level (often associated with "B" waves) of $80.15) that it already tested last week, and now the dollar wants to test a lower level, it can test that .618 retrace that is often associated in Elliott Wave analysis with a wave 2 retracement. This doesn't mean that the dollar "has to" get there. But it does allow for the interesting prospect that it could reach a wave 2 level without violating the December 2008 low, and leave open the possibility of a wave 3 up.

So, although the euro has spiked higher and the dollar has spiked lower than I may have expected based on their reactions earlier this week to the extremes of one week ago, neither one has reached such an extreme that they are beyond trend reversal points.

ChartsEdge (U.S. equities) map for 5/29

Market Map for May 29

Posted: May 29th, 2009
Author: Mike Korell
Filed under: One-Day Market Map Comments to ChartsEdge »

Initial price target for oil met today - will its coincidental flirtation with 200-day average join with other bearish factors to send it lower?

Oil met our symmetry target today - hurray! So ... now what?! Let's take a look at the charts and make a few observations for and against oil continuing higher. Fundamentally of course, there are many concerns ranging from whether the economic pickup will last, to inventory and geopolitical concerns. Technically, our target was based on a symmetry level that implies an ABC count, which is often corrective and cautions that this may have been simply a pullback upward that sees price roll over and down again. The target was also based on Fibonacci levels, the first of which was reached in WTIC today simultaneously with the symmetry target. This is another reason oil may weaken now. There are ways that can happen without going to new lows, which I'll describe below. The pattern can become more bullish by turning into an impulse that just continues past the levels reached today. If not, then traders and investors should watch closely to see if oil corrects or consolidates as its next move. I'm not convinced on an Elliott Wave basis that oil finished all 5 waves that should be in a C wave up. It's possible for a small pattern to complete the last 5th wave without shooting much higher; in fact, that could happen with oil just rising slightly above our projected targets (the levels about $65 in WTIC and $35.70 in USO, touched today). The big question then becomes, will it print out a reversal pattern over the next several days?

When you look at the daily and longer-term charts of WTIC and USO that I've included below, you'll see why I find both positive and negative factors in them. As it's almost doubled off its lows (which would be a Fibonacci number of its own), WTIC also reached one of my Fibonacci retracement levels which can be a reversal zone, or at least a place for consolidation. Indicators are mixed, and in particular on the monthly chart, WTIC has achieved the kissback to the broken uptrend channel that I pointed out and discussed weeks ago. Having completed that kissback can be scary - meaning, rolling over after that kissback can point to lower levels - look out for that last step!

But I mentioned that oil could roll over and down without going to new lows. One way would be that the completed movement up so far may count as a larger (A) wave, then after another correction or consolidation in (B), it could go up again to higher levels in wave (C). Another would be that the ABC counts as a zigzag of a larger triangle. Normally triangles are consolidation patterns; there's also a bullish scenario that would be a diagonal triangle moving oil to new highs. I don't hold out hope for new highs, so if oil doesn't roll over to new lows, I'd be more inclined toward the first scenario of a larger (A)(B)(C). One of the reasons why is that, after a corrective or consolidation (B), another rally (C) wave up could get oil to its 38.2% retrace (at $78.21) back to its all-time highs, or the 50% retrace (at $91.51) back to those highs. That type of scenario would be more consistent with what the Point & Figure (P&F) charts below are showing (I've included those for WTIC and USO). (Note however, that if oil instead prints a bearish reversal pattern, that will reflect in the P&F charts which will alter the suggested price projections.)

If oil continues up, either impulsively from here or after a correction/consolidation, that will be very interesting on the monthly chart, especially if it results in re-entering that uptrend channel previously broken. Re-entering that channel could indeed set the stage for a diagonal triangle that, over time, would lead to new highs. Frankly - I'm not seeing it. I'm more inclined to think that either oil does roll over and plumb new depths; or, after a correction/consolidation, it finds its way to one of the higher Fibonacci retracements I mentioned above, by once again touching up to that monthly channel line.

Notice too that WTIC is working with its declining 200-day moving average, and USO is well below its 200-day moving average. Actually today's movement in WTIC was above that key level, but especially given that this was needed to reach the symmetry and Fibonacci level I've been expecting for rather a while now, I don't think it's guaranteed that WTIC remains above it. There are similar tests of the 200-day moving average by the oil service holders ETF (OIH) and XLE (both charts, at bottom below), both of which look like they're in consolidation patterns similar to triangles. I grant that these can turn bullish and break above the 200-day moving average. But be aware, it's also very possible that they will not be able to break above the resistance of that key moving average. It can result in that pattern becoming a "triangle trap" reversal pattern that sends prices back down again.

The weekly chart of USO shows that the 50-week moving average (MA) crossed under the 200-week MA recently, and the weekly chart of WTIC (not included below) shows a similar bearish cross just occurred. Now, one of the bullish factors is that there was a lot of volume at the lows early this year, and StochRSI on the daily chart is strong again. But volume has fallen significantly during the rally, and there are other hints in the technical indicators that bears can argue show impending weakness too. This includes some bearish divergence in StochRSI at least starting in the OIH and XLE charts which hints at the possibility that those triangles may become traps.

The monthly chart showing the kissback to the broken channel line is the one that looks the most bearish to me. Then, one factor I think argues most strongly in favor of a continued move up is the fact that a continued rally "should" reach toward a higher Fibonacci retracement. But I really don't know that oil "has" to do that. One aspect that I did not incorporate into this is cycles timing, and that might help oil as well. But just looking at the obvious timing of the rally waves since the end of 2008, it's possible that oil may be in a cycle crest.

Furthermore, if my other analysis about the dollar probably getting support at its current levels is correct, the dollar may actually strengthen. If that happens, it would likely be bearish for oil. Conversely, if the dollar loses support that would tend in oil's favor.

All in all - where I'm personally tilting, is to take a skeptical view on oil from here. This is based partly on the views of oil I've made over a number of weeks (you can look at my prior posts under the "Oil" label to see those over time), and partly on how this rally leg has expressed to date. Therefore I'm considering to start getting on the defensive side now with oil, if it triggers to the downside (such as a day that moves or closes under the low of prior day). USO's hourly chart (at right) does show some selling may have started this afternoon. Then I'll be on right side of the game if it continues by pulling back, correcting or consolidating - or more bearishly, gets untidy and goes to new lows. Conversely if oil then finds support and starts back up again, I can switch back once again to a more bullish view.


(click on any of the charts to see it larger or more clearly)