REVIEW
The week started at SPX 1951. After a gap up opening on Monday morning to start the week, the market made higher highs and lows every day, ending the week at SPX 2015. For the week, the SPX/DOW gained 3.5%, the NDX/NAZ gained 2.5%, and the DJ World index gained 4.4%. Economic reports for the week continued their neutral to negative bias. On the uptick: wholesale inventories, the WLEI, GDPn and weekly jobless claims improved. On the downtick: ISM services, consumer credit, export/import prices, the MMIS and the trade deficit expanded. Next week, a busy week, we get industrial production, the FED’s Beige book, and Retail sales.
LONG TERM: bull market
We continue to count this six year bull market as Cycle wave [1] from the SPX 667 Super cycle low. Cycle wave bull markets unfold in five primary waves. Primary waves I and II completed in 2011, with Primary II taking the form of an elongated flat. Primary III completed in May 2015, and Primary IV probably completed at the August lows. If not, it will likely extend for a few more months, due to alternation, before it does complete. Primary V is now the main focus, because when it ends, so does the bull market.
The day after the SPX 1872 retest of the August SPX 1867 low, we posted two possible counts. Primary IV ended in August and Primary V is underway, (hourly/weekly charts), and Primary IV may still extend for a few months longer to satisfy P4 v P2 alternation (daily chart). The deciding factor, as noted, would be determined by the current uptrend. Should the uptrend impulse higher, Primary V is underway. If not, Primary IV continues. The current uptrend clearly appears to be impulsing. With the SPX 1867 low in mind, we posted some potential targets for Primary V. They are noted on the weekly chart above.
MEDIUM TERM: uptrend
The main advantage of OEW over EW is that it quantifies all medium and long term waves. We can’t just place a label on the weekly chart because it looks right. We can only place labels where there are actual, quantified, turning points. This does not mean we always know where the market is heading in advance. No one does. What it does provide is a view of the most obvious future path of the market medium and long term.
Just after the late-September SPX 1872 retest of the low, OEW confirmed an uptrend. As noted in the previous section, this suggested two possible paths. We somewhat favored the Primary IV low in late-August because this would satisfy the P4 v P2 alternation now. This is why we posted that count on the hourly/weekly chart. Despite the mixed signals from other indices and indicators, the DOW/NDX/NAZ clearly displayed the potential for the low in August.
Since this uptrend had quite an odd, and somewhat confusing, beginning we will explain the count. From the SPX 1867 low, the market rallied quickly in five waves: 1915-1880-1990-1948-1993. We had labeled this Major wave 1. Then Major 2 went into a long extended corrective pattern: 1903-2021-1872. We labeled this as an irregular zigzag. Does it look right? No. But that is the pattern the market presented.
When the market started to rally off the SPX 1872 low, it started off with a similar irregular pattern, but on a much smaller scale. The market rallied to SPX 1917, then did an irregular flat for the pullback: 1897-1927-1894. After that, it advanced to SPX 1992-1972-1999 by Wednesday this week, completing another five waves up. Clearly this uptrend is looking impulsive. More on this below. Medium term support is at the 1973 and 1956 pivots, with resistance at the 2019 and 2070 pivots.
SHORT TERM
With Major wave 1 at SPX 1993 and Major 2 at SPX 1872, Major wave 3 has been underway. Thus far, we can count five waves up from SPX 1872: 1917-1894-1992-1974-1999. We have labeled this Int. i of Major 3. Then we labeled the pullback to SPX 1976 as Int. ii. Intermediate wave iii should now be underway from that low. When it completes, there will be an Int. iv pullback, then an Int. v rally to complete Major wave 3. We will count the waves, and note them on the daily updates as the uptrend unfolds. Thus far, Int. iii has rallied to SPX 2020 in just one wave from the SPX 1976 Int. ii low. There should be five waves up before it concludes.
Short term support is at SPX 2000 and the 1973 pivot, with resistance at the 2019 pivot and SPX 2040. Short term momentum ended the week just above neutral. Best to your trading!