Multiple technical indicators have given "negative technical signs". Specifically, the McClellan oscilator gave a sell signal on Friday. We also had negative divergence as the SP500 made a new high on Friday but not the Dow.
This may indicate a wave 4 down move this week that may not bottom until Thursday or Friday. That would then be followed by a wave 5 up move to a slight new high the following week above last weeks high. Friday the 11th or early the following week would be the target date for the wave 5 high. If that is the correct outlook, wave 5 would be the top of an ending diagonal trangle in the wave (C) position. This is a bearish pattern that is often followed by a fast move down toward the start of the triangle at the July 8th low. Resistance for a wave 5 top is at 1049 and 1063 on the S&P500. Updated wave count is shown below on the SPY etf. Click image to enlarge.
The S&P500 made a slight new high for the week and the year after the open this morning and continues to act stronger then expected. Wave structure is looking more bullish but cycles are becoming more bearish. Best guess is that the wave structure will win out until mid September when the next major time cycle is due.
Stocks moved up this week into Friday as forecast after the big Monday selloff. However the move was rather strong and went thru resistance to close at a new high for the year. This casts some doubt on the bearish outlook given previously. Monday is a key day. Most likely, stocks will go slightly higher Monday which may be the high for the week. There is resistance at 1032 and 1042 on the S&P 500. If stocks are strong up on Monday, that may change the outlook to bullish with a possible high at the next major time cycle due in mid September.
Two new short term cycles have been found that top this weekend. There is a very high probability that stocks will make a high on Friday or maybe Monday. Next week looks bearish with the possibility of a very large downmove.
Gold Gold has probably completed the E wave low of a large triangle as of yesterday. The target for the upmove out of the triangle is 105.5 on the GLD. That is the length of the widest part of the triangle(wave A) added to the wave E low. See chart below for primary and alternate wave count labeling. This expected upmove is most likely impulse wave 1 of a new primary wave. The wave structure of the entire correction from the Q1 2008 high is potentially very bullish. The gold stock ETF GDX would be a more leveraged way to play the current upmove although the wave count is not as clear.
Chart: GLD etf, 6 month chart
S & P 500It looks like the mid august high is in. This was forecasted in the July 23rd and August 5th posts along with a most likely price target in the 1060-1120 range on the S&P500. The price target was not reached but the Dow Jones Industrials did reach the .382 fib retracement of the 2007-2009 downmove.
The next major time cycle is in mid September. That may be when this downmove bottoms. It could also be a high if instead the market starts moving back up. This current downmove could bottom as soon as Tuesday if that is the case.
The best wave count at this point will label the upmove from early July to the August high as wave (c) of the entire move up from the March low. This count is shown below. It's also possible that the July-August upmove is wave (1) of primary wave 3, but cycles do not indicate that as they are becoming more bearish especially in September.The S & P 500 did not reach the price target so this indicates that we probably have not seen the final high. However that may not happen until the 4th quarter or 1st half of 2010. In the meantime we may have a wide range sideways type market.
GoldGold has reached the price target for wave E. If instead this is wave C of (y), it could move down toward the July low.
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