Our timeline for August has been pretty much in line with our forecasts. Germany hit 7100 level, slightly above our target resistance of 7000 for the 2 year downtrend resistance, Germany released its GDP numbers last August 14, 2012. And the anticipated wall of worry will resume after Germany hitting near 7000 level. All eyes in Germany for predicting future movements on U.S. Markets. I chose to lighten and sell risky positions when it started to get into 6900-7000 levels, to avoid absorbing the flactuations of the market.
This correction can be minimal or even a resumption of sell-offs in Global Markets. 3 scenario can happen.
1. Correction of 5-10% after hitting 7000, good support at 6500 levels. Then into sideways market. (60% chance)
2. Resumption of selloffs, another round of European Crisis will hurt the markets , if 6500 doesn’t hold, Germany can selloff to as low as 5500-5600 levels, or even 5000 level that we met last 2011. (30% chance)
3. 3. Correction of 3-5%,and resumption of rally, breaking out of 7000 2 yr resistance line, and eventually hit 7400. (10% chance)
U.S. Markets followed through when Germany rallied 18% from June selloffs. Dow Jones rallied 10.3% from its lows. SPX hit new yr highs into 1427, but Dow didn’t. Not bad for a trading range.
Dow Jones hit 13300 levels 3x for the past 6 months, and didn’t pierce above. Seems this could be the wall to break to trend higher. Dow is still in uptrend short term,but must hold into 12800 pivot point to be said as uptrend, there is weak support though at 13000. A breakbelow that level would possibly lead to 12500, or even 12000 level.
Elliot Wave analysis suggests that we are in minor wave 4 correction of Major 3 of Primary Wave III.
Short Term: Corrective pattern seen, 13,000 weak support, then 12,800. Still in uptrend. But European status worrisome.
Medium Term: Uptrend
Long Term: Uptrend. Long term uptrend support raised to 12,000.
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