Elliot Wave status and forecast-Bull Market status 1-17-2013

Elliot Wave Analysis suggest that 90% chance of what we are experiencing today is still a Bull Market with the ff. analysis:

With few headwinds coming due to Negative Divergence of MACD and RSI of the Weekly Charts of SPX. A fast rally to new highs should make MACD and RSI strong.

<1. (30%) – too bullish scenario –

a. we are currently in the Primary Wave V end of Bull market, and is in the minor wave 3 of Intermediate Wave 3, we expect to reach new high (1400-1440) and then small pullback then finish off to new highs to finish minor wave 5 of Intermediate Wave 3,then a sizable amount of pullback for Intermediate Wave 4, then finalizing the Bull Market with the last final bang.

b. This count abide some of the Elliot Wave rules namely: Primary Wave III is the shortest, Primary Wave IV went below Primary Wave I. and this is just a model scenario of what may happen.

2. (60%) – typical bull market and is extending

a. 2011 deep correction was just Primary Wave II, and we are currently in Primary Wave III, and waves are subdivided into small waves. Taking a look into smaller waves, we are in the Intermediate wave iii and a few more rally and make new 52week high before intermediate wave iv correction could happen (5-10%),then a rally to close the intermediate wave v (Primary Wave III), after that,expect the biggest pullback that can amount to 11-20%, like Primary Wave II 2011 correction, then a final blow to end the Bull market by finishing Primary Wave V.

b. Targets to finish intermediate wave iii is at 13700-14000, other targets will be depended on the wave structures,will post more soon.

3. (10%) – Bear Market Correction

a. This scenario is unlikely to happen, but can still be the case. If we closed soon this month and sold off by 10% or more, this scenario can happen.

AU, SPX Daily,Wkly, Germany Daily,Wkly and HK 1-2-2013

Happy New Year!!!!!

  

As expected, the Global Markets continued to rally into the first few days of the Year. Historically, this has been the scenario,when if markets sold off by Oct or Nov, and valuation is good, jump into the markets as 85% of the time, Markets rally enormously Dec end for Yrend window dressing and until early January for myths that if January net is Up, its going to be Positive for the whole year.

We first tackle AU, We have last seen AU getting from RSI = 30 to RSI = 70 in a matter of 1.5months and 10% rally without any decent pullbacks. This behavior was last seen on 2006 when Global Rally was sceptical. Although Global Markets did a good job on their P/E, I still suggest that this behavior seen in AU can possibly not last long,and may expect some pullback very soon. P/E isnt that good either at 19x.

Every time AU hits RSI > 70, it corrects an average of 5-8%. Last time it hits above RSI 70 was April 2011 and Oct 2012. MACD also reached +50 where historically speaking that rally should pause soon.

Short Term: Uptrend but lighten

Medium Term: Sideways to Up,may revisit 5000 2 yr high soon.

Long Term: Sideways between 4000-5000.

We last tackled Germany last 2 weeks ago,when it was attacking the 5yr downtrend resistance. And after the expected pullback to 74xx, Germany continued to rally and confirmed the breakout. Medium Term down trend was upgrade to Sideways pattern. This was fueled by better GDP of European big 3 (Germany,France, U.K.) due to London Olympics.

Spain and Greece news are now absorbed by the investors in a Neutral way, as people are still awaiting for worse news. Still, Spain and Greece are ticking timebombs,ready to explode and send markets lower.

Our indicators posted that Germany hit RSI >70 twice last Dec 2012. These were never been seen since May2011 and March2012. Negative Divergence on MACD is seen and could have some good correction. P/E is at 13, with some cautious reminder since RSI is high and Negative Divergence is seen on MACD.

Short Term: Uptrend and peakish short term

Medium/Long Term: Broke out of 5yr downtrend resistance, but Germany weekly charts shows Negative RSI. A warning. Next resistance is 7700-8000(2007 highs). I still put warning on Germany/Europe as they even nearly reached their 2007 highs compared to the healthier U.S.

 Germany Weekly Charts

SPX just rallied 2% last night due to Fiscal Cliff deal, and been the expected behavior of US Equities on the first few days of Jan trading. Charts look good, P/E is at 14.8 (slightly above 13.5x average) and may continue to rally into few more days or even up to end of Jan. RSI and MACD of Daily Charts are healthy due to good corrections, and has rooms for more rally. (assuming no bad news).

Short Term: Uptrend

Medium Term: Uptrend with support at 1395

SPX weekly charts on the other story has continuation of its Negative Divergence that caused Nov deep correction, the Negative Divergence effect may not be done,but once we cleared to 52 weeks highs and continue this good rally, the Negative Divergence will be omitted soon.

Long Term: Uptrend with support at 1350

After 1.5 years of being underdog, HSI finally brokeout out of 22,000 and is pushing through the limit to breakout of 23,000 and 23500 to revisit 24000 level. Although we are seeing a downtrend resistance at 23,000 for Medium Term, it likely brokeout of the range and may revisit the next resistance at 23,500.

23,500 level serves many resistance points and factors:

<1. Short Term uptrend channel is very steep and pointing to a probably 23400-23500 top this week.

2 2. Medium Term Downtrend resistance since 2010 top is pointing to a 23000-23500 downtrend resistance.
   3. RSI is in Negative Divergence

   4. RSI never hit 70 this rally

We may see HK and AU correct and shed some of its gains,but surely,HK is now in a better chart/shape to resume its uptrend, as China Equity may already bottomed and started to Uptrend. A Correction to 22,000-22800 is advisable before the next leg of rally. P/E is slightly cheap at 12x.

Germany, Breakout or might be a trap? 12-17-2012

After 5 years of battling with its Long Term Downtrend lines, it seems that Germany has broke out of its 5yr drought.. It was not expected at first, but we waited for few weeks before I posted this analysis.

There are certain times that breakouts are false,and only to attract high volume/high speed traders, and in this scenario, let us say that I am 70% satisfied that its a breakout. and 30% that it could be a false one.

We need to check and wait for more considerations, specially that MACD is Negative Divergence, and RSI just crossed at 70. Europe might be strong this H2, increasing almost 20% in their equity prices, we may not know if turmoil in Spain,Greece could trigger any selloff anytime soon.

Short Term: Uptrend

Medium Term: Sideways to Up

Long Term: We are stilll weighing if it broke out of its 5yr downtrend resistance. a fallback to 7400 is highly probably,and we may see the correct trend anytime soon.

AU,Germany SPX,HK Snapshots 12-3-2012

Australia

 Germany

 SPX

HK

Dow, Germany, WTIC Oil 11-16-2012

DOW and Global Markets have corrected/dropped for 1.5months already, the typical for a good correction. Dow also lost 9% already in the past 6 weeks time. In case that this is just a correction, we can conclude that supports are at 12500 for possible uptrend support, and the 61.8% retracement is on place. The RSi and current Wave a = Wave c correction structure also concludes that this could be the bottom.

Although in Elliot Wave terms, int. ii must not go below the minor I of int i, we can still take this scenario as a bullish one, unless it goes below 12035 level. Current count is still as bullish state, and ongoing int. ii of Major Wave 3 of this Primary Wave III bull market.

Short Term: RSI overbought, and MACD as low as 12035 low. Positive Divergence on Daily charts, and possible uptrend support, 61.8% retracement level.

Medium Term: Possibly bottom soon.

Long Term: Uptrend

Germany was not so bad at all, only corrected 6.2% for the entire frame, and the selloff was gradual. It expanded 0.2 or 0.3% QoQ and still having a slow but sure growth, UK and France GDP just inched higher as well, but European GDP contracted and entered 2^nd recession since 2009,due to 25% unemployment of Spain and Greece, plus low GDP of Portugal and other areas.

We don’t see any support for Germany, and Global Markets doesn’t depend on Germany anymore, seems that Fiscal Cliffs drags US Equities in particular, as the effect is for US based companies. Although we may see lots of indicators that US equity is currently a good entry point, Germany may have broke its slow downtrend support. We are looking to a support near 6900. And Medium Term uptrend support at 6400.

Short Term: Correction isn’t as sync with US. Sideways to Down, possibly just broke down a major support.

Medium Term: Sideways to Up

Long Term: Sideways

Oil prices was one of my leading indicator that Equities are bound to correct. US and Europe made its new high last end Sept,but Oil sold off immediately up to 5% instantaneously. Although Equities and Oil doesn’t 100% go in tandem,this is one of the few indicators to guide the next direction of the market.

Oil has a support at 85. And has Medium/Long term support at 80. RSI is now at OK levels, thus Equity rally /bounce can begin shortly.

All actions above are ideal for Technical Reasons, in case the Fiscal Cliff extended its range and increases tax scope, Fund Managers/individuals can do a quick sell-off that can trigger our must avoid levels.