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5/29/09 - Strong Fridays

Executive Summary

Weekly Update
Last week I expected the SPX to rebound on Tuesday and decline to 840 by Friday but the rebound was too strong and my Plan B for a rally towards 944 took over and the decline is postponed once more.
This week the Weekly BSI is still negative and I expect the SPX to make a high on Monday and
decline back to the 875 area and probably worse
Plan B has the SPX holding 910 and moving towards that elusive 944 target by the end of the week.

The Full Moon of June 7th and the Moon in Capricorn of June 8th are statistically lows and should take us lower into next week from this potential double top near the 1998 and 9/11 lows of 925 and 944. Since the low on Friday March 6th, each strong Friday gave us a Sell for 1 to 3 days, and each weak Friday was a Buy signal suggesting weakness into mid-week.

Wave Count
The March 6th low was most likely a Wave B low and we are now completing a Wave C rally that will finish Wave 4 up from the November 21st low. Wave A up from the November low went 203 points in 6 weeks, Wave B went down 277 pts and took 8 weeks, and Wave C has now gone 263 points in 9 weeks and is probably complete or will complete by June 8th in 13 weeks near the 9-11-01 and January highs of 944 which is where Wave C = Wave B.

Daily Update
The sharp spike in the last minutes Friday was probably forced liquidation of a very large short position as discussed in this well written piece from The Market Ticker . Except for the Ticks, the closing spike higher on Friday turned most indicators bullish, but the blue Nyse Tick line is overbought and not really supportive of a break above 930. The cycles are suggesting weakness into Tuesday from the Sell Strong Fridays pattern, but also the 7 trading day spike high pattern, and the 3 week cycle high of Friday May 29th. The move up Friday was reminiscent of the move 7 trading days ago, which also happens to be 7 trading days away from the spike high of May 8th, leaving a pattern suggesting a reversal lower on Monday as other patterns above show. Except for the red Nasdaq Tick which is already bearish, most other indicators are still bullish and overbought but turning and the blue Nyse Tick is making lower highs suggesting a move lower into the next cycle Wednesday. The move down from the May 8th high is building a triangle with lower highs and flat bottom, which usually breaks down to much lower price levels. However, we will need to see Wave 3 behavior and break the 875 level before we can give up on a final rally to SPX 944, Nasdaq 1786 and Dow 9000 by June 8th.

Breadth Summation Indexes (BSI)


Next Day Forecasting Accuracy
Forecasting the close can be difficult at times, and you can use my recent performance on the right as a guide to the accuracy of my current vote, but I may skip voting if too cautious and my vote for Monday is bearish but cautious 		Firebird - Your Score: 58.3% [G100 Ranking]
Last 22 sessions: corrects=7, incorrect=4, omissions over limit=1.
SessionOpinionS&P 500Score
05-28-2009bearishup
05-27-2009omission 1/10down-
05-26-2009omission 2/10up-
05-22-2009bullishdown
05-21-2009bearishdown
05-20-2009bearishdown
05-19-2009omission 3/10down-
05-18-2009bullishup
05-15-2009bearishdown

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Short and Medium Term Market Breadth


The blue and red Tick lines are diverging and still in the bearish zone

The Put/Call lines turned bullish but are probably too low for a break above 930

The Momentum indicators are turning bullish and the Nasdaq 100 is stronger

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courtesy of StockCharts.com

The Volatility is in a bullish trend but turning up a bit

The Trin or Arms index is turning bullish again

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The New Highs and New Lows are turning bullish

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The McClellans are bearish and overbought but turning a bit

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Stocks on a Point and Figure buy signal are turning bearish from overbought

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Stocks above their 50/200 day MA are turning bearish from overbought

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Cycles and Wave Counting


Moon cycles peaked on Thursday and the Sell Strong Fridays pattern

The Full Moon of June 7th and the Moon in Capricorn of June 8th are statistically lows and should take us lower into next week from this potential double top near the 1998 and 9/11 lows of 925 and 944. Since the low on Friday March 6th, each strong Friday gave us a Sell for 1 to 3 days, and each weak Friday was a Buy signal suggesting weakness into mid-week.


courtesy of StockCharts.com


The 3 week cycle high of Friday May 29th

Since the low of Friday March 6th we have had rallies lasting 12 to 14 trading days that end every 3 weeks on Friday. The pull backs have been increasing in length each time and are suggesting a pull back into at least mid week and probably into the Moon in Capricorn of June 8th. 		Click here for Chart
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courtesy of StockCharts.com


A look at the last Sell in May of 08

The March 17, 08 low to the May 19, 08 high was 44 trading days and the move from the March 6th low to the May 8th high was 44 trading days and the move down for the last two weeks looks a lot like the two weeks after the May 19, 08 top. Both of these periods line up almost perfectly with the Saturn retro and direct periods with an 11-12 day difference that also showed up between the lows of March 6, 09 and March 17, 08 and 11-12 days after the Saturn direct date of May 16, 09 is May 27-28th.



courtesy of StockCharts.com


A Crash alignment for the 2002 and 2008 lows

A good fit is found by aligning the crash lows of July 02 and October 08 with a 60% time scale. The Tick line broke out but was much weaker than in 2003, and the Put/Call showed a lot more skepticism back in 2003, compared to the growing optimism we are seeing since the October 07 lows. Even at the beginning of the 2003-2007 Bull market, the SPX went sideways for two months before it started another move higher, and its unlikely to go much higher now.




The 91 month cycle as a guide

The 91 month cycle is a combination of Prime numbers since it is the 13th repetition of the 7 month cycle, and turns out to be significant as the chart here shows . A closer look at the March 6th low aligned with the 9/11 low 90 months ago shows many similarities and it suggests a decline to the 800 level in June followed by a retest of the highs in July before a decline to new lows by October. A decline to SPX 800 in June certainly fits with the sentiment and would be similar to the correction seen in the 2003 analog at right.



courtesy of StockCharts.com

courtesy of StockCharts.com


Mercury retrograde suggests weakness in May and/or June

Most Mercury retrograde periods have come near the end of rallies in the last 2 years, and suggesting weakness during the retrograde period of May 8-30, and/or soon after in June as seen on the chart below. 		Click here for Chart
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courtesy of StockCharts.com

Equities


Outlook for Monday is bullish to mixed

The sharp spike in the last minutes Friday was probably forced liquidation of a very large short position as discussed in this well written piece from The Market Ticker .
Except for the Ticks, the closing spike higher on Friday turned most indicators bullish, but the blue Nyse Tick line is overbought and not really supportive of a break above 930. The cycles are suggesting weakness into Tuesday from the Sell Strong Fridays pattern, but also the 7 trading day spike high pattern, and the 3 week cycle high of Friday May 29th.
See the NDX 1 minute chart here and the Dow 1 minute chart here

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courtesy of StockCharts.com



Next 36 hour cycles on Wednesday and next Monday

The move up Friday was reminiscent of the move 7 trading days ago, which also happens to be 7 trading days away from the spike high of May 8th, leaving a pattern suggesting a reversal lower on Monday as other patterns above show. Except for the red Nasdaq Tick which is already bearish, most other indicators are still bullish and overbought but turning and the blue Nyse Tick is making lower highs suggesting a move lower into the next cycle Wednesday. The move down from the May 8th high is building a triangle with lower highs and flat bottom, which usually breaks down to much lower price levels. However, we will need to see Wave 3 behavior and break the 875 level before we can give up on a final rally to SPX 944, Nasdaq 1786 and Dow 9000 by June 8th.

Click for Printable Chart

courtesy of StockCharts.com


Outlook for the week of June 8th is mixed to bearish

Most indicators are near the middle line and heading in different directions leaving a mixed and diverging picture that will most likely result in a turn lower. We have made double bottoms twice at the February highs near 875 and the indicators are weaker on the second one for now. It will take a strong move higher soon to turn these indicators bullish and send us towards 944, but the rallies from the 875 level have been too weak so far.
See the NDX 10 minute chart here and the Dow 10 minute chart here

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courtesy of StockCharts.com



Wave C of 4 may be over close to the 9/11 and January highs of 944

The March 6th low was most likely a Wave B low and we are now completing a Wave C rally that will finish Wave 4 up from the November 21st low. Wave A up from the November low went 203 points in 6 weeks, Wave B went down 277 pts and took 8 weeks, and Wave C has now gone 263 points in 9 weeks and is probably complete or will complete by June 8th in 13 weeks near the 9-11-01 and January highs of 944 which is where Wave C = Wave B.

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courtesy of StockCharts.com


Wave 5 should start in May and/or June and take us to new lows in 2009

The start of each major wave down since the all time high of October 07 can be seen clearly in the high Tick lines on top and the low Put/Call lines just below, and is confirmed more loosely with the Trin line at the bottom. All indicators are overbought, especially for a bear market, and unless we are starting a new bull market, these readings should send us lower into June and probably to new lows by October. 		Click here for Chart
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courtesy of StockCharts.com


Sentiment for the SPX suggests new lows in 2009

The blue Call buying line is now making a double top near the highest level in years, and is considerably higher than it was the last time the SPX traded near 944 in January, leaving us more vulnerable to a deep decline now than back then. Despite the fact that we keep making deep new lows with each decline, the Call buying remains at higher levels of optimism than at the October 07 highs and will eventually require a significant decline in 2009 to take it back down to the levels seen in 2008.
See the Nasdaq daily chart here and the Dow daily chart here 		Click here for Chart
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courtesy of StockCharts.com


Shanghai should rally into August

The Shanghai has moved up in a fairly clear 5 waves, and will likely pull back to the 2300 area or even to the 200 day MA near 2200 in June, before probably moving back up to test the recent highs or even the 3000 level. China has large reserves and built a lot of new infrastructure for the Olympics that should benefit its economy for decades and it should recover the most in 2009, since it is the manufacturing base of the world. 		Click here for Chart
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courtesy of StockCharts.com


Australian market should pull back into September

The Australian market is struggling with a number of resistance lines just below 4000 and is unlikely to make a higher high before it drops to the 3000-3250 area or worse by September. 		Click here for Chart
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Commodities

Commodities should pull back in June

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The CRB should rally into July

Commodities finally broke above the 20 year S/R level near 250 and will probably reach the 280 level by July. 		Click here for Chart
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Oil should pull back from the high 60's in June

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Oil should pull back into November

Oil finally broke out of its range and will probably extend the rebound a little more into the high 60's before it pulls back into November. 		Click here for Chart
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Gold should pull back from the 1000 area in June

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Gold should rally into July

Gold should test or briefly make new highs by the late July cycle and pull back once more into year end before a large Wave 3 up to the 2000 level and above starts in 2010. 		Click here for Chart
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Silver should pull back from the 1993 highs near 16 in June

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Silver should rally into July

Silver has already reached the 1993 highs near 16 and may exceed it briefly by July or make a double top. 		Click here for Chart
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Gold Miners should decline in June

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Gold Stocks should head lower into December

Gold stocks are struggling in this last advance and are likely to make a high in May and decline to below the 100 area into the Summer and Fall. 		Click here for Chart
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Currencies

The US Dollar should rebound from geometric support between 0.77 to 0.79 in June

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The US Dollar should decline into July

The USD is failing on its third weaker attempt to rally to the 0.90 level and will likely pull back to the 0.77 area by July before it can mount a good rally to the 0.90 to 0.92 level into year end for the 4.3 year cycle high in early 2010. 		Click here for Chart
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The Yen should rally towards 110 into June

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The Yen should rally into September

The Yen reached the most likely target for this Wave 4 near the 100 level and will probably break that level briefly before it can start moving towards 110 by July and probably test 115-120 by September. 		Click here for Chart
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The Loonie is parabolic and should exhaust in early June

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The Canadian Dollar should pull back into September

The CDN Dollar broke through the trend lines near 0.88 ahead of the late June cycle high and will probably exhaust soon, maybe near the heavily congested 0.94 area, or even last September's high near 0.97 by June 22nd. 		Click here for Chart
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Bonds and Rates

The 30 year Bond should rebound in June

The 30 year Bond rebounded sharply from the 115 level and will most likely head to the 125 to 130 area into June.

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The 30 year Bond should decline into July

The 30 year Bond is losing support near 120 and could easily drop to the 112.50 level by July if it does not rebound soon as the short term cycles suggest will happen. 		Click here for Chart
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High Grade Corporate Bonds should pull back in June

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High Grade Corporate Bonds should decline into July

High-Grade Corporates are priced for perfection, and that is definitely not the current environment or even the one going forward, and the next crisis which is likely to be the upcoming GM bankruptcy will probably bring a dose of reality and take us down into the 80's. 		Click here for Chart
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