... draft in progress, subject to change ...
To some extent, many U.S. stock indexes have spent the past two weeks retesting or reacting to the Aug/Sep trend line (Chart 1 and Chart 2). The retests and reactions are typical to an important "line in the sand" until we have some resolution.
Chart 3 presents price actions in SPX and key tracking counts with interesting implications.
On the bearish side, a potential head-and-shoulders pattern is developing with Friday's selloff as the right shoulder testing the neckline. If this H&S pattern plays out fully, the projected target is around 1795 which would be a retest of the January low and can be counted as the red wave v. It should be noted that the decline from 1947.20 (red iv) is so far a zigzag. This implies that the red wave v is likely an extended wave or 1947.20 is not red wave iv or is not where red wave iv ends. It is interesting to note that wave v/i equality would suggest a failed red wave v where January's low holds.
On the bullish side, Friday's selloff could simply be wave E of an expanded triangle wave B (Chart 4), or wave [C] of a zigzag pullback from 1947.20 (Chart 5 gray).
On balance, odds appear to favor the near term bullish scenarios - SPX appears likely to deliver a low Monday morning.
Friday, February 5, 2016
Thursday, February 4, 2016
Wednesday, February 3, 2016
Tuesday, February 2, 2016
Monday, February 1, 2016
Friday, January 29, 2016
Stocks, Bonds, USD, Gold - key intermediate term scenarios to watch
The January plunge in stocks is the "downward thrust" we outlined in 2016 Outlook (1/1/16), although the downward thrust unexpectedly but moderately exceeded the August 2015 low in SPX.
U.S. stocks likely have completed the proposed fourth wave decline, either as wave  relative to the 2009 bottom (Chart S1) or wave (4) relative to the 2011 low (Chart S2).
These two fourth wave at different degrees are relevant in the sense that:
(a) Support from wave  (Chart S1) is around 1720 and rising, which introduces the alternative possibility that the January low is wave (a) of  as marked.
(b) Support from wave (2) (Chart S2) is around 1865 and rising, which coincided with the January low.
A retest of the lows in early February remains probable but not required (Chart S3, Chart S4) . Whether the retest is the bullish blue wave ii or the bearish red wave v, the January low is likely to (roughly) hold since a typical red-wave-i-and-v-equality would suggest a failed red wave v.
The U.S. 10-year Treasury Yield Index is retesting the gray "neck line" (Chart B1). If the H&S pattern, which we think is less likely at the moment, does play out, its target would be a near zero 10-year yield. In an environment where negative nominal policy rates are already a reality, it is prudent to keep an eye on this extreme scenario.
Our base case scenario is that bonds are overbought and long-term rates are likely rebound higher from here (Chart B2).
Our long term tracking of the USD index remain unchanged (Chart $1). If the USD index does not break out to a higher high in early February (Chart $2 green), a retest of the 93 area is likely next (Chart $2 blue, red).
Gold is likely in the final subdivision of an EDT (Chart G1). The current upswing in Gold is likely wave (b)-up of wave [e]-down of the proposed EDT (Chart G2). If so, a final sell-off should deliver the overthrow to conclude this EDT. The bullish alternative of Gold having bottomed appears less likely than the main tracking count at the moment.
Posted by Market Timing Update at 8:45 PM