Saturday, June 25, 2011

MTU-The Big Picture (U.S. Stocks), June 2011 Update

Overview
The Feb 2010 entry highlighted the most probable long term bullish or bearish wave counts for U.S. stocks. Based on market developments over the past 16 months, the current entry
(1) adds a more bullish wave count (inspired by tglacour) as at least a competing scenario to the bullish count highlighted in the Feb 2010 entry,
(2) makes adjustment to the bearish count.

Summary of the Feb 2010 entry
The Feb 2010 entry highlighted the most probable long term bullish or bearish wave counts for U.S. stocks (see this chart).

Based on the bullish count, primary wave [5]-up of cycle wave V-up of supercycle wave (V) of grand supercycle wave [III] has been in progress since the 2009 low.

Based on the bearish count, grand supercycle wave [III] ended at the 2000 high and a grand supercycle wave [IV] correction is in progress. At that moment, it appears that primary wave [2]-up of cycle wave c-down of supercycle wave (a) of grand supercycle wave [IV] has been in progress since the 2009 low.

What has happened over the past 16 months?
[1] 6 of the 11 broad market indexes have since exceeded their respective 2007 highs, including the equal-weighted SP500 index (Chart 1).

[2] Among major SP500 sectors, consumer staples, health care, consumer discretionary and retail sectors have also exceeded their respective 2007 highs, with energy, material and industrial sectors not far behind (see Were it not for financials … (1/21/11)).

[3] In Europe, $DAX and $FTSE100 have already retraced 87.92% and 80.31% of their respective 2007-2009 decline.



An addition to the top bullish count
Chart 2 presents an addition to the top bullish count, inspired by tglacour’s comments to the Feb 2010 entry. While the primary count in Chart 2 differs from what I gather is tglacour’s count (see the alternative count), the main message is the same.

Based on this count, cycle wave V-up of supercycle wave (V) of grand supercycle wave [III] has been in progress since the 2009 low. As a result, the 2009 low is one wave degree higher relative to the previous top bullish count.

The key merits of this count are
(1) it channels better at multiple wave degrees,
(2) the 2009 low rests right on the boundary of the base channel.


Adjustment to the top bearish count
Given new market developments (i.e. new all time highs and deep retrace highlighted in Chart 1), we must downgrade (but not eliminate) the likelihood of the rally since the 2009 low being primary wave [2]-up of cycle wave c-down.

Instead, a cycle wave b-up (or x-up) or supercycle wave (b)-up (or (x)-up) appears far more likely within the bearish interpretation. Please also see discussions in A Potential x Wave (2/4/11) Chart 3 presents the adjusted count.
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