Stocks -
Stocks made little progress in February in terms of the structure of the proposed Hope Rally (Chart 1). For example, after a 1% pop on Feb 1st to 1513.17, SP500 closed February at 1514.68.
The fluctuation since the February high (1530.94 in SPX500) is likely a wave 4 off the November low (Chart 2, green). The proposed wave 4 has either ended at the 1485.01 low or is still missing another wave down, as Chart 2 illustrates. In due time, wave 5 will likely push SP500 to a new recovery high under this interpretation.
The more bearish options (for example, Chart 2, blue) remain on the table. However, they need to reconcile with the fact that the Dow made a higher high during the rebound (Chart 3). It should be noted that the higher high was not confirmed by other indexes, which is bearish. However, on an immediate sell-off, odds appear to favor an expanding triangle or an expanded flat correction in the Dow UNTIL key support levels are breached (Chart 3, dashed red lines for SP500).
Bonds -
Treasury yields rose from their 2012 low and are now facing the possibility of a retest of prior breakout resistance (Chart 4, green line) and the lower channel line (Chart 4, red line). There appears to be a decent chance of one more rally in bonds.
As there is little change in the near term wave structures, tracking counts remain the same (Chart 5). Please see Monthly Outlook Update (2/1/13) for discussions.
USD -
A potential head-and-shoulders pattern in the USD index has failed to deliver (Chart 6, green neckline). Such failure often underscores near term underlying strength. Indeed, the USD index has rallied for the entire month to north of 82.
Recent advance counts as an X wave or the initial advance for a major upswing. The immediately bullish scenario appears to be relatively less likely than the X wave count as the rally looks near term overbought and the USD index is now approaching a multi-year trend line resistance (Chart 7).
Reflecting the recent development, we add the black count in Chart 7 to accommodate a more immediate breakout of the green back.
Gold -
The proposed wave [4] correction in Gold (priced in USD) continues to track - the precious metal has dropped about $100 over the course of February (Chart 8)
Gold prices have approached a near term "line in the sand." A decisive breach of current support level would suggest a measured target around $1300, which is well within the normal range of wave [4] and also represents a Fib-382 retrace of the prior wave [3] advance (Chart 9).
The following charts show gold priced in Euro (Chart 10) and in Yen (Chart 11). They should shed additional light on potential support levels and target areas for the proposed wave [4] pullback.
