Saturday, November 2, 2013

Monthly Outlook Update (11/1/13 close)

For the near term, we are tracking a completed five wave upswing in SP500 since its October low or a final small-degree wave five rally to complete the proposed upswing (Chart 1).

Our near term analysis would suggest that
(1) the final c of (c) is already in place of is shy of a final upward subdivision if the Hope Rally is a complex double three (Chart 2).
(2) the existing or the pending high is (5) of [3] or 5 of (3) if the Hope Rally is a regular five wave impulse (Chart 3, green)  or wave [C] of a large diagonal triangle (Chart 4).

Long dated U.S. interest rates, as proxied by the 10Y Treasury yield index, are tracking a fifth wave north (Chart 5, green) or a subdivision south (Chart 5, red). Chart 6 shows how these near term structures fit into the long term picture.

Odds appear to favor higher yields at the moment.  Note that the proposed wave [iv] (Chart 5, green) overlapped wave iv of [iii], which is the previous wave four of a lesser degree, as well as a fib 0.382 retrace of the proposed wave [iii]-up in yield.

US Dollar
Recent price actions in the USD index raise the likelihood of a stronger dollar in the form of a multi-year upward flat (Chart 7, black [c]) as the squiggle count on the daily chart (Chart 8, blue) hints. At this stage, the burden of proof is on the bulls, as a five-year overhead resistance represents a major challenge.  If USD fails to break above, various long term triangles highlighted in Chart 7 are at play and the dollar could be stuck in this wide range for the next year to two.

Price actions of Gold over the past two months raise the possibility of a truncated fifth wave (Chart 9 - red truncated 5) as the October sell-off can be counted as an ending diagonal triangle (Chart 10).  If this is the case, its implication is a major bottom in Gold.  This interpretation appears to be supported by the wave structure of Gold priced in euro (Chart 11) and a well-defended low of Gold priced in yen (Chart 12).

The risks to the above interpretation are an extended fifth wave (Chart 9, red 5, green) or a side-ways fourth wave still in progress (Chart 9, red and green triangle)