Friday, January 7, 2011

MTU Weekend Ed. - Near Term Update (1/7/11 Close)

Stocks are approaching the end of the advance since July lows. Bond yields are poised to climb higher following the consolidation in recent weeks. Gold (priced in USD) is likely to make a new high once the current multi-month consolidation is complete. Continued near term strength in the USD index is likely now that EURUSD has broken key near term support.

SP500 Index
A five-wave advance since the July low in SPX is approaching its end, in the sense that Friday’s low is most likely either wave (a) of [iv] of 5 based on the blue count or even the end of wave [iv] of 5 based on the green count (Chart 1). One more upswing as [v] of 5 will conclude the advance since the July low.

Nasdaq 100 Index

NDX has already exceeded its 2007 top and has a different long term wave structure (Chart 2). Eventually, NDX is likely to reach the 2460 area where wave [Y] and [W] reach equality as indicated. However, the end of minor wave 3 is fast approaching (Chart 3).

10-year Yield
The sideways consolidation since mid-November in 10-year yields counts well as a fourth wave – minute wave [iv] of minor wave 3 of intermediate wave (1)-up since the October low (Chart 4). If so, 10-year yields are poised to climb higher to finish minor wave 3.

Gold (in USD)
Gold’s price has been range bound since November. It counts well as a fourth wave consolidation and likely a triangle (Chart 5, blue count). If so, Gold will make new highs towards the upper trend channel line (Chart 6).

The bearish alternative count (red), which suggests a top, is less ideal with respect to the general wave form and a truncated and tiny final fifth wave. Nevertheless, this count is worth tracking if the recent low is breached.

USD Index
Chart 7 presents two near term counts for the USD index from its November low. The blue count places the USD index at early stages of a bullish impulse wave advance, whereas the red count tracks a corrective rebound. It is too early to tell which is playing out. However, odds favor the USD index making a run at the upper channel line under both counts. In addition, the largest component of the USD index, EURUSD, has recently broken a key near term support around 1.2974. Thus, continued near term strength in the USD index is likely.