Sunday, December 29, 2013

MTU Weekend Ed. - 2014 Outlook (12/27/13 close)

We expect U.S. stocks to pullback in price or/and in time.

SP500 is approaching a major peak based on all three of our tracking counts (Chart 1). Specifically, the anticipated top tracks as wave [D] of an expanding triangle since the Y2K top, or wave [B] of a complex-three since the Y2K top, or wave (3) of a bullish wave [5] advance since the 2009 low. In each of these scenarios, the subsequent pullback corrects the advance since at least the 2011 low around 1100.

From a fundamental perspective, the pullback in stocks could be triggered by unexpected inflation or unexpected downward pressure on the economy. Interestingly, these potential fundamental triggers offer different outlooks on bonds, the USD and gold. With unexpected inflation, one would expect higher yields, lower USD, and higher gold prices. With another recession, one would expect bonds and USD to rally and gold be pressured by USD strength.

The risk to our view is that U.S. stocks continue to rally throughout 2014.  We interpret this scenario as an extension of the current investor mindset and thus a delay of the scenarios discussed above. In this case, bonds and USD are likely to remain range bound.

Chart 2 to Chart 4 present the long term technical profile of 10Y US Treasury yields, the USD index and gold priced in USD.

2013 Weekly Commentary

* 2014 Outlook(12/29/13)
* Post Tapering Announcement Rally(12/20/13)
* Neckline and more(12/13/13)
* Short Term Update(12/6/13)
* Monthly Outlook Update(11/29/13)
* Potential Pullback(11/22/13)
* New High (3)(11/15/13)
* Short Term Update(11/8/13)
* Monthly Outlook Update(11/1/13)
* New High (2) (10/25/13)
* New High (10/18/13)
* Showdown (10/11/13)
* Shutdown (10/4/13)
* Montly Outlook Update (9/27/13)
* Short Term Update (9/20/13)
* Gap Dynamics (9/13/13)
* Stocks and Bonds (9/6/13)
* Monthly Outlook Update(8/30/13)
* This Gap is Different(8/23/13)
* Head-and-Shoulders (8/16/13)
* Short Term Update (8/9/13)
* A Fifth Wave (8/2/13)
* Monthly Outlook Update (7/26/13)
* A look at NDX (7/19/13)
* Short Term Update (7/12/13)
* Stocks and Bonds (7/5/13)
* Monthly Outlook Update (6/28/13)
* Post-FOMC Update (6/21/13)
* Short Term Update (6/14/13)
* Tracking Update (6/7/13)
* Monthly Outlook Update (5/31/13)
* Bull or Bear (5/24/13)
* Tracking Counts (5/17/13)
* Short Term Update (5/10/13)
* Extension(5/3/13)
* Monthly Outlook Update(4/26/13)
* Bull Fake-Out (4/19/13)
* SP500 Breaks Out (4/12/13)
* A Top (4/5/13)
* Monthly Outlook Update (3/28/13)
* Short Term Update (3/22/13)
* A View from a Top(3/15/13)
* New All Time High(3/8/13)
* Monthly Outlook Update(3/1/13)
* Short Term Update(2/22/13)
* 7UP and Mature Fractal(2/15/13)
* Sideways Consolidation (2/8/13)
* Monthly Outlook Update (2/1/13)
* Triple Top (1/25/13)
* Downside Risks Increasing (1/18/13)
* Pullback (1/11/13)
* Cliff Low (1/4/13)
* 2013 Outlook (12/28/12)

Saturday, December 21, 2013

MTU Weekend Ed. - Post Tapering Anncouncement Rally (12/20/13 close)

SP500 surged to another record high of 1823.75 after the Fed announced its decision to taper its asset purchases. The rally likely validates the wave-5-rally-to-new-highs tracking count discussed in Neckline and More (12/13/13).

While the post-tapering-announcement rally has been swift and sizable relative to its time frame (Chart 1), the overall price actions appear to suggest (at least) the advance since the June 2013 low is topping (Chart 2).

As Chart 2 indicates, the rally this past week counts well as a fifth wave or a final [C] wave of a double zigzag since the June low.

Also, advance/decline profile of SP500 is negatively diverging from SP500 index itself at the moment (Chart 3). Weak internals would be consistent with a terminal move. The caveat is that the rally could be in its early stages as illustrated by the black count in Chart 1, and SPX internals would catch up with the index before long.

Furthermore, SP500 continue to crawl along its resistance line on the monthly chart despite incremental record highs this year (Chart 4). At the moment, there's no evidence yet of a (wave 3) breakout. As we mentioned before, this resistance line is "responsible" for the 2010, 2011 and 2013 corrections.

See Chart 5 (updated) and Neckline and More (12/13/13) for discussions of larger degree tracking counts with respect to the 2009 low.

Monday, December 16, 2013

Market Timing Update (12/16/13)

[215pm] SPX update -

[820am] ES update -
Overnight dip is near term bullish (especially if it holds on retest). Currently 50% retrace on rebound in ES, and ES regaining neckline. See chart and Neckline and More (12/13/13) for details.

Saturday, December 14, 2013

MTU Weekend Ed. - Neckline and more (12/13/13)

The sell-off in SP500 this past week has brought the index back to the neckline of a potential head-and-shoulders pattern discussed in Short Term Update (12/16/13). The recent low in SP500 also overlapped its October high, suggesting the retrace is not against the advance since the November low, but at least against the advance since the October low.

As such, Chart 1 highlights near term scenarios.

[green] The current pullback is wave 4, correcting a wave 3 advance between the August low and November high. This count suggests a new high to follow.

[black or red] The advance since the June 2013 low is complete, either in the form of a regular five-wave advance (black) or a double three (red). These counts suggest meaningful declines to follow. See long-term scenarios below.

Chart 2 summarizes long term scenarios, with the recent top being the top of a third wave of certain degree the bullish case or C wave the bearish case .

[green - near term extension] The current pullback is wave (iv) with respect to the June 2013 wave [iv] low. One more high will complete wave 3 with respect to the mid-2012 wave 2 low.

[blue] The recent high marks the end of wave (3) with respect to the 2011 low. The current decline will likely push SP500 to the 1550-1650 area.

[red or black] The recent high completes wave [3] with respect to the 2009 low under the bullish interpretation (red) or wave [C] with respect to the 2009 low under the bearish interpretation.
Note that the 2010 wave [1] or [A] high of 1219.80 is right around the 50% mark of the entire rally since the 2009 low to date.

Wednesday, December 11, 2013

Market Timing Update (12/11/13)

[EOD] Stocks -
See chart 2 below as an update to chart 1 below.
[120pm] SPX update -
Near term tracking ...

Saturday, December 7, 2013

MTU Weekend Ed. - Short Term Update (12/6/13 close)

SP500 saw a 1.9% pullback form its record high this past week (from 1813.55 to 1779.09). Furthermore, the pullback counts well as an impulse wave with alternations between waves two and four. The subsequent rebound has also reached the right shoulder of a potential larger head-and-shoulders pattern. Further downside is expected based on this scenario.  As such, the 1750 area becomes an initial downside target. See chart 1.

However, the pullback in NDX is very much corrective, further validated by its subsequent recovery higher high! See this chart.  So one also tracks the near term bullish scenario which is a small degree fifth wave in progress - see chart 2 (SPX) and chart 3 (INDU).

Friday, December 6, 2013

Thursday, December 5, 2013

Market Timing Update (12/5/13)

[1pm] SPX/NDX -
Beware of a potential bearish small-degree triangle, as evidenced in NDX and mapped into SPX. The drop in NDX is so far corrective.

Alternatively, the pullback (possibly counts as a fourth wave) could be over and a potential wave five is in progress.

See charts.

[8am] ES update -