Saturday, February 2, 2013

MTU Weekend Ed. - Monthly Outlook Update (2/1/13)

The analysis below updates our 2013 Outlook (12/28/12).

Stocks -
The SP500 index rose 0.68% over the past week, despite the volatility associated with the intra-week round trip in stocks. This is consistent with our assessment that the net near term upside potential is likely limited without a pullback either in price or consolidation in time. See our discussion in Triple Top (1/25/13) for details.

As to our longer term outlook, stocks are on track to complete their Hope Rally. Chart 1 updates the corresponding Chart 1 in 2013 Outlook (12/28/12).   Our primary assessment, an advance to point #7 (black #7 and black lines in Chart 1), remains unchanged.   However, recent development has also raised the possibility of a flat-like structure for point #6 (red #6 and red lines in Chart 1) - see Downside Risks Increasing (1/18/13).  Going forward, we track these two scenarios as those outlined in Chart 1.

Chart 2 offers top tracking counts on 30-minute bars.  While the blue count and the main purple count project continued subdivision higher, the red count and the alternative purple count offer the earliest warning of a completing three-wave rise since the November low.

Bonds - 
Chart 3 and Chart 4 update the corresponding Chart 3 and Chart 4 in 2013 Outlook (12/28/12).  The proposed ending diagonal triangle continues to track.  Although bonds (Treasuries) sold off from their recent peaks, we do not yet have confirmation.  A retest or even the usual overthrow can often be expected.

Chart 4 illustrates these possibilities.  The proposed terminal wave C-down in the 10Y yield may have completed (green), may extend (blue) and may yet to materialize (red).

USD - 
Chart 5 and Chart 6 update the corresponding Chart 5 and Chart 6 in 2013 Outlook (12/28/12), with no need to alter any chart labels / annotations.   In other words, the USD index is expected to be stuck in a long term range for some time, and near term downside pressure exists.

More interestingly, price movements over the past month has completed the right shoulder of a potential head-and-shoulders pattern (Chart 6).  If the pattern delivers, a measured move would suggest a decline toward 76.

Gold -

The proposed wave [4] correction in Gold (priced in USD) is well underway (see Chart 7 in 2013 Outlook(12/28/12)).  Chart 7 updates the near term counts of the proposed wave [4], with odds favoring an eventual retracement lower.