Friday, March 8, 2013

MTU Weekend Ed. - New All Time High (3/8/13)

Broad U.S. stock market indexes broke above their 2007 peaks and made new all time highs (Chart 1, Wilshire 5000), a remarkable achievement. 

Stocks are likely in a topping process along the proposed cycle-degree "wave b" advance (Chart 1, red).  Note that if we were to label the 2002 bottom as the end of cycle-degree "wave a" decline, senior market
indexes (WLSH, SP500, INDU) and the Nasdaq Composite Index would align in terms of their wave structures since their 2000 tops (Chart 2, COMPQ).

The proposed multi-decade supercycle-degree correction likely fits into the long term profile as a wave (IV).  Chart 3 on the Dow illustrates.  Based on the tendency of alternation, the proposed wave (IV) is likely to be more sideways than wave (II) which had retraced in a sharp and deep manner.  

A bullish interpretation would label the rally since 2009 as a nascent supercycle-degree wave (V) advance.  However, wave structures associated with the rally to date are far from convincing.  Other than the potential of a set of nested 1st and 2nd waves, wave structures over the past four years does not describe an impulse wave. Time will tell.

Regardless the larger count, a five-wave advance since the November 2012 low is approaching its end (Chart 4 and Chart 5).  A partial or more likely full retrace is likely to follow.