Friday, April 26, 2013

Monthly Outlook Update (4/26/13)

The upswing since the November 2012 low in stocks has extended for another month, but with fair amount of volatility. Over the past month, a new all time high in SP500 was registered, followed by a sharp reversal and an equally sharp rebound.

Chart 1 presents the tracking counts on the post-November advance in SP500.  Chart 2 presents short term tracking counts since its April high.

The blue count in Chart 1 has the five-wave advance complete at the April high. This can be paired with the bearish red count in Chart 2.

The green and red counts in Chart 1 track probable extension. In this case, the rebound from the April low is wave [v] of 3, or wave 5, or final wave C of a double zigzag. These can be paired with the bullish green count in Chart 2 (barring possible truncation).

On balance, the remaining subdivisions in case of probable extension and the net upside potential appear to be limited.  

The sell-off in 10Y UST from its 2012 price high (yield low) is visually a three-wave structure (Chart 3, red), unless the recent rally is wave (c) of an expanded flat wave [ii] (Chart 3, green). As a result, the previously discussed larger degree tracking counts continue to track (Chart 4).

There’s no change to the analysis on the USD index in Monthly Outlook Update (3/18/13). The USD index briefly exceeded its 3/27/13 high on 4/4/13 before pulling back. The USD index has yet to regain its 4/4/13 high (Chart 5 and Chart 6).

Gold crashed in April, in an attempt to fulfill the proposed wave [4] correction, based on our top long term wave count (Chart 7).

Since the crash, gold has regained the blue channel support which is bullish (Chart 8). However, potentially strong overhead resistance is at the green channel (Chart 8). Until the gold regains the green channel support, a retest and even a breach of the lows is probable. The potential retest would conveniently complete a visual nine wave decline (impulse) from its October 2012 high.

 The potential further downside in Gold prices (or upside in JPY vs. USD)  is quite conspicuous in Chart 9 which tracks gold priced in Japanese yen.