Saturday, July 13, 2013

MTU Weekend Ed. - Short Term Update (7/12/13)

SP500 is only 7 index points from making another all time high and Wilshire 5000 is effectively at a new all time high. Recent price actions support our primary count that the May/June sell-off in stocks is likely a 4th wave decline (Stocks and Bonds (7/5/13), Monthly Outlook Update(6/28/13)), which has successfully retested the breakout area (Post-FOMC Update (6/21/13)).

 Chart 1 updates the simple zigzag count of the Hope Rally. The May low counts as wave (4) with respect to the 2011 low. The blue (4) accommodates the possibility that the proposed wave (4) is a triangle or a flat which is still in progress.

Chart 2 updates the bullish impulse wave count since the 2009 low. The May low counts as a 4th wave of uncertain degree depending on how wave [3] extends.

Chart 3 updates the successful retest of the breakout area.

For the near term, the upswing from the June low can be counted as a completed zigzag (Chart 4, blue and green) or even a completed five (Chart 4, red).  Chart 5 offers the corresponding squiggle counts from the July low. It raises the interesting possibility of a wave (5) failure if a five-up is already complete - the likelihood of this scenario is debatable. 

From a time perspective, the following week or so offers a window for a pullback.  A pullback, if materializes, would fit as a small degree 4th wave or 2nd wave or some thing more bearish (such as a C wave) based on the EW counts.