23 Sep 2009 17:21 GMT
Across Markets
Stock Indices Trend Conditions Still Bullish
Despite the position of the dominant daily cycle, the underlying bullish trend conditions have been able to carry the S&P index through the 1007/1048 resistance band. And there's really not much resistance now till the 1121 to 1158 area. Only a break of the latest notable reaction low support at 991 (September 2) would halt the bullish pattern of lower lows and lower highs.
The DJIA has also been probing resistance at 9653 to 9794, with little in its path till the 10334 area. That's actually a big level as it marks the halfway back mark of the big slide from 14198 to 6469. According to my data, back after the 1929 crash (386-195), the subsequent recovery into April 1930 stopped at 297, just short of the 313 halfway back mark, before collapsing into the July 1932 low (see chart on next page).
Volume Improves
One of the big factors that i thought would hinder the equity advance was low volume. Look at the bottom panel of the chart on this page. It shows a 20-day exponential moving average (red) of the NYSE volume. It peaked in March of this year, and steadily fell into late august. From that time though, it's been slowly rising, climbing above the trendline (blue) that originated at the March peak. So volume is on the rise, arguing for further power to come behind the advance.
So for now, it's best to respect the underlying bull trend in the equities, while keeping a close eye on the early September lows (S&P 991, DJIA 9252, and DJITA 3571). Only a break of these levels would knock the steam out of the rally.
1032 Then 1071 Next For Gold
Back on September 3, i pointed the big triangle pattern in gold from a "&traditional (Edwards and Magee) sense." No doubt this pattern has been a driving force of the gains since then, narrowing the distance toward the triangle measured objective at 1071/1072. Of course there's the initial obstacle at the 1032 big trend high from last march.
Note too, that the Elliott wave patterns are even more bullish than what the traditional triangle pattern would suggest. The "triangle" is actually a series of first and second waves, with the current rise a developing 3 of (3) of ((3)), often the most powerful point of a trend. There is a chance that the recent 1024 high marked the top of wave 3, in which case, the current corrective action from there should hold above 988 (0.382 of wave 3) to 982 (previous fourth wave). So as long as this area holds, look for the ongoing bull trend to continue through 1024/32 and head at least to 1071.
Silver 16.08/16.03 Support
The trend-cycle model for silver turned from neutral back to bullish on august 28, pushing prices above the 16.25 early June high with little difficulty. Prices are now stalling a bit after approaching the top boundary of the bull channel, but the action from the 17.67 high has been corrective in nature.
Wave patterns point to 16.08 as the start of the most important support for now. It's the 0.382 retracement of the wave ((iii)) rally from 13.50 so far. It forms a cluster with another important Elliott wave support, the previous fourth wave low at 16.03. As long as this area holds, look for another new high above 17.67. That would clear the way for run at the 18.32 external Fibonacci resistance (0.764 of 21.36-8.46) and then the 19.48 July 2008 notable reaction high.
USDBRL Pulling Away From Support
The USDBRL bear trend is finally starting to sustain the push through the pivotal 1.8065 (early august trend low) to 1.8060 (0.764 of 1.5545-2.6202) support zone. With the trend-cycle model bearish, the dominant cycle in its bust phase, and momentum bearish, odds call for downward acceleration in the near run. There's little now in the way of nearby support till the 1.6482 to 1.6072 trading range from last august. But the next big level is that month's low at 1.5545. Only a move above the 1.9213 reaction high would point to a major trend reversal. Until then, respect the underlying bear trend.