Equities and Dollar Rally on Back of Fed Taper

Today the S&P pushed down to 1768 and then shot up to just a point short of the Dec 9th 1811 high. So far the move down from the Dec 9th high can still be counted as the second of a series of one twos down from the Nov 29th 1812 high. However, if the move up passes the Dec 9th high then the count below would be the main count completing a wave minute circle wave four which would take the index to new highs this week to complete minute wave five. Even though the move does not invalidate the more bearish count, I am going with the bullish counts below because the Dow did break above its second wave two down before stopping short of the 16174.51 Nov 29 supposed top by just over a point at 16172.91. If one were to count the S&P down as a one two series, proportionately the count would fit even though the expanded flat retraced almost 100% of the second wave one of the series. However, since the Dow moved up past is second wave one, todays move up would have to be counted as a very large flat which would make it way out of proportion to the single wave one down. The NAS moved up also today, hitting a low at 3979 and then accelerating up late in the day to 4070 and closing there. The move from the Dec 12 wave one low can be counted as an expanding flat. The retracement is sitting just under the 88.6. A break above it tomorrow would turn me bullish invalidating the count below. Transportation also failed to confirm the more bullish moves of the Dow and S&P moving up in what appears to be a zigzag three from its Dec 12 7036 wave one bottom. A break above the Dec 10 wave two top would invalidate the count below.

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The Dollar index fell today and bounced off the 78.81 to complete a wave two and moved up to close out the US session at 80.62 in what so far appears to be a wave three. The move keeps the larger bullish picture intact. The move down from the Nov 8th 81.48 wave one high counts as a nice zigzag with a triangle B which has completed at AB equality just past the 61.8 Fibonacci retracement for a wave two. From there, the index should be moving up in a three of three.

The US 10 Year Yield reacted rather sporadically to the Fed Taper talk moving up to the 2.94 and then selling off only to close at 2.87 within the previous weeks range. It is tough to count the Yield so far off of its Oct 24 2.52 low. The move up, although making higher highs and lows, is rather choppy with poor momentum. The Yield has to give soon; and if the dollar moves up, yields should move with it.

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Both Gold and Silver have been in a consolidation from there Aug 28th highs. Both moved up today with Silver moving up .23% to 19.79 and Gold .18% to 1221. It was surprising though that the metals did not sell off giving the Fed’s QE taper. Both can either move up or down from where they are given that the retracements are both quite shallow and that both the metals are in consolidation zones at subminuette and minute degree. Gold needs to break below 1180 minute wave three for a wave five move confirmation while Silver needs to break below 18.21 to confirm its bearish move down to wave five at minuette.

I am not convinced with the Fed taper talk today and I do not think the markets are either with the bid in equities to near new highs and yields ending flat. However, it won’t shock me if equities sell off tomorrow for we can not forget what happened when Bernanke surprised Wall St and did not taper in Sept. Equities had been moving up before the announcement and rallied strongly on the news only to sell off the next day taking almost 5% off of the indexes.

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