Equities Rally While Dollar Takes Breather

Equities all over the world rallied this week with the S&P, Dow, NAS and Transportation hitting new highs. Utilities made a weakly high in impulsive manner near at 507 and closed for the week just past 78.6 retracement of the move down from Nov 7th 510. A move up above the 510 will be breaking the double top correction of the larger move down from the Apr 26th primary high. It does look like the index will break above the double top and if so then the longer counts on all the indexes will be confirmed for more upward movement until late Feb early March. However, as of now, equities are due for a good size retracement at minuette degree before heading up to the March highs. Recently, the moves up in the major indexes have been strong and have reached Fibonacci levels that confirm these extended moves up. With these new highs, the S&P is poised for a fifth wave move to complete a third wave at minuette degree and then move down for a forth wave to Nov/Oct trend line support. The index should complete its third wave move at subminuette early next week and then correct to about the 1750 in a subminuette wave 4 before heading up to a new high. These counts at primary degree can be counted as impulses or zigzags. No matter how you cut them up, they are all are extending making it difficult to predict a top. Equities are poised to turn at any time at these levels. However, I do not think they can sustain their upward march past March 2014 when they will be up against some very strong Fibonacci resistance and extended EW Fibonacci targets.

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The Dollar index corrected the whole week and so far looks like its heading down for a Y wave of a complex zigzag at subminuette degree. Target is at 80.49, Y equality with wave W, which it should reach early next week. From there the buck should head up in a minuet wave three. Technically the USD looks very strong against all the majors. Structurally, this recent weakness was expected. Look for the buck to rally strongly by the middle of next week. But take note, that the buck could correct down to the 79.95 the 61.8 retracement of the move up from the Oct 24th 79.00 low. A break below the 88.7 will lean me to turn bearish on the buck. However, given the moves on Gold and Yields, I do not think this will happen.

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The US 10 year moved sideways for the past three days after hitting a weekly low at 2.69. So far the move down from the 2.78 is still short of targets and is confirming the Dollar index’s near term retracement. Look for Yields to finish their move down to complete wave two at minuette degree near the 2.60%. From there, Yields will be in a third wave which should at least test the 2.98 minute degree wave three high.

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Gold’s move up from the Nov 12 1262 low is very corrective. On very choppy corrective action, it hit a weekly high at 1294 on Thurs and has since been trading sideways. It is do not think the metal will move up much more and can very well turn down now. The reason being is that silver, although also correcting its recent impulse wave down, made its low on the 13th as opposed to gold’s low on the 12th. Silver has not retraced as much as gold as of yet and has been trading sideways mostly since its bottom refusing any considerable upside movement. Given the dollar recent wave structure, both metals could turn early next week after short correction. Gold settled at 1289 and Silver at 29.70 of Friday’s close.

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