Markets at a Loss while Yields Pull Back on Back of Poor Non-Farms

The Market was surprised by the weak Non-farms payrolls report and traders are now confused as to whether or not the Fed will begin its taper this month. The Dollar sold off, yields dropped and equities traded sideways. Markets really did not really show their hand yet. Take note that the poor Non-Farms numbers came on the back of the dovish like FOMC. Given the week numbers and dovish FOMC the S&P and the Dow failed to make new highs.

The S&P Failed to make a high above Thursday’s retracement up to 1844 of the move down from the Dec 13th 1849 high. Since this corrective high, which is labeled so far a red circle wave 2 double zigzag, the index has moved down in two impulsive like waves which each retraced without making new highs, leaving the index with what appears as a one two sequence down of a wave three.

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The Dow Gapped up to 16462 after the poor Non-Farms but then sold off and took out most of Thursday rally off of the Jan 9th 16378 low. These moves seem to be a final fifth wave of a leading diagonal down from the Dec 13 16589 high. The index closed at 16487 on Friday which is just shy of the 61.8% of the wave diagonal wave three—a common Fibonacci retracement. The 3,3,3 move down is also adhering to the 3 Drives Fibonacci measurements and should turn up around the 16348 which would also be the final spot for a diagonal wave five overthrow. If the index moves down past the 16384, then after a retracement to about 16498, the index should sell off in a wave three to lower lows. If the Dow pushes up past the 16525 early next week then it could head for a new high.

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The NASDAQ and Transportation both made new highs with the NAS making it up to 4183 and the Dow Transportation Average hitting the 7468 and closing there on Friday. The NAS made its high on Thursday while Transportation made its high after Non-Farms Friday. The NAS and Transportation’s new highs can be counted as a complete fifth waves that have finished off longer term corrective targets. The NAS pulled off of its high and has made one impulsive move down to the 4142 and has been trading sideways. This so far can either be a wave one or an A wave of a zigzag corrective move; and even though Transportation closed off of its high, the move up is contracted and diverging on the Awesome—a pull back or break down is imminent.

The US ten year, fell a bit after the poor employment report and closed Friday ten basis points lower at 2.86 for a 3.48% drop. From an Elliott wave perspective this turn down was due. As for the structure of the longer term trend up, the yield could have either just finished off a fifth wave and is now heading down for a wave two or it could be in a C wave of an expanded flat fourth wave and is now heading down in a five wave move to complete a (C). A (C) wave should head down to at least the 2.47 and at most the 2.18%. However, If it is a wave two at larger degree then Yields could retrace as far as 2.03. I am going with a flat because wave two of the move up was a zigzag and counting the move as five, wave four would have to be counted as a zigzag also. However, with the ten year being counted as in a wave four flat, it would mean that wave four was alternating, a common occurrence for a wave four vs. wave one.

The Dollar Index retreated a bit of the bad news, however, it was as expected. After hitting a near term high Thursday the 9th at 81.18, the Greenback pulled back to the 80.62. Just finishing off a first wave of three, The Dollar pulled back to just past the previous wave four, true to form. On the smaller charts the buck could push down in one more wave before heading up in a wave three of three. If the Buck breaks down below the 79.68 invalidating the current count, the buck could head down for lower lows. However, as of right now, the trend is still up. The EUR/USD has so far move down in five waves from the Dec 27th 1.3893 high and tested the lower channel trend line. From there, it seems that the Euro is finishing up a corrective flat. According to the Awesome Oscillator the Common Currency should push up in a wave five of a C before it resumes its march down. Look for this fifth wave push to complete around 1.372 which is the 50% retracement of the impulsive move down from the 1.3893. The USD/JPY has been kind of wild after moving down in five waves from its equalized 5 vs. 1 fifth wave top at minute degree. The wave one Jan 3rd bottom has been moving sideways, spiking up to just past the 88.6 at 105.26 before heading back down in what looks like three waves so far. The pair has been consolidating sideways after Fridays 103.80 low in a fourth wave. The Yen should move down in a fifth wave to around the 103.75 to complete a wave one of three.

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Gold and Silver moved up on Friday. After consolidating sideways on Thursday, Gold moved up in three waves from 1226 to 1249 and closed Friday near its high at 1248. Silver opened up at 19.52 on Friday’s New York trading session and moved up in three waves so far and hit the 20.25 before pulling back to close at 20.15. Both the metals should move up for the next couple of weeks or so. Last week, Gold tested the 1180 support while silver fell short of its 18.21 previous support. Both metals could be finishing off fifth waves and moving up or they could still be in fourth waves which are still incomplete. Regardless of which scenario you prefer the metals look strong from both perspectives. See the two Gold Alt counts below.

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