Now that Wall Street knows that QE is off for this year and that some but not many are coming to the realization that we are in QE to the ‘endgame,” I have to start thinking that the taper just might be forced on the FED sooner than I thought. But it is hard to tell. I don’t really think the US, given the political atmosphere and Yellen up to bat, that policy will turn around and let the much needed restructuring to occur not only at home but all over the world. With all the drama taking place at the home of the world’s reserve currency, it had been forgotten that the headwinds are global in nature. Make no mistake, when the US prints, the world follows, all at their own peg, but they do. China shook up the markets this week by reporting that banks have up to three time more underperforming loans than thought. Their Repo rate shot up to 4.5 and then cooled a bit at 4.05. This tightening of credit markets shook the risk currencies for a safe haven bid for the buck and yen with the Buck being more muted. Asian Stocks sold off along with the US equities.
With the CPIs creeping up, poor fundamentals in the States and middle of the road numbers all over the world, it should be apparent that the QEs are not working. However, CPIs are not high enough as of yet. It is pretty much the consensus that the monetary easing will continue on until, well, enough stuff is created to service all the debt and keep the monster going. Something I really don’t think possible if you understand reality and the Elliott Wave Theory.
I usually start the weeks charts with the indexes but today I am going to start with the US 10 year yield. Take note of the move up since the July 2012 low. It is a textbook EW four wave move so far; a testament to RN Elliott, a man who sat down terminally sick in his latter days and integrated by hand and pencil a basic five wave form made up of two modes: impulsive and corrective, which turn out to create 13 patterns that govern human emotions. Take a look at blue minute wave one. A classic leading diagonal adhering to all the rules and guidelines. Then the wave three extension out of the deep 3 wave two retracement ending at the 200% of wave one extension–common for wave three extensions. What is even more amazing are the internals. Take the time to check them out and you too will be impressed with what you find. The turn down into the wave four correction at blue minuette is up to par also. The move is a classic ZigZag Correction looking to complete just past the previous wave four at fuchsia minuette degree. After retracing to the 2.61 for a shallow wave two of a five of C, it has since moved down in a third wave to close at 2.48 Wednesday 23rd.
I have targets at the 2.30 area just past wave four fuchsia at minuette degree. It is also the AC equalization point of the corrective. From there the yield should move up in a fifth wave to complete the motive wave one at minor degree.
US stocks are at critical points. November, I believe is going to be a telling month on whether or not equities head south or turn up to make new all time highs at the strong Fibonacci resistance I have been mentioning. Both the NAS and the S&P took out the Sept 18 highs while the Dow hasn’t–a Dow non-confirmation. The S&P hit the 1758 before retracing to the 1746 and closing near that low at 1751. It appears so far as if the index has just finished off a wave 3. But keep in mind that there is a good alt count that supports a nice ending diagonal now completing with sentiment indicators at extreme levels while fundamentals are weak–classic topping environment. The Dow failing to take out the Sept 18th high is losing steam at 15413 on oscillators. It made it up as much as 15518 only to settle back at the 15413. The move up so far looks like a completed wave one. However, keep in mind that there is an alt count here too which has the index already heading south of a wave 2.
The buck lost ground early in the week and fell through the 88.7% retracement of the move up from the Sept 17 low at 78.60. The index has carved out five waves down from the 84.75. Check out the internals on the last wave at fuchsia minuette. It is a nice five. If wave one is the extended wave then wave five should not be longer than wave 3 leaving this wave five complete. However, the move down did pass the 88.7% and when that happens, there is a good chance there will be more downwards movement for the buck. But until the pattern is invalidated, I am sticking to this bullish count for now.
The EUR and Pound are at topping levels with bulls piling up at critical turning points. The EUR made a new near term high at 1.3784 while the pound tested its 1.6157 near term high just today. Both have room to the upside without invalidating counts. The Commodity block headed south on the China scare. It was expected from the Aussie and Kiwi being up against some heavy Fibonacci resistance. It is quite apparent that markets are starting to realize that the US problems are the world’s problems. The Yen has so far retraced to the 70.7% of the motive move up from the 96.63 low at the completion of the wave four triangle. The corrective move down so far is a Zigzag and if you notice the last leg of the C wave needs to complete one more wave down for the fifth of the C. From there we should get a bounce to the upside for a wave three of five at minute degree. If not then the triangle pattern could be a B instead of a four of a larger move down.
Gold and silver are carving out the alt I have been talking about. Gold moved up to 1335 and has plenty of room to go. Wave structure on silver has room up to the 28.20. This is where price meets Zigzag equality. Gold could also head up a bit to the 1517 area. It too is carving out a Zigzag. Given this move in the metal, I am having it hard time keeping my more bullish Dollar stand now. Maybe the metals will gain more than the buck index loses. As it did today. The metals seem to be moving nicely against all the Central Banking paper.