Stocks Tumble, Tank, Roller Over! Whatever, Things Look Really Bad

Global stock markets went to Hell last week. The Shanghai Composite took the biggest shellacking loosing 11.1% for the week. The FTSE lost 5.5% and the DAX bled red 8.3% while the Nikkei 225 was down just about 11% for the week. Over in the US, the SPX 500 lost 5.6%. The dollar index also lost for the week falling 1.66%. Gold and US treasuries we well bid. The Yellow metal staged a staggering 4.4% gain on the week while crude oil sank 4.5%.


The US 10 year yield touched the 2.03 just shy of the 1.98 51.8% retracement of the move up from the 1.65 Feb low. The 10 year yield, which trends inverse bond prices, lost 5.83%. It looks like the 10 year yield wants to dip below the 2.0. It is hard to tell for here. The benchmark is at a Fibonacci wave 2 completioni point. The charts are screaming fear now. To my surprise, last week the Fed did nothing to stop the carnage and as a matter of fact were quit hawkish when given the chance. US CPI numbers ticked up once again continuing their firming trend. This, along with the FED’s singing the same tightening tune, did nothing to help matters. Besides, this rout is not a product of last week’s CPI and FED hawkishness anyway. Remember that this rout is global. Crude is trading below the 40 now this Sunday evening. The commodity is now a painfully low level. The CPI could tick down. Things look really bad technically as every major index has broken some kind of major Cycle degree support. Moreover, the Elliott Wave structures they are all sporting are very bearish indeed.


Last week’s drop has taken the SPX 500 down below the 1968 low. The move is strong and should be a 3rd wave move expected to reach the 1895 before taking a breather. After a Green 4 wave correction the index will then be expected to run down to test the 1819 low. It should correct then in a 2 or B wave. Once complete the index should drop down to at least the 1738 low.


Crude fell hard hitting 39.49 and closed at the 39.56 Friday. The move should be nearing its end down from the 61.79 high. Crude now is also at the end of a bigger five wave series down from the 107 last summers’ high. Since then the commodity has lost a staggering 63% . I would like to see some type of sideways action soon. However, it is beginning to look like this final 5th wave is going to stretch this impulsive wave series down from the 61.79 high into its end. The 36.18 2008 low is not very far down. Price just might want to make it down there. If so, I don’t see how those CPI numbers are going to keep firming if commodities keep heading south.


Gold staged a 4.4% run up last in what could be its first impulsive wave series of a counter corrective move at intermediate degree. I expect the move to carry over the Black trend line and to the 1223 for its Green A of three which could reach the 1300. From the hourlies, the move looks strong and could carry up to the 1880 once it bounces around in a wave 4.


The Dollar Index went red on the week as investors dumped the buck while running for safety in Bonds and Gold. However, long term the Buck has held up well. It is now trading at the 94.74–the middle of the triangle trading range I have been tracking since the 100 high. The move down from the Green B high is nearing its end and can turn up at any minute. If the index keeps dropping through key support, once past the 93.13, the chances increase this move down from the 100 is not a triangle but a zigzag series down to the 90 level. I look for the index to drop down to about the 94 area before we get a bounce back up to the 98 level.

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