In general , traders took Yellen’s remarks as dovish for the Buck headed south a bit while stocks moved up. However, equities are looking quite shaky all over the globe with the SEE Composite looking the ugliest by far so far. The Shanghai Composite dropped 13% on the week losing a whopping 6.4% on Friday alone while cutting out a very impulsive looking series down from the 5176. The Chinese index appears to be in the middle of a 3rd wave run now at Friday’s 4478 closing price. The FTSE has cut out either a leading diagonal or a zigzag from its April high and looks like it has fallen through a bearish head and shoulders trend line on the daily leaving the index looking very bearish. The DAX has lost better than 10 % since it’s April high; however, it is at the end of what could be a zigzag which completed at the 10806 June 17th low. Technically, the DAX could make it to new highs from here. However, given the rest of the markets, I don’t think it will make it. Besides, the move down from the April high could very well turn out to be a leading diagonal series down, which if so, would leave the index now needing one more push down for a final fifth wave of 1 larger wave down—very bearish. The Nikkei, although down 3.6% from the 20655 May 27th high, is still holding above previous 4th wave contraction zones at lesser degree. The move down also looks very corrective even thought it needs one more swing down to finish the three from the May 27th high—still bearish but not as bad as the rest. The US fared the best as the NASDAQ made it to the 5143 new all-time but closed at 5117 below the 5132 2000 high. Transportation, Utilities and The SPX failed to make it to new highs. However, they are showing signs of making one more run to test their respective highs. Nonetheless, I do not think the index will get far at all if they get there. As a matter of fact, I still favor the leading diagonal count down with the top put in at the 2137 May 19th high for the SPX. The three waves down from the high to the June 9th 2017 low should be wave 1 of this diagonal series I am anticipating.
Even though the SPX could make it to the 2040, the chances are good that the three up to the June 18th 2126 high is a complete wave 2 leaving the index primed for a move down to test the June 18th low, which I do not think will prove much support for the wave 3 of the leading diagonal the index is most likely in.
After Yellen talked down the Buck on Wednesday, the Dollar index lost .81%, falling from the 94.86 to close Friday at 94.08. She kept rates on hold as the markets expected but was more than unexpectedly dovish—hence, the subsequent dollar drop. Regardless, from the bigger charts, the index is holding up pretty well despite all the bad data that is putting the Fed on hold. The sell-off lasted only until the next day’s New York’s session. From there, the Buck was bid up to the 94.49 and retraced the following Friday closing at 94.06 pretty much stuck in the contraction zone around the 94 handle the buck has been wrapping around since the drop from the 100 high. The structure down from the 97.77 May 27th high, although deep, is very corrective and should be the first leg of a three or a five wave counter trend series for a wave 4 at intermediate degree. Notice that Yellen’s dove-like remarks failed to take out the 93.13 May 14 low. As mentioned, price is now testing the 94.05 previous Green wave 4 low and should hold. From the hourlies, however, the move up from the 93.56 low counts better as a three than as a five. This could be pointing to further losses for the buck inter-day, however, they should be limited to the 93.13 low. There has been plenty of reason why the buck should be lower than it is. From the weekly on up, however, the buck has been holding up pretty well for it is still short of the 92.16 38.2% retracement of the move up from the 78.86 May 2014 low. There is still a good chance the Buck is going to consolidate between the 94 to 100 for the next couple of months and maybe year. If so, the index should start to move up soon. I am looking for the dollar to rally to at least the 97 area for Green D. If the index does happen to move down below the 93.13, the chances increase the index could make a move down to the 91 for a larger Green A zigzag structure. Until then, however, I am looking out for three waves to the 95.48 for Blue A. After pulling back in its Blue B to about the 95, the index should bounce up through the 95.48 in a C wave run up to the 97.
Crude is still stuck in the range it has been cutting out since the May 6th high. I am waiting for price to cut out a triangle for the rest of the month, which, once done, should give way to a move up to the 64 handle. Form there, I will be watching the move down to the 54.75 support. A move down below this and the commodity could head down below the 40 mark into the low 30s. However, I am being careful, for even though rates fell after the FED’s dovish talk, they have been trending up nicely from the 1.65 Jan 30 low. If this move up in rates keeps up, Crude could very well had put in a bottom at the 42.02 March 17th low. From the hourlies, the commodity needs to move down to about the 58 for a black C. From there, D and E should bounce between the 60 and 58 until it completes this supposed triangle for magenta 4.
After cutting out a leading diagonal series up to the June 10th 2.48 high, the yield dropped in what is 3 wave so far to the 2.26. This down move looks like a wave 2 which could take the yield down to about the 1.84. The 61.8% is at the 1.97. Yields were pretty much sliding before the FED’s dove-like comments and kept sliding after but not by anything unexpected or out of the ordinary. The Japanese 10 year looks like it too is retracing a leading diagonal series up from the Jan 20th low. This corollary move could reach as low as the .286 before we get a move above the June 10th .553 high. The German 10 year, which has also been trending up, is showing a three wave advance from its 2014 all-time low possibly pointing to a swing down below the .046. However, three wave move could also turn into a five wave series if this recent swing up from the .47 May 31st low extends itself into a 3rd wave run. There is no doubt that the pressure is on. I believe yields are ready to pop. The US ten year has almost retraced 61.8% of the move down from the 3.03 high now. However, I would like to see a 3rd wave run through the 2.64 confirming this bullish view.
Bear in mind the Yellen’s Dovish talk failed to take the yellow metal above the 1200, leaving it in the middle of a nasty contraction zone which should be done soon for it has been contracting into an apex since the drop from the 1308 Jan 2015 high. I feel the metal should soon be breaking down for an E wave ending. The final counter corrective could very well be complete at the 1207 June 18th high. The five wave series down should reach the 1041 for an intermediate wave A down from the 2011 all-time high. We could see this fall in gold this week if the dollar index does head up to its 99 counter corrective target. Oil could also roll over with Gold, which would put some life into the buck for sure. It will be interesting to see how rates dance with the two commodities if the buck rallies. From the big picture, it is looking more and more like global bonds have put in a top. Global Stock should fallow. The Buck should splinter for a bit while it consolidates till Sept before it makes a run up to test the 100 near high.