Both the Dow and the S&P are topping or near a top. As of now, we are favoring the one more push up. If equities make one more stab up, they will hit heavy Fibonacci resistance mid November with the SNP topping between 1800 and 1840 and the Dow between 16280 and 16880. However, one must keep in mind that there are good Alt counts that have the indexes in a short term sideways triangle wave. And yet some others that have set in a top and are in the beginning wave of a long five wave move down past the 2009 bottom. There can be not doubt now that taper is off the table this year. Yet regardless of this, stocks have giving up all their post dovish Fed announcement gains of last month. But it is interesting to note that equities and the Buck have been able to hold on regardless of the poor fundamentals and political mess and partial government shut down in the US while across the Atlantic and Pacific numbers and political climate has improved.
The Dollar index weakened throughout the week, however, as both Fundamentals and the political situation worsened for the US, the Buck stabilized and actually gained back half its weekly losses to close Friday near its daily high at 80.13. The Buck is at critical points now against all the majors. Take note that the Pound reversed with conviction against the Greenback on Thursday and Friday on what analyst attributed to softening UK numbers this past week. But I don’t think this was the cause. Those soft yet still good economic numbers far out weigh the mess in the US if you think Fundamental analysis outweighs Technical analysis–something this analyst believes not. The EUR, lagged behind the pound, moving up on it and the buck on Thursday, to finally break down on Friday along with The Cable. Both the EUR and the Pound, have completed wave counts and are due for moves down; however, they still have some room to to the upside without invalidating midterm counts.
In short, technically the buck is looking stronger. It put in good days on Thursday and Friday; and, even though the Commodity block rallied a bit against the the USD, GBP and the EUR, they failed to take out last weeks key short term highs against the Buck and appear to be in corrective waves from possible tops. A break of 80.66 on the USDollar Index and fall below 1.3462 on the EUR will confirm a bigger dollar move coming. The Yen also has hit some key structural points and heavy Fibonacci resistance against the buck. The triangle four has completed all of its minimum requirements and appears be heading up in a thrust fifth wave at minor degree.
Gold and Silver have also been acting fundamentally funny. One would think that with all this negative global political climate and unprecedented money printing that the metals would be bid up, but they are not. Wave structure tells us the the tendency is still down. Both Silver and Gold can be counted as just having complete forth waves. There is a chance, however, that these two corrective waves still have room to go up and is something I am looking out for. But contrary to the market sentiment and political climate they are being stubborn and appear to want down. The counts below show a forth wave correction on Gold and an B wave correction on Silver. These are two alternate views and are interchangeable. Regardless of which one you prefer, they both look weak favoring the downside
The 10 Year yield held up pretty well against the so called US political disaster. The bond markets showed some signs of worry with short term yields spiking a bit and credit default swaps rising by the largest amounts since 2009–a sign bond investors are starting to get worried and are hedging US debt. However the 10 year yield traded sideways throughout the week making a five week low at 2.58 on Thursday and then spiking a bit on Friday settling at 2.65 at the close. The Ten Year Yield is carving out a nice fourth wave pattern and looks like it is at the start of its B wave of what looks like so far a zigzag four. I am looking for the 10 year yield to move up to about 2.80 before it moves back down to around 2.46%. This area is the previous 4 wave at smaller degree and a common stop for fourth wave retracements.
It has been a very exiting month so far I must say. I do believe in keeping an eye on news and fundamentals for gauging short term sentiment. However, and I cant say it enough, technicals must come first. M2 money supply has been increasing at an alarming rate yet the M2 velocity rario has topped in 1997 and fallen to an all time low even since.
I’ll leave you with a wonderful anecdote that you have probably heard yet is never to be forgotten if you want to be a successful trader:
An analyst calls his client and tells him he has some got some bad news and some good news. The client asks what they are and the Analyst replies,”Remember the Stock I recommended you buy last month? Well it is down 20%.” The client sighs and asked what the good news is and the Analyst replies,” The Fundamentals are still good!”
Good Luck Trading