Value of Perfect Information

5:40pm EST:   On the SP-500 daily candles chart, notice that both raw volume and on-balance volume are increasing and are above the Jan 2010 high.  This is a bullish signal of strength.

SP-500 Daily Candles (EOD):

4:45pm EST:   Deja Vu.  Higher highs (1148 vs 1145) and higher lows (1140 vs 1137).     The SP-500 have hit my initial target area of 1145/50 for wave 1-[5].   I still think there could be some extension if wave 1-[5] into the 1160/65 area.  The 1160/65 target terminates near my mid-channel line on the daily SP-500 chart.  I’m thinking the wave 2-[5] pull-back my be shallow.  A 38% re-trace takes us back to the Inverse Head and Shoulders neckline around 1116, but a 23% pull-back would only drop to about the key 1130/33 support area.

SP-500 60-min Chart (EOD):

SP-500 Daily Chart (EOD):

11:30am EST:  Here’s a little bonus for the non-Alert Service subsribers.  Below is my most up-to-date 5-min and 15-min charts.  The PUG Alert subscribers get these updated charts a couple times per day.

SP-500 5-min Chart (11:30am):

SP-500 15-min Chart (11:30am):

8:25am EST:  ES Futures were basically flat overnight.  Continuing to look for more wave (5)-1-[5] extention towards the 1160 target.   Financial stocks are really starting to move up and XLF is approaching a new high.  This is another sign of returning strength in a bull market.

I’ve noticed most of the Perma-Bear E-Wave blogs have now come out with 9th Revision of their failed P2 Models predicting the SP-500 will advance to 1230 (62% re-trace).  They have been calling for a P2 top since 870, 956, 1018, 1140, 1080, 1101, 1115, 1150…  So now after 9 attempts at calling a top, the perma-bear bloggers finally have a P2 model that agrees with my P1 end point area of 1200 to 1260.  Of course I have only had one model and this 1230 area has been my target since I opened this blog back in Oct 2009.   And I will note that both the Nasdaq and Russel-2000 are now solidly beyond their 62% re-trace levels.

60-min ES Futures (EOD):

Click Here for Presentation >>>>>>>>>>>>>>  Stock price  Do not hit the enter button to continue, instead click the “next” button on the bottom right when watching the presentation.

Readers of the last 4 articles (since Jan 4) were given several technical and fundamental argumenst calling for more declines in EURUSD. Here’s another one, with a touch of gold. Last week, gold hit a new record high in euro terms, highlighting the latest weakness in the single currency rather than gold’s improved lustre. Analysing gold’s movements against various currencies is not only crucial in weighing the true performance in the precious metal, but also important in valuing a currency’s secular movement (rather than comparing it to other currencies). Thus, figuring out whether a falling EURUSD is a result of broadening euro weakness rather than a strengthening USD can be addressed via golds multi-FX analysis.

The first chart shows weekly gold in USD terms suffering from classic bearish case of lower highs i.e. failed rebounds. The $1,225 record high from December 2nd coincided with the same month of the higher than expected US November jobs report and the triple downgrade of Greece credit rating from Fitch, Moodys and S&P. As long as gold fails to regain $1,133 (50% retracement of the decline from 1225 high to 1043 low), it remains vulnerable to $1,020 (target by Mar 6^th), followed by $980. Our long-term bullish stance in gold would only be reconsidered in the event of a break below $880.

The second chart shows weekly gold in EUR terms reaching a new record high of EUR 831.00 Since this occurrence is primarily EUR-driven move, it merits more attention regarding its implications for EUR rather than gold. We would only start to focus on golds strengthening trend when it nears its highs vs. the stronger JPY and AUD as was the case in early December.

The third chart shows eroding interest in gold net longs (positioning of futures contracts in NY Mercantile Exchange). Last week, net longs rose for the first time in 5 weeks after having fallen to 181,519 contracts, the lowest since September. Since December, falling net longs were more a case of a decline in new longs rather than an escalation in fresh shorts, which is unlike in Q3 2008, when golds decline was prompted by surging shorts as a result of the great unwinding trade. Reconciling golds robust performance against EUR and the fading interest in gold net longs (vs. USD) justifies our bearishness in EURUSD as well as anticipation of further losses in Gold/USD. Technical analysis of golds net longs suggests the decline will retest the 130K level from the current 188K.

Fed Chairman Bernanke will likely use this weeks semiannual monetary policy testimony to tone down any overshoot in short term yields by reiterating exceptionally low levels of the federal funds rate for an extended period, but that will likely fail in dissuading USD bulls, especially as bond traders anticipate payment of interest on reserves as the Feds next step of exiting its liquidity strategy.

Dead Cross on Gold

And those who became familiar with the meaining of DEAD CROSS formations, Daily gold sees its 50-day MA falls below its 100-day MA. Readers of this site were warned on Jan 19 about the dead cross in EURUSD (50-day MA falling below 100-day) 23 hours before it occured. 18 hous later, EURUSD lost 210 pips.  3-year Anniversary of the Pre-Crash Correction  February 27 (marks the 3-year anniversary of the 1st correction in global bourses, which wiped out nearly $600 billion in market value, triggered by fears of higher transaction taxes in China, an expected plunge in US durable orders and preliminary fears of US subprime debt. The Shanghai Composite plunged 10%, NASDAQ fell 4% and DJIA dropped 3%. While the global patient has shown marked signs of improvement, it remains highly vulnerable to multiple sources of contagion (Eurozone fiscal woes, Chinese tightening, rating concerns in Gulf & pace of liquidity reduction by Fed). Pay attention to recurring cycles and repeat events.

Canadian dollar falls across the board as markets unwind gains in commodity currencies ahead of potential event-risk from Bernanke’s testimony. CADJPY bearishness was highlighted by negative crossover in the stochastics, losing 270 pips since Monday’s tweets and IMTs. Subscribers to our IMTs and Twitter.com/alaidi were initially warned on ensuing CADJPY bearishness on Monday when it stood at 87.70.

 5:30pm EST:  Boring day, so it probably set the stage for an explosive next week.  For the primary count I think we completed (1)-3-[5]-P1 today and will get a small pull-back for (2)-3-[5] to the 1096 area, before (3)-3-[5] gets underway in earnst next week.  (3)-3-[5] should get through the tough resistance at 1115 and 1130.  And 3-[5] could reach for the 1150 area in a short amount of time, before  5-[5] finishes around 1165.

For the alternate count I have decided to move c-[B] out in time to Moday and into the 1115 gap area, as I think iv-c-[B] was the drop down to 1086 yesterday and we are in v-c-[B] now with a burst up towards 1115 coming Monday.  If this alternate count is correct, we will know by a hard reversal signally the start of a nasty [C] leg down to new lows.  The threat of this nasty [C] leg drop is keeping a good amount bulls on the side-lines.

Have a nice weekend.

15-min Chart (EOD):

60-min Chart (EOD):

Daily Chart (EOD):

12:50pm EST:  How about a large symmetrical triangle for Wave [4]?  It should be made up entirely of 3’s, or A-B-C-D-E which is 3-3-3-3-3.   So far it looks pretty good for A-B-C-D all being 3’s.  We might be working on E right now with a touch down at about 1094/96 required before breakining out upward.  One nice thing about a Wave [4] triangle is that it would alternate with the Wave [2] simple Zig-Zag or A-B-C, thus satisifying a key Elliott Wave guideline.  The Wave [5] triangle target would be about 1205 on the SP-500 for Wave [5] of P1.

60-min SP-500 Triangle (12:50pm):

10:20am EST:  On a postive note for the bulls, the 13-day EMA is just about ready to cross back over the 34-day EMA, which would by a buy signal for the SP-500.  Notice the SP-500 bounce off the 1097 area this morning as support.  Also, the Russel-2000 already had this 13 vs 34-day EMA bullish cross early this week.

SP-500 Daily 13 vs 34-day EMA Chart (10:20am):

10:05am EST:  Forgetting the counts for a moment, just take a look at this SP-500 Daily Chart below.   You can see that the SP-500 is once again trapped between support at 1085 and resitance 1110, same as the Nov-Dec 2009 time frame. The bounce off the 20-day SMA at 1086 yesterday indicates that is a strong support level. And of course we have not been able to decisively break back through the 1110 level since the Feb 5th low of 1045. In fact every time the 1105/1110 level is tested, the SP-500 tends to sell-off hard indicating strong resistance there.

So we must be patient and wait it out. I would say that a break of either 1085 or 1110 decisively should bring in a lot of volume and a new directional move in the markets. So be careful around these levels and protect your trade with stops.

SP-500 Daily Candles Chart (10:05am):