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Monthly charts are updated, comments are written on some of them.
The GDP number disappointed, coming in at 0.7%, below the 1.0% expectation.
But a decent Earnings week (GOOG, AMZN, MCD, CAT) fueled the market enough to make this a positive week overall, despite the weakness which started mid week.
Earlier in April, (around the time when the market made another test of the L1 DGL support) bullish divergences in several indicators like the NYSE Summation Weekly trend indicator, alerted about a possible advance coming, with the S&P 500 nearly reaching the March high this week.
Wednesday’s overbought RSI-2 and a bearish Pin bar flashed a warning sign for this short term bullish trend and some selling pressure forced the market lower in the last half of the week.
Using the TLT weekly ETF as a proxy, the Bond market made a bearish reversal after reaching important trendline resistance this week. It possibly completed what could be an a-b-c wave 4 structure from the late 2016 low.
A potential wave 5 could take the Bond market lower for a test of that 2016 low (or at a minimum, trendline support) and with it… a higher interest rate could be the outcome.
The Dollar daily fell below a long standing trendline this week, which could open up for more weakness for the buck, signaled by any break below this week’s pivot low.
The S&P 100 BPI (Bullish Percent Index) daily Sentiment chart
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Retail sales fell 0.2% in March. A deflationary sign, the Consumer Price Index (CPI) fell 0.3% in the same month.
Also, war related developments and possibly pre-holidays selling could be factors which forced the S&P 500 to finally break out from the Triangle pattern to the downside, on below average (Easter?) Volume.
RSI-2 has reached an oversold extreme but the last trading day’s close at the low could mean some more (intra-day?) weakness coming, towards the 50% retracement area (2320). This is also indicated by Volatility – VIX daily which has yet to reach important trendline resistance.
RSI could even stay oversold until the key Fib. support area (2300) is reached. Anyway, daily reversal type of candlesticks (i.e. a Hammer) forming at one of these levels, would be an alert the market is ready to reverse. With RSI-2 at these levels, there is over a 70% chance the market will close above it’s 5 day EMA within a week.
Two possible wave scenarios is developing from the March high.
The market is currently working on a wave iii of 3, as part of a five wave impulse structure developing to the downside. In the Elliott Wave Theory, the wave 3 and C are the sharpest ones, in whatever time frame. This scenario is more in line with the earlier mentioned cycle bottom due this coming summer.
Or it could be the last wave y, as part of a w-x-y correction from the March high, with the finer degree wave development better seen on this updated S&P 500 hourly chart. In this scenario, there is unfinished business to the upside, with a test of the March high or even new highs in the cards.
Weekly momentum is getting oversold, with bullish divergences at the same time observed in several indicators like the daily 21 EMA McClellan, SPX vs. FCX (Copper & Gold) and the NYSE Summation Weekly trend indicator, which is in fact still holding on to it’s bullish mode, despite the short term price weakness. These bullish divergences are more in line with the w-x-y corrective wave scenario.
Only time can tell for sure, what scenario will turn out to be the right one.