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Market Sentiment At Its Lowest In 10 Months

Market Sentiment At Its Lowest In 10 Months

Stocks sold off last week…

Strong U.S. Dollar Weighs On Blue Chip Earnings

Strong U.S. Dollar Weighs On Blue Chip Earnings

Earnings season is well underway,…

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Market Report: All Eyes on The Prize

DOW

In my last article I was looking for new highs on the DOW, well we finally got that now, so with the DOW finally making a new high it's at least potentially completed the ending diagonal idea I have been working from the Oct 2014 lows. The only issue I see is the decline from the last peak is a messy move and not that impulsive, so see a retest of the all time highs would not surprise me.

DOW Daily Chart
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However with or without a new all time high it does not detract from the fact that the wedge shape supports the idea of an ending diagonal. If the idea is correct then once it's complete we should see a strong decline. I suspect it would mark the end to a larger 3rd wave that started from the March 2009 lows (alt idea is ending wave C). Regardless of the larger time frame, if the rally from the Oct 2011 lows is close to ending and completing a large 5 wave advance, then I would initially target the Oct 2014 lows, that being the origin of the ending diagonal. So whist it may see a bit more chop to the upside, I still favor a strong reversal once it's complete. I am no longer bullish now. It would need a move above 18800 to suggest the idea is wrong.

DOW Weekly Chart
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DXY

In that same article I mentioned that I was looking for a low on the US$ and expecting a large rally higher. That idea turned out really well, although I am still bullish there is the possibility that this is a corrective bounce. If the rally remains as a 3 wave bounce, it could well be part of a move that suggests a high is in place (as shown by the blue labeling) and setting up for a move lower. I would need to see a strong break under 95.50 to start to consider bearish options, staying above 96.50 supports the primary idea and rally back to test the 101 area for wave 5 and complete a much larger 5 wave rally from the May 2014 lows.

DXY Chart
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Gold

So as the US$ moves higher it should pressure Gold to move lower and finally hit our long standing target around $1100-1120, I still think this is lacking a few final touches and would like to see a new low under $1131.

Gold Chart
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In a prior article I mentioned the idea we were still looking for $1250 to end wave [b], well I can't say it won't test $1250, but the odds likely support the idea wave [b] is probably complete, so we still want to see wave [c] of wave 5 and target sub $1131.


VIX

We finally got the new low I expected to see, that also aligned with the new high on the SPX and a nice reversal on both markets. However as the decline on the US markets is a bit sloppy, we may see a retest of the support band on the VIX, either way I think the VIX is a strong buy if a retest was seen, as the SPX moves lower we should see the VIX move higher. Both the VIX and the SPX support an ending diagonal pattern which is a reversal pattern.

VIX Chart
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Until next time,
Have a profitable week ahead.

 

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