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Friday, May 4, 2012

Friday Weekly Charts

Here is the Friday chart, along with the pivot points for May (P is highlighted in blue, S1 in red, and S2 in green). It looks, so far, like the low for this month will be at least 1362, and it could be as low as 1327.  We may have already hit the high for the month, but conceivably we could go as high as 1427. Now for the bad news: this is one of the 30% of follow through days that fail. To give IBD credit, they have repeatedly pointed out that, seasonally, May through July fiollow through days have a low probability of success.

 Last week I theorized that we may have just completed am Elliot wave 4 off the October 2011 bottom. It now looks like that is incorrect, and we are probably still in wave 4. If so, that means we are due for a wave 5, and if the past in an indication, it should start within about a month from now. If it doesn't happen, don't blame me, blame Prechter.

Thre momentum indicators are all headed down on both the SPX and the Nasdaq, and on a weeakly chart that carries somewhat more weight than on a daily chart (so I have read). One thing that the bulls may have going for them is that volume is still in a long term decline, so they big money that bought back in 2011 still doesn't appear to be selling in droves yet. 

 Another positive sign is the once again relatively strong Dow industrials. Positive in that this is now telling us a correction is coming, if not here. Once this starts breaking down, then we are talking bear market. A correction here is bullish, as it means we are probably due for another wave up: a genuine bear market means the bull market off the 2009 low is dead and buried.

 The transports are also hiolding up quite well, probably thanks to a decline in oil. For now I'm really not too excited about it: dropping oil could mean a rising dollar. Ignore the green line on the bottom, that got there by accident and I didn't see it until now.
Stochastics on the Russell 2000  are dropping like a rock, as is price. We still have a major support leve above the 40 week average, then the average itself. This should hold one of the two: if it doesn;t. it's a loooong way down.

Today was pretty devastating to anyone counting on a May rally. While the month has barely begun, it is going to be extremely difficult for the market to get into gear with the economic headwinds facing it, starting with the employment situation we saw today.

I wiull have the new highs update shortly.

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