The first impulse - update

The 4th correctional wave was a bit higher than initially excpected, giving more room for 5th to go.
So, I expect the current 3d to complete this Monday morning (East Coast time zone). The 4th may be a strong one, leading to the formation of expanded triangle.

As for the EURUSD, things seem to be a bit in advance to the stock market. A strong reaction to NFP figures means the 4th wave is in the making and should complete under 1.25 on Monday:

The first impulse

The picture in the markets seems to get clearer.
In my opinion, next week we're going to finish the first bear impulse for the DOW. The currencies also seem to start looking to stabilize before the correction of the downtrend will start.

Among all indexes, The Dow has the clearest picture:

And as for currencies, I expect euro to over perform the commodities dollars (AUD, NZD, CAD)  before the bottom of this impulse (in DOW) is reached. The base for EURUSD will be probably built over 1.24 level:

Midterm DOW

An intermediate top is due the week starting 13th June. But the entire bull market may still try to climb until the end of the summer. The wave C where we currently are, will reach in that case the duration of the  A.

Current EW count for DJIA

The clearest picture of the current markets is shown, in my opinion, by the DJIA:

Some ideas about the market's medium term future

Last Tuesday (in US it still was Monday) I've posted the projection on how the markets could behave with some US sectors and individual stocks during the nearest future in the russian part of the blog. The main idea behind this projection is the fact that US markets are entering the period of the broad top formation for the whole rally which started from the March '09 lows. In this context, there is high probability that many individual stocks have already put their cyclical tops in and are in early stages of decline. The same thing may be true even for major broad indexes (SPX, Dow Industrial). But what was clear at that point for me, it's that some important individual stocks, secondary indexes and even the Dow Transport were still strong ans able to refresh the new cyclical highs before the things really roll over. So, as for example, I've cited just few of them:
Russel 2000, XHB (homebuilders ETF), IYT (Dow Transport ETF) and INTC (Intel Corp). All of them seems to be on the road to complete the expanding triangle pattern:

Since that post, the defined  supports were touched on 3 of 4 (INTC missed by about 30 cents). Market has rallied  strong and many pundits have declared the correction over.
I'm not sure the things are so simple, especially for the broad indexes like SPX or Dow Industrial.
Let's take the latter. If we look at the candle charts, the move since late April looks more corrective than not.

 But if we take the close price only, things are much  clearer. And they will become even more clear, should we retest the last Tuesday's lows, especially closing near them. In this case we'll have a  5 waves decline on the close basis, meaning, from the point of view of classical Elliott wave principles,  that the trend for the Dow Industrial has changed. But, since many  other narrow indexes are still looking bullish , the rally in DOW will be long with a deep retrace.  May be, at the top, we will see the case of the Dow theory  non confirmation : new highs on Transport with the failed Industrial.

Risk appetite and some confirmation

I've been expecting the techs to underperform the broad market and especially big caps well before the markets start to roll over.  And that's what we have had.

 On the chart bellow we see the Nasdaq Composite to Dow Industrial Average ratio. It reflects the willingness of investors to buy riskier  (more expensive on the relative basis) growth stocks.  This ratio has put a top at the end of September and since, it has declined in the clear 5 waves pattern, meaning, from the Elliott waves point of view, the trend has changed.

So the rally in "risk appetite" has lasted a bit less than 10 months, and hence it confirms the coming reversal in the major averages (SPX, DOW)  which will mark at the same time the beginning of the 3d wave down for the Nasdaq to Dow ratio.

Santa rally, really?

What an entertainment to see bears turning bulls after the 60% rally. Yelnick has called "Wolf!" some times already since at least September, but finally he's calling for the Santa rally to the year end, and may be until February.
Oh, yeah, I understand, it's quite difficult to track any Elliott waves in the corrective crap the SPX or DOW  are made of, so we start to imagine it was just an accumulative phase and we gonna explode on  the upside.
Meantime, I don't see any reason for the averages to accelerate  hence there are virtually no bears in the woods to hunt. Or, may be, still Pretcher, if he calls to cover his double short position, I will immediately put in the mine.
The best illustration is provided by the DOW: he's well as he is, drifting higher under the green line,  enjoying the last weeks of this indian summer.

Watching the grass grow

While I've been expecting that this rally should last until the year-end  I didn't think it would get so boring. I definitely prefer the tops of bull markets, with their spikes as early bears get squeezed.
Nasdaq Composite goes nowhere since 2 months already.

Hopefully, there is DOW, the big caps are still desired.

And if you think we gonna break out on the upside, look at the high beta small caps Russel 2000:

And some of not so old leaders,

Homebuilders:

And Semiconductor Companies:

 Ok, ok, I know, the real story is about Gold. There is a lot of action. People are scared by coming hyperinflation and are buying gold as if there is no tomorrow. Personally, I'm far from being sure , most of them really understand why they need gold, but it continues to be the game du jour until it's no more.

It's a final count down

So, a pretty strong day for the beginning of the week.
Patterns are in process of completing: Dow and XMI have put in new recovery highs, which was quite expected. Also, the inflation related stuff was pretty strong, as an example, the brazilian ETF has hit at new high as well. But silver wasn't impressive, unwilling to follow gold to new highs and that despite the dollar weakness.
To resume: the liquidity is dissipating, but the psychology is another matter.

Sell the news

The Fed was as dovish as they ever could, but we didn't managed to hold. Looking at the charts, I think the lows of 1027 (on December's SPX) should hold in the comming days. What we have seen yesterday was the most likely  wave A for those in the correction (semis, Nasdaq, small caps) and the wave (i) for, at least, Dow Industrial.
Looking bellow at charts of Dow, SPX and Nasdaq Composite we can see that only Dow didn't violate the trend line from the March lows. Moreover, Nasdaq has already put in a lower low, but it's not the case of 2 other indexes.

So, I'm still sticking to my Nasdaq's count, but may be with the correction about the year end. As for now, markets look a bit weaker than I've been expecting, so the top of this correction wave (since July's low) is closer and if this wave is the final one (I believe so)  at year end we will be significantly lower than even now.
May be a disappointing shopping season in the US and Europe will be a nail in this rally's coffin.

Leaving the techs alone

While still waiting for a thrust to at least 2200, I'm looking at the Nasdaq to Dow Jones ratio.

For the intermediate bottom, it has turned up well before the indexes actually did. So, now I will look at it in order to confirm the trend change as well. And, as for now, the ratio seems to be poised to plunge.