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Jason Haver: Long Bond Captures Target; S&P Approaches Its Next Targets


The bond-target capture leaves that playing field open; meanwhile equities are approaching their next targets.

Before I get into any market analysis in this update, I feel the need to briefly note the obvious: It's been a while since I've been able to write an update.  I apologize to my readers for the long hiatus; I've had difficult family issues recently, which were sapping the majority of my time and energy.  But things may finally be evening out a bit, so hopefully I can return to my regular schedule in the near future. 

With that out of the way, let's take a look at the market.  The first thing worth noting is that the 30-year Treasury Bond (USB) did ultimately capture my 138 target from February 20.  Almost immediately after it captured the target, it reversed.  And as of this moment, it's testing its 50-day moving average.  With the target capture, I'm now neutral on the long bond:  If the rally was an ABC fourth wave, then it's likely complete or nearly so, and new lows are possible from here.  On the bullish side of the coin, if the rally develops into a five-wave impulsive structure, then we'll consider the possibility that the end of 2103 marked a long-term bottom.

Click to enlarge
Moving on to equities, the last couple updates in May noted some if/then equations for the S&P 500 (INDEXSP:.INX).  As noted on the chart below:

1.  On 5/23/14: Sustained trade north of the blue trend line would suggests a trip to the red trend line (captured).
2.  On 5/30/14: Sustained trade north of the red trend line would suggest a target of 1978-89 (high of 1963 so far).

While a larger fourth wave could sneak its way in here (blue "Bull (4)"), as long as support holds, then we should probably give the benefit of the doubt to bulls for the next correction to be bought higher and into the target zone; though I'd actually prefer to see the target zone captured more directly. 

The Nasdaq Composite (INDEXNASDAQ:.IXIC) made new highs recently, and has thus officially validated the intermediate preferred count of April 7.  I presently don't have a strong opinion about how much higher wave V will carry, though current evidence suggests more upside is probable.  The worst scenario for bears here would be if the wave I have labeled as a leading diagonal (from 2010 to 2013) was instead a nest of first and second waves (as mentioned on the chart).

In conclusion, the long bond captured February's target, so I no longer see a clear trade there -- we'll simply have to wait for more information, and for the next trade to emerge.  Regarding equities, I ended my last update (May 30) with this sentence: 
" the event that SPX and INDU can power through long-term resistance and turn it into support, then this could become a trend followers market again."
That's where we stand at the moment.  For the time being anyway, the bull market continues; and until bears put a dent in the long-term technical picture, there's no point fighting the tape.  Equities may be close to entering a fourth wave correction, but present evidence suggests that further upside is likely to follow that correction.  Trade safe.
Follow me on Twitter while I try to figure out exactly how to make practical use of it: @PretzelLogic.

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No positions in stocks mentioned.
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