First The SP500 Elliot Wave chart of the Entire Rally

Now a close up of the last waves (It is either over or needs another push up to 1155 – 1160).

Trading chart on the Russell 2000 (Continues to push against the top of the exhaustion Zone)

Trading Chart on the XRT (Continues to push against the top of the exhaustion Zone)

Long Term Dow Industrials

Short Term Dow Industrials (has tried 3 times to get back into the Bear Channel – 4th Time should be the treat)

Long Term SPY

Short Term SPY (imitating Icarus) 

Long Term VIX (Waiting for it to return into the LT Channel

We are still in Primary 2 up – although in the final throes. 

The initial stock decline of 2010 was Phase 1; the current rally will take stocks up to or slightly through the Jan highs.  Then the more serious Phase 2 will begin; The Main stream media news will highlight the “buying opportunity”, the numbers will look great, it’s all fake – it’s all an illusion.

The current rally will absorb the first two weeks of March and possibly a few more, and then cede.  Greece, Spain, UK, Toyota, US States debt, health care, weather and inflation  come to mind for why it will end. 

By July/August the financial crises will again be prominent, with revolts and either financial (protectionism/defaults) or physical war almost likely.  Debt, taxation, and inflation are central.  Inflation likely to briefly spurt with  Oil  possibly to exceed $100/barrel this spring.  The powerlessness of those in power will come to the fore, and the pain of payment after overspending and underfunding real liabilities will be evident.

The charts are below.

Longer term chart

Short term Chart

Okay Russell 2000 Trading chart – you can see it tried to push above the exhaustion zone today (on no volume) – unbelievable.

Now the Retail ETF XRT – same comments as yesterday

Now the Long Term Industrial

Now the 60 day Industrials

Now the Long Term SPY

And the 60 days SPY

And a new chart on the VIX – I am watching before re-posting an EW count on this.

As they point out it does explain this last weird 5 wave rally:

This explains the unusual five wave rise, which is hard to count as an impulse:

• it has overlapping waves 2 and 4, not allowed in an impulse, ok in an ED
• it has a long wave 1, unusual in an impulse but ok in an ED
• it breaks as a series of “3s”, verboten in an impulse, expected in an ED
• it tracks declining volume, de-confirming an impulse but ok in an ED
• it comes in the final wave, as it must, if this truly ends P2

Kenny gives a target of Sp1159, but watch for a truncation.

This would also explain why minor wave 1 down of a Primary 3 was so small – Because we haven’t started Primary 3 yet.   It makes a lot of sense – I may need to do a recount (again!!!!).

For those of you who read my friday updates on the Industrials and the SPY (Sp500 ETF) you know that on Friday both indicies jumped out of their bear channels and I am watching to see if they will get back into them this week.  Here are updated charts. 

60 Day SPY

5year SPY

60 Day Industrials

5 Year Industrials

As you can see they are both still above their Bear Channells.   This week should set the direction for the next few months.

First the Updated Russell 2000 chart

And now the updated XRT chart

Russell 2000 at top of exhaustion Territory

Only once in the entire rally from March 2009 has the RUT managed to get to the top of the exhaustion buy zone, and that was Sep 17 2009.  At the very minimum we shuld get a reversionto the 20 day EMA, which is currently 633.

PELLEY when I called and proposed this interview about a year ago, your representative laughed out loud. And said, “The Fed chairman never does an interview.” I wonder why are you doing this?

BERNANKE Well, it’s an extraordinary time. It’s an extraordinary time. This is a chance for me, I think, to talk to– to America directly.

In extraordinary times what would our government do to turn things around.  Answer:  Anything they can, legal or illegal.   Since March 2009 have we been dealing with a Managed Market for a Managed Economy.

Now many have suggested that the Fed (or PPT) is buying SP500 futures every monday night.  I say nay – they are a pretty dour group and news would somehow have come out.  Addittionally Gld and Oil have also gone up, along with most world markets and I cannot see the Fed trying to cause the price of Oil and Gold to go up.  Of course if they printed a couple of hundred billion dollars and gave it to a few key banks, with the guidance to put it in the markets – then that wold account for all asset classes rising in unison.

Now that’s over then let us look at one of my predictive charts from last July:

As you can see, in this chart, I thought that we wold get back up to the major trend line of the bear market at 114 – we reached just over  115 so I was out by around $1.  I did think the rally would complete by late November 2009 and, in terms of the SP500, it appears to have ended in mid January 2010 – which means I was out by about 6 weeks.

Now let us have  look at the Major Bear Market trend Channel:

As you can see there have been several attempts to get out of the channel, including Oct 2007, spring 2008 and last Friday (March 4 2010).  In prior attempts this initial escape was marked with an immediate (within a week) push-back into the channel and a decent sell off.  If we take a close up of the last 60days action then we can see how important Fridays action was:

SPY Short Term

As you can see we gapped up to above the line in the low-volume Thursday night futures market.  This meant that this critical resistance line never had a chance to be tested and upon opening all of the stops above it started to triggered.  This resulted in a low-volume melt-up all day with a buying frenzy in the 3.30 to 4pm purchase-before-mutual-fund-Monday-ramp-up.  This means that the SPY closed (both day and weekly) above the line.   The volume was nothing to write home about and the market ended up extremely overbought with negative Divergences abound.  For the bear case to remain intact the Bear Channel needs to be reentered early next week.

So what does this foretell – next week we either Crash like 1987 / 1929 or we move further into the world of make believe.