The Market Pulse: USD, Commodities and ES_F

So, the political unrest in the Middle East has spooked the Market. If you watched my weekly video featuring the S&P, Gold, Oil and Copper... the only minor surprise was that the S&P turned tail a bit below my target area of 1346.25-1347.25.  I've received many e-mails from subscribers asking if I'm still looking higher or whether the top has been made for the year in US equities.

Here's a hint! It's still all about the US Dollar.

For many weeks, I have spoken about the "all in one" concept where commodities and equities move inversely to the USD. Above are the charts of several commodities and their inverse relationships to the USD. You might argue that my case is weak as several commodities such as Copper, Soybeans, Corn and Wheat are on the decline even as the UDS falls.

I offer the weekly chart of the CRB Index that shows that the larger degree trend is still up and the only reason for the short term disconnect between the USD and commodities is due to the the w.(4) decline. Thereafter, commodities will resume their assent. Could a case be made that the top is in, i.e. w. V (green)? Certainly, but we don't have any evidence to support such a claim. There are no trendline breaks, nor violation of structural support. We have to look higher.

That brings me to my opening statement regarding the USD's role in anticipating a trend change in equities.

BOTTOM LINE: The USD continues to coil. When markets continue to go sideways, and you have to force a wave count, you're asking for trouble. There is no way that I can make a bullish case for this market if a triangle is forming. At best, I see an advance to w.e and then further selling pressure.  Without a break of 86.55, I remain bearish on the USD. If my analysis is correct, that implies that the run in commodities and equities MAY NOT BE OVER!!

The Market has a habit of inflicting maximum pain to market participants when nobody expects it. When you think about all the manipulation that is going on, how fitting it would be to run stops of all the late to the party bulls and then turn right around and burn all the Bears that re-entered the market thinking that the market had made a major turn.  I'm keeping this thought in the back of my head as the wave structure unfolds to the downside.

When a market weakens, watching market leaders can tell us allot about the health of a market.  Leading stocks like AAPL, NTFLX, and AMZN have struggled this week. NYSE volume rose across the board, logging back to back distribution days in the S&P and DOW. Since Jan. 1, 2011, there have been 7 distribution days indicating that institutions are selling.

So here's how I'm viewing the market. The market has made an initial five wave decline. Since there are no channel lines and structural support that have been broken, I can't fully embrace the fact that w.2 circle has ended. I've labeled the chart accordingly. 

Here are the internal subdivisions of the recent decline. Regardless of whether a top is in place, what's important is that I am expecting a countertrend rally in the ON and daily session. Look for failures between 131850- 132025, followed by another round of selling.


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