Market outlook for Aug. 5th: Still bound by upper resistance levels!

Initial Jobless Claims rose unexpectedly to 479,000 this week compared to an expectation of 450,000. Continuing Claims came in at 4.537 Million, while expectations were of 4.500 Million. Before the numbers were released the Dow Futures were up 10 points and after the number the Futures were down -28 points with Fair Value up 3 points. The Initial Jobless Claims are at the highest level since April. This should have an impact on the markets and has already on European markets going lower than they were. But you never know in this market whether people will just shrug off the news as they have in the past. Why the market is still as high as it is is still confounding because the data is pointing very strongly that we are in a Deflation period which is accelerating.

The chart of the S&P 500 above shows that on Tuesday we formed a Hammer Pattern. This pattern marks a reverse in the previous trend. While yesterday's closing was not down, today's should be to fulfill the Hammer pattern reversal. Watch the S&P 500 today as it should lead the market over the Dow, which often gives confusing signals, because there aren't many stocks in the Dow Index and fewer stocks can be manipulated more easily.

The chart above from Haver Analytics was last updated on July 29th, so it doesn't include this week's data but as you can see 479,000 is clearly a trend in the wrong direction and alarming to many, especially the long term unemployed, often referred to as the 99ers. Those are individuals out of work longer than 99 weeks and get no benefits currently and are living on a string, as an article on the front page of the NY Times said on Tuesday, describing a 49 year old woman who moved out of NY with only a few hundred dollars and drove to Brattleboro, VT and plans to live in her car and try and find some work.

Revisions to the previous week's data were made from 457,000 to 460,000 Initial Claims. Tomorrow the Unemployment rate for July will be released and it was already expected to rise to 9.6% from 9.5%, but with these Initial Claims rising steadily, it could go back up to 9.7% or higher.

Stay tuned and return during today's market action for any Updates which will be posted below.

Market Summary and projections for the weeks ahead.

What do you think you should have learned from this week's market action? Or are you going to keep your head in the sand and hope everything is all fine now? In the charts above there are some very interesting revelations if you know how to read chart patterns and Candlestick patterns. First, in the Dow 6 month chart, you will notice that we have recovered 2/3rds of the recent drop. To be exact, the market has recovered 61.8% of the drop. What's so special about that? 61.8% is a Fibonacci number. So one thing it should tell you is that the last Elliott Wave up, is finished! That is why Friday was a down day and why most likely Monday will be so too.

What else do the charts tell us? The second chart is of the Dow for 1 month, so you can easily see the candlestick pattern for yesterday. Why is this at all important? Because it gives a signal of a Hammer pattern. A Hanging Man candlesticks form when a security moves significantly lower after the open, but rallies to close well above the intraday low. The resulting candlestick looks like a square lollipop with a long stick. If this candlestick forms during a decline, then it is called a Hammer. That is what yesterday's pattern ended up as. Another point of yesterday's action was to look at the Volume chart. Friday's usually have less Volume than Thursdays. But yesterday the Volume was higher than Thursday. As a matter of fact, if you look at an intraday chart of Volume you would notice that over 20% of the volume yesterday happened in the last 15 minutes. Over 50 Million shares were traded in that time and it got the Dow off its lows to close down only 162.8 points. Hmmm, there that Fibonacci number again.

There is no way for certain to predict the future, but candlestick patterns give one a better than 50% chance. However, knowing this, there are patterns within a day as well and while it points to a lower low on Monday than today, it could just open that way and climb somewhat higher. However, it will not go over the recovery high in place last week. It should stay below that and my guess is that the market will go lower next week. Why do I say that? Because this market move needs to be looked at in a much larger context, say 30 years!. I have posted a 30 year Dow chart in the past month and shown that we are in a Super Grand Cycle where we now are ready for a major move to the downside unlike anything we have experienced in our lifetime. Exactly how and more precisely when this will happen is unknown. But it is coming.

Gold this week rallied to new highs confirming the lack of confidence in world currencies and fear that the only real safe place is in Gold. I do not believe this will last during this Super Grand Cycle, as Gold will eventually drop below $900/ounce and go as low as $600/ounce if we humans behave as we have in the past. But enough of the speculation for now. The point is that all the signs point to a major, seismic, drop like a rock. I have been warning about this the past 3 months. I have been using language like "Fair Warning" which is a term used by auctioneers that the impending sale is about complete. I don't know what else I can do to warn people, as it is we little pople who will be hurt, not the Wall Street tycoons. Fair Warning!