ThxPORTAL - My OnlinE InvestmenT ProgresS

NEW YORK (AP): The stock market managed to steady itself after hearing Federal Reserve Chairman Ben Bernanke's plans to dismantle the central bank's supports for the U.S. economy.

The Dow Jones industrial average closed with a loss of 20 points after falling nearly 100 in early trading. Treasury prices fell as demand for safe havens eased.

Bernanke revealed the Fed's thinking on how to wean the market from massive emergency supports put in place to keep the economy afloat. He said the Fed will likely start tightening credit by boosting the interest rate it pays banks on deposits with the central bank.

The talk of a smaller role for the Fed in U.S. markets came as investors looked for the opposite overseas. Investors are hoping European Union countries will extend a bailout to Greece. The country is facing big budget gaps. There is concern that financial woes in Greece as well as in Portugal, Ireland and Spain could spread and threaten a global economic recovery.

"We're in a messy transition period," said Paul Ballew, chief economist at Nationwide Insurance in Columbus, Ohio. "While you see policymakers back off in some areas you're going to continue to see them intervene in other areas."

Officials said the EU member nations have made no decisions about how to help Greece.

The debt problems are the latest setback in the past four weeks that has halted a 10-month advance in stocks. Investors have also been concerned about China's plans to curtail economic growth to avoid speculative bubbles and President Barack Obama's calls to restrict trading at large financial institutions.

The prospect of more restrained Fed shook the markets at first, even though it wasn't a surprise.

Bernanke said in a statement that the Fed likely will begin tightening credit by raising the interest rate it pays to banks on the money they have deposited at the Fed. That would lead to an increase in borrowing rates for consumers and businesses. The Fed chief said the central bank is not yet ready to boost interest rates, which stand at record lows.

Craig Kaufman, co-founder and head of capital markets at Kaufman Bros. L.P. in New York, said the Fed's plan is reasonable and didn't represent a shift in policy.

"We're sort of in this fake world and we need to show that we're moving back to a normalized process," Kaufman said, referring to the record-low interest rates.

The Dow fell 20.26, or 0.2 percent, to 10,038.38 a day after jumping 150 points as hope of a Greece bailout grew.

The broader Standard & Poor's 500 index fell 2.39, or 0.2 percent, to 1,068.13, while Nasdaq composite index fell 3.00, or 0.1 percent, to 2,147.87.

Bond prices slid for a second day after an auction of 10-year Treasury notes brought only modest demand. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.69 percent from 3.65 percent late Tuesday.

The dollar fell against most other currencies. Gold also slid.

Crude oil rose 77 cents to $74.52 per barrel on the New York Mercantile Exchange.

Financial stocks rose after Legg Mason Inc. said its assets under management are higher than last year. The stock rose $1.37, or 5.5 percent, to $26.45.

Among companies reporting earnings, Dean Foods Co. fell $2.45, or 13.9 percent, to $15.19, after the dairy company said higher operating costs hurt its fourth-quarter earnings. The company's profit forecasts also fell short of analysts' expectations.

Shares of The Walt Disney Co. edged up 12 cents to $29.96 after the company's fiscal first-quarter earnings were about the same as a year earlier but above what analysts had predicted.

Advancing stocks narrowly outpaced those that fell on the New York Stock Exchange, where volume came to 1 billion shares compared with 1.2 billion Tuesday. Analysts said volume was light in part because heavy snow along the East Coast kept some traders out of the market.

source HERE

DJI - Is it just a correction or the starting of bear rally?



Gold : What happened to gold? Will it follow the DJI to the south or else?

Of the many forward looking market indicators we at EWI employ, one of the most interesting tools (and least discussed in the financial media) is the DJIA priced in gold -- "the real money," as EWI's president Robert Prechter calls it.

We've been tracking the Dow/Gold ratio for many years and it has serves our subscribers well. It's not a short-term timing tool, yet in the longer term, as our January 6 Short Term Update put it, "the nominal Dow eventually plays catch up to what is transpiring in the Dow/Gold ratio."

Here's a good example. Remember when the nominal DJIA hit its all-time high? October 2007, just above 14,000. At that time, most investors expected new highs still to come. But our Elliott Wave Financial Forecast warned five months prior, in May 2007:

One key reason [for a coming top in the DJIA] is the undeniable bear market status of the Dow Jones Industrial Average in terms of gold, the Real Dow...

Notice, by contrast, the relative strength of the Real Dow versus the nominal Dow, the index in terms of dollars, from 1980 to 1982. By August 1982 when the Dow denominated in dollars bottomed, the Real Dow was rising strongly from its 1980 low... The nominal Dow soon played catch-up, and they both rallied more or less in sync until 1999.

Now, instead of soaring the Real Dow is crashing relative to the nominal Dow. In fact, it’s barely off its low of May 2006. This dichotomy reveals the weakness that underlies the financial markets’ push higher. When mood turns and credit inflation reverses, the ensuing drop in the nominal value of the market should be dramatic.

"Dramatic drop" did indeed follow: Between October 2007 and March 2009, the DJIA lost 53%, high to low.

source HERE

Stock markets, whether in Europe, Asia, or the United States, all appear headed lower throughout the remainder of 2009. With global equity markets moving in sync since topping in 2007, a view of the DJIA will suffice.

The decline from the 2007 high above 14,000 was in 5 waves (an impulse) and the recovery from the March low is a corrective 3 wave affair. Market movements in the direction of the larger trend occur in 5 waves. Similarly, 3 wave market movements are classified as corrections. The rally from the low is corrective (in this case a complex correction), and will therefore be entirely retraced.

Is it possible that a larger degree brings the Dow back to 10,000 or so before the larger bear resumes? Anything is possible but other markets appear to have already turned, which favors the downside from the current juncture. Also, corrections tend to end near the 4th wave of one less degree, which is the case here (see arrow). The position of the 200 day SMA (in red) also supports bears. The smaller chart is a 240 minute bar chart and shows the wave count at a smaller degree of trend. An acceleration of the decline this month is expected.

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July 5, 2009- Market Summary
In this week's report we'll take a look at a common reversal pattern, known as a head and shoulders, which is starting to form on the charts of several major indexes. For those who need a quick refresher, you'll find that this pattern must go through four main steps to signal a reversal.

The first step is the formation of the left shoulder, which occurs when the security reaches a new high and retraces to a new low.
The second step is the formation of the head, which occurs when the security reaches a higher high, then retraces back near the low formed in the left shoulder.
The third step is the formation of the right shoulder, which occurs with a high that is lower than the high formed by the head, but is again followed by a retracement to the low of the left shoulder.

The pattern is complete once the price falls below the neckline, which is a support line formed at the level of the lows reached at each of the three retracements.