tuesday update

SHORT TERM: choppy day, DOW -28

Overnight the Asian markets lost 0.7%. Europe opened higher and gained 0.7%. US index futures were higher, and at 9am Case-Shiller was reported lower: +6.7% v +8.1%. The market opened four points above yesterday’s SPX 1978 close and immediately began too pullback. At 9:45 the Chicago PMI was reported lower: 60.5 v 64.3, then at 10am Consumer confidence was reported lower: 86.0 v 92.4. The pullback ended just past 10am at SPX 1970 and the market started to rally. At 11:30 the SPX hit 1985, then the market started to pullback again. At 12:30 the SPX hit 1973, rallied to 1978 by 1pm, then dropped to 1969 by 1:30. Another rally carried the market to SPX 1978 by 3:30, then a pullback ended the day at 1972.

For the day the SPX/DOW were -0.20%, and the NDX/NAZ were mixed. Bonds lost 3 ticks, Crude dropped $3.15, Gold slipped $8, and the USD was higher. Medium term support slips to the 1956 and 1929 pivots, with resistance at the 1973 and 2019 pivots. Tomorrow: the ADP index at 8am; ISM manufacturing, Construction spending and Auto sales at 10am.

The market opened a few points higher today. Dropped to SPX 1970, then rallied to 1985 before heading lower again. After a week of choppy downward activity we have now had two days of sideways choppy activity. We continue to count the downward choppy activity as a 55 point ‘a’ wave: 1979-2000-1966-1986-1964. And now count the choppy sideways activity as a 21 point ‘b’ wave: 1980-1971-1982-1970-1985. A ‘c’ wave should now be underway from today’s SPX 1985 high. We still favor the Primary IV scenario 65%-35%. Short term support is at SPX 1964 and the 1956 pivot, with resistance at the 1973 pivot and SPX 1986. Short term momentum again spent the day vacillating neutral. Best to your trading!

MEDIUM TERM: uptrend in jeopardy

LONG TERM: bull market

CHARTS: http://stockcharts.com/public/1269446/tenpp

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monday update

SHORT TERM: gap down opening again, DOW -42

Overnight the Asian markets lost 0.5%. European markets opened lower and lost 0.5% too. US index futures were much lower overnight. At 8:30 Personal income (+0.3% v +0.2%)/spending (+0.5% v -0.1%) were higher, and the PCE was higher: +0.1% v +0.1%. The market gapped down at the open to SPX 1967, continued to 1964 to put the low in for the day, and then started to rally. The SPX had closed at 1983 on Friday. At 10am Pending home sales were reported lower: -0.1% v +3.2%. The market then rallied to SPX 1980 by 11:30am. Then after a pullback to 1972 by 12:30, a bounce to 1978 by 1:30, and then a lower low at 1971 by 2:30 the market tried to rally again. At 3:30 the market hit its high for the day at SPX 1981, then pulled back to close at 1978.

For the day the SPX/DOW were -0.25%, and the NDX/NAZ were -0.15%. Bonds gained 13 ticks, Crude rallied 90 cents, Gold lost $1, and the USD was lower. Medium term support remains at the 1973 and 1956 pivots, with resistance at the 2019 and 2070 pivots. Tomorrow: Case-Shiller at 9am, the Chicago PMI at 9:45, Consumer confidence at 10am, and a speech by FED governor Powell at 10:45.

The market had a gap opening today for the fourth time in the past five trading days: 3 down, 1 up. The last time we had this kind of activity after an all time high we were entering a downtrend. Right after the open the SPX broke below the OEW 1973 pivot range (1966-1980), then quickly recovered and staged a rally. Nevertheless the market has now triggered three of the five criteria we have been observing for the potential Primary wave IV scenario. The two that are left are a downtrend confirmation and a break of the 1956 pivot range. At today’s low the DOW was well into another triple digit move, but the market recovered and the DOW triple digit streak ended at five days.

From the SPX 2019 high we see five overlapping waves down: 1979-2000-1966-1986-1964. We are labeling that decline as an A-B-abC to complete either: an ‘a’ wave under the bearish scenario, or a Minor 2 under the bullish scenario. After that we have a rally to SPX 1980, pullback to 1971, and then a rally to 1981 so far. This could be the resumption of the uptrend, or a three wave B under the bearish scenario. Since the market has triggered three of our five parameters, we are now favoring the Primary IV scenario 65%-35%. Short term support is at the 1973 pivot and SPX 1964, with resistance at SPX 1986 and SPX 2000. Short term momentum, despite the early selloff and rebound, spent the day vacillating the neutral line. Best to your trading!

MEDIUM TERM: uptrend in jeopardy

LONG TERM: bull market

CHARTS: http://stockcharts.com/public/1269446/tenpp

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weekend update

REVIEW

After establishing an all time high on OPEX Friday a week ago the market went into volatility mode this week. Every day we observed the DOW moving triple digits: three down and two up. For the week the SPX/DOW were -1.2%, the NDX/NAZ were -1.3%, and the DJ World index lost 2.0%. Economic reports for the week were skewed to the downside. On the uptick: the FHFA, new home sales and Q2 GDP. On the downtick: existing home sales, durable goods, the WLEI and weekly jobless claims rose. Next week, end of month/quarter, will be highlighted by Friday’s Payrolls report and the PCE and ISM during the week.

LONG TERM: bull market

The Cycle wave bull market from the March 2009 continues to unfold in five Primary waves. Primary waves I and II completed in 2011, and Primary III has been underway since that October 2011 low. Primary I divided into five Major waves with a subdividing wave 1, and simple waves 3 and 5. Primary III has also divided into five Major waves, but wave 1 was simple and waves 3 and 5 have subdivided.

SPXweekly

After the Primary I high in May 2011 the market declined for five months and lost 23% of its value during Primary II. So it is important to identify the Primary III high as we are likely to experience a similar type of correction for Primary IV. We estimate it will last about three months and the market should lose between 15% and 20% of its value.

During Primary III Major waves 1 and 2 completed in late 2011. Major waves 3 and 4 completed in early 2014. A subdividing Major wave 5 has been underway since that February 2014 low. The SPX count suggests the market is currently in an Intermediate wave v uptrend. When it concludes, if it hasn’t already, Primary IV should be underway.

MEDIUM TERM: uptrend in jeopardy

The current uptrend started in late august at SPX 1905. We count five waves up into the recent SPX 2011 high. Then the market pulled back to SPX 1979 just before it rallied in three days to the 2019 pivot. After that, which was last Friday, we had a very volatile week. Initially we thought the pullback to SPX 1979 ended Minor wave 2 and Minor 3 was underway to new highs. When the market dropped back to SPX 1979, rallied to 2000, and then dropped to 1966 we realized something bigger than just a pullback might be underway. So we set some parameters and dug a little deeper into some historical charts.

For the past month or so we had been considering an extending Major wave 5. This would require a few more uptrends to complete. The basis for this reasoning was the shallow Major wave 4 correction in the NDX/NAZ, the odd pattern in the DOW since the beginning of the year, and the ECB initiating their form of QE. Over the past week or so two of these potential positives appear to have diminished.

The ECB is counting on their TLTRO programs 1 thru 8 to generate most of the $700bn increase in their balance sheet. TLTRO 1 was a small $86bn, and the other programs are not until December. Their ABS program, according to the vice president of the ECB, is not expected to amount to much. We originally thought it would be the biggest part! The recent small Major 4 correction in the NDX/NAZ is not as big a factor as we originally thought. We knew that second and fourth waves, during a bull market, are usually quite similar. But the second and fourth waves of this bull market are Primary waves, not the Major waves during a rising Primary wave. We will continue to carry the extending wave alternate count on the DOW charts, but no longer consider it a high probability. Certainly not 50/50 against the current SPX count.

SPXdaily

The main question, due to all the recent volatility, is did the uptrend end at SPX 2019. The uptrend on the daily charts does look like three waves up to SPX 2019: 2011-1979-2019. But some are counting it as a five wave pattern. If one looks closely at the last uptrend of Primary I, it also looked like three waves up when it topped. But it was clearly a five as that was the top of Primary I. Are we again seeing a similar pattern to end Primary wave III?

A review of the charts displays many negatives. The monthly RSI has a negative divergence and the MACD is sky high. The weekly and daily charts both have negative divergences on the RSI and MACD. The NYAD is close to confirming a downtrend, suggesting the advances are getting narrower and narrower. The R2K has already confirmed another downtrend after peaking during the SPX Intermediate wave iii in July. And now, the recent volatility is looking similar to the early stages of Primary wave II. In 2011 the market gyrated wildly too: -42 +30, -40 +28, -35 +33, then down 79 and so forth. From the SPX 2019 high so far: -40 +21, -34 +20 as of Friday. This is starting to look similar.

We noted during the week, after the market pulled back to SPX 1979 and rallied to 2000 the following. Should the SPX drop down to 1979 again and break the 1973 pivot range the probabilities would increase that a downtrend, and Primary IV are underway. Later we added should the SPX break the 1956 pivot and confirm a downtrend the evidence would be most conclusive. On Thursday the SPX traded below 1979, and closed at the lowest end of the 1973 pivot range (1966). Then Friday the market gapped up avoiding a break of the 1973 pivot. Nevertheless, we have seen enough to raise the probability of a Primary wave IV underway to 60/40. Medium term support is at the 1973 and 1956 pivots, with resistance at the 2019 and 2070 pivots.

SHORT TERM

As noted above we have an odd configuration from the SPX 1905 low that could be counted as three waves to SPX 2019, or five waves. The activity since that high is clearly corrective: SPX 1979-2000-1966-1986. The bulls could count the SPX 1966 low as the end of Minor wave 2, with Minor wave 3 underway. The bears can count the SPX 1966 low as the end of Minor wave A, with Minor B underway. The bulls need a rally above SPX 2019 to confirm their Minor 3 scenario is underway. The bears need a decline below SPX 1966 to confirm their Primary IV scenario is underway. Bullish and bearish these are our two parameters: SPX 1966 and SPX 2019.

SPXhourly

We had also noted above four parameters: SPX 1979, the 1973 pivot, the 1956 pivot, and confirming a downtrend. At this stage of the wave pattern, a break of the 1973 pivot heading towards the 1956 pivot will likely be enough to confirm a downtrend. With the market closing at SPX 1983 on Friday, this is less than a 2% decline. Clearly the current pattern, technical indicators, and some specific indices favor the bearish scenario. And, a downtrend confirmation will probably confirm Primary IV is underway. Short term support is at the 1973 and 1956 pivots, with resistance at SPX 2000 and the 2019 pivot. Short term momentum ended the week overbought.

FOREIGN MARKETS

The Asian markets were nearly all lower losing a net 1.2% on the week.

The European markets were all lower losing 2.2% on the week.

The Commodity equity group were all lower losing 1.2% on the week.

The DJ World index lost 2.0% on the week.

COMMODITIES

Bonds continue to downtrend but gained 0.3% on the week.

Crude remains in a downtrend but gained 1.7% on the week.

Gold is also downtrending but gained 0.3% on the week.

The USD remains in an uptrend gaining 1.1% on the week.

NEXT WEEK

Monday: Personal income/spending, and the PCE at 8:30, then Pending home sales at 10am. Tuesday: Case-Shiller, Consumer confidence, the Chicago PMI, and a speech from FED governor Powell. Wednesday: the ADP, ISM manufacturing, Construction spending and Auto sales. Thursday: weekly Jobless claims and Factory orders. Friday: Payrolls (est. +228K), the Trade deficit and ISM services. Best to your weekend and week!

CHARTS: http://stockcharts.com/public/1269446/tenpp

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friday update

SHORT TERM: gap up then rally, DOW +167

Overnight the Asian markets lost 0.2%. Europe opened lower but gained 0.4%. US index futures were higher overnight, and at 8:30 Q2 GDP came in as expected: +4.6% v +4.0%. The market gapped up at the open to SPX 1971 and continued to rally. The market had closed at SPX 1966 yesterday. At 10am the market hit 1976, Consumer sentiment was reported flat at 84.6%, and the market began to pullback. At 11:30 the SPX hit 1968 and then tried to rally again. The rally continued into the afternoon when the SPX hit 1986 around 2:30. A pullback to SPX 1981 followed, then the market bounced into a 1983 close.

For the day the SPX/DOW were +0.95%, and the NDX/NAZ were +1.10%. Bonds lost 9 ticks, Crude gained 95 cents, Gold fell $3, and the USD was again higher. Medium term support rises to the 1973 and 1956 pivots, with resistance at the 2019 and 2070 pivots. Today the WLEI was reported lower: 52.0% v 52.1%.

Volatility continues. The market gapped up at the open today for the first time since last Friday. Pulled back to within two points of the opening gap, then rallied strongly for the rest of the day. Today’s action makes it five triple digit daily swings in the DOW this week. The rally looked impressive, and so did Wednesday’s rally to SPX 2000. Lots to discuss in the weekend update. Best to your weekend!

MEDIUM TERM: uptrend in jeopardy

LONG TERM: bull market

CHARTS: http://stockcharts.com/public/1269446/tenpp

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thursday update

SHORT TERM: gap down decline, DOW -264

Overnight the Asian markets lost 0.1%. Europe opened higher but lost 1.3%. US index futures were lower overnight. At 8:30 weekly Jobless claims were reported higher: 293k v 280k, and Durable goods orders tumbled: -18.2% v +22.6%. The market gapped down at the open to SPX 1991 and continued to decline. The SPX had closed at 1998 yesterday. By 10:30 the SPX hit 1970, taking out yesterday’s 1979 low. After a bounce to SPX 1976 by 11:30, the market dipped to 1968 by 12:30, then bounced to 1973 by 1:30. After that the market hit SPX 1967 by 2:00, then started to rally. The rally topped out at exactly 1973 by 3:30, then the market declined to its lowest level of the day and closed there: SPX 1966.

For the day the SPX/DOW were -1.60%, and the NDX/NAZ were -2.05%. Bonds gained 16 ticks, Crude slipped 25 cents, Gold added $4, and the USD was higher. Medium term support drops to the 1956 and 1929 pivots, with resistance at the 1973 and 2019 pivots. Tomorrow: Q2 GDP (est. +4.6%) at 8:30, then Consumer sentiment at 10am.

The market gapped down at the open for the second time this week. While Tuesday’s gap down was closed in the first hour of trading, this one was not. In fact, by the first hour of trading today the SPX dropped below the important support level at 1979. Then for the rest of the day traded within the OEW 1973 pivot range (1966-1980). We noted yesterday that this level and pivot appear to be quite important: “The key level to watch now is SPX 1979 and the OEW 1973 pivot range. If the market heads back to that level and breaks that pivot, probabilities increase that Primary IV is underway.”  We will now add two more parameters to the potential Primary IV scenario: 1. a break of the OEW 1956 pivot, and 2. a downtrend confirmation.

The 1956 pivot is important because the rising support trend line for nearly all of Primary III is currently at that pivot. A break of that trend line would be another negative. A downtrend confirmation is important because we do not see any other counts, but a Primary IV underway, should we get one in the 19xx’s area. Since the market lost 23% during the five month Primary II, we would expect a similar decline but likely lasting only 2-3 months. We are certainly at an interesting juncture in this bull market. Short term support is at the 1956 and 1929 pivots, with resistance at the 1973 pivot and SPX 2000. Short term momentum is displaying a potential positive divergence. Best to your GDP trading tomorrow.

MEDIUM TERM: uptrend under pressure

LONG TERM: bull market

CHARTS: http://stockcharts.com/public/1269446/tenpp

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wednesday update

SHORT TERM: reversal Wednesday, DOW +154

Overnight the Asian markets were mixed. Europe opened lower but gained 0.8%. US index futures were higher overnight, and the market opened one point above yesterday’s SPX 1983 close. After an uptick to SPX 1986 the market started to pullback again. At 10am New home sales hit their highest level in 6 years: 504k v 412k. The pullback continued until about 10:30 when the SPX hit exactly 1979. Then the market started to rally. The rally continued for the rest of the day, with only one three point reversal, as the market hit SPX 2000 by 3:30. Then a dip into the close ended the day at SPX 1998.

For the day the SPX/DOW were +0.85%, and the NDX/NAZ were +1.05%. Bonds lost 8 ticks, Crude rose $1.45, Gold slipped $6, and the USD was higher. Medium term support remains at the 1973 and 1956 pivots, with resistance at the 2019 and 2070 pivots. Tomorrow: weekly Jobless claims and Durable goods at 8:30.

The market opened higher today, then pulled back to exactly last Tuesday’s SPX 1979 low. The irregular flat we had been tracking: 1979-2019-1979, appeared in place and we marked a tentative Minor wave 2 label at that low. The market then had its first reversal rally since the 40 point decline began. This irregular flat looks like the one in the SPX in mid-May. Then when the market crossed the hourly EMA’s we updated the tentative label to a dark blue Minor wave 2. After a hard down Minute wave C, the market now has a chance to kickoff Minor wave 3. The key level to watch now is SPX 1979 and the OEW 1973 pivot range. If the market heads back to that level and breaks that pivot, probabilities increase that Primary IV is underway. Short term support is at the 1973 and 1956 pivots, with resistance at the 2019 and 2070 pivots. Short term momentum hit quite overbought today. Best to your trading!

MEDIUM TERM: uptrend

LONG TERM: bull market

CHARTS: http://stockcharts.com/public/1269446/tenpp

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tuesday update

SHORT TERM: gap down opening, DOW -117

Overnight the Asian markets lost 1.0%. Europe opened lower and lost 1.6%. US index futures were lower overnight. At 9am the FHFA was reported higher: +0.1% v +0.4%, then at 9:25 FED governor Powell’s speech was released: http://www.federalreserve.gov/newsevents/speech/powell20140923a.htm. The market gapped down at the open to SPX 1987, then started to rally. The market had closed at SPX 1994 yesterday. By 10:30 the SPX had closed the gap, hitting 1995, then pulled back to 1988 by 11:30. Another rally failed to generate much interest as the SPX hit 1993 by noon, then pulled back to 1984 by 2:30. Then after rallying to SPX 1989 by 3:30 the market dropped to the low of the day, 1983, and closed there.

For the day the SPX/DOW were -0.65%, and the NDX/NAZ were -0.35%. Bonds gained 9 ticks, Crude rose 60 cents, Gold added $7, and the USD was flat. Medium term support remains at the 1973 and 1956 pivots, with resistance at the 2019 and 2070 pivots. Tomorrow: New home sales at 10am.

The market gapped down today for the first time during this pullback. After a rally to SPX 1995 the market worked its way lower for the rest of the day. At the low the SPX hit 1983. This represents a 36 point pullback from Friday’s 2019 high. While we noted yesterday this could be a C wave of an irregular Minor 2, we find the type and depth of the decline somewhat disconcerting.

When this uptrend began the SPX rallied from 1905 to 2011, then it pulled back in very choppy, eleven wave action, 33 points to 1978. After the SPX 1978/1979 low the market rallied 40 points to 2019. Now it has pulled back nearly the entire 40 point advance without one notable reversal. This decline has been straight down. Should the SPX lose the 1973 pivot range next, then something larger than just a pullback may be underway. Short term support is the 1973 and 1956 pivots, with resistance at SPX 1995 and the 2019 pivot. Best to your trading!

MEDIUM TERM: uptrend

LONG TERM: bull market

CHARTS: http://stockcharts.com/public/1269446/tenpp

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