SHORT TERM: quite a pullback … 2%
Stock indices gapped down on the opening, due to the selling in Europe and the negative divergences in the short term indicators. The pullback seemed to stair step it’s way down during the day, dropping a few points then holding, then dropping a few more. In the last hour the stair stepping ended as a steady decline pushed the indices to the lows of the day, where they closed. The DOW made a new closing low for the correction, and the other three majors were only a few points from doing the same. Another nasty day!
Short term indicators are now oversold, while the hourly’s/daily’s are at neutral. The first level of support by the EW pivots held till the afternoon. But the selling pushed the indices through, and are now approaching the second level. Repeating the EW pivots: NAZ 2109..2153..2177..2190, NDX 1539..1571..1611, SPX 1240..1254..1268..1281 and the DOW 11,039..11,261.
On the first leg down of this correction, all of the indices bottomed in between the two lower pivots, with the exception of the DOW which double tested its lower pivot. During this counter rally the NAZ/DOW rose above their upper pivots, while the NDX/SPX ran into resistance exactly at their upper pivots. Now, if we’re still in a counter trend rally, which I believe, the highlighted pivots should hold as the indices make a higher low. And, the rally resumes. This, however, is somewhat dependent upon the worldwide reaction to the selling in our market today, and the minutes of the FOMC May 10th meeting, which will be released at 2PM tomorrow. This correction is still only a few weeks old, and I expect it to continue for several more weeks. Let’s see what unfolds.
INTERMEDIATE TERM: downtrend
LONG TERM: bullish