SHORT TERM: market gaps down at the opening, then reverses to new closing highs
After a 6.5% decline in China’s SSEC last night, and the stock index futures being pressured all night, the market gapped down at the opening. The SPX had dropped 8 points to 1510, within minutes. Then just as quickly the market started to rebound, as the Tech stocks GOOG and AAPL began to rally, with AAPL making new bull market highs. If the recent pullback was going to turn into a correction, this morning was the opportune time. By 2:00, however, the market and the SPX had retraced the entire opening decline and was trading about unchanged. The SPX had rallied back to 1522, yesterday’s high, but pulled back a bit while the FED was releasing the FOMC minutes from the recent meeting. After what appeared to be a traders "tug of war" for about one half hour, the market started moving higher again. This time, however, it broke through short term resistance at SPX 1522 and spiked upward. Nearing the close, the DOW posted an all time new high. At the close all the major indices SPX/DOW/NDX/NAZ posted new closing highs for the bull market. It appears that the decision has be made, and the market is going to extend this uptrend. The SPX/DOW was up 0.80%, and the NDX/NAZ rose 0.90%. Bonds were a few ticks higher, Crude gained 25 cents, Gold lost $4.50, and the Euro made lower lows.
What appeared last week as a near perfect setup to end this uptrend and Major wave 3 is now getting delayed. The SPX/DOW had both hit our medium term targets, there were numerous negative divergences, and breadth was weakening further every day. The only ‘glitch’ in the technicals was the fact that the COT readings displayed a continuation of Commercial bullishness and Speculator bearishness. The market did react after hitting the targets, by selling off nearly 2% to SPX 1505. Then rallied, in what appeared to be an ABC to 1522. Yesterdays; action, followed by today’s gap down opening should have continued the selling, if the market was going to break. Instead, the SPX never reached 1505, held at 1510 (the b of the apparent abc rally), and then rallied strongly throughout the rest of the day. Looks like we’re going higher.
Since the SPX has not exceeded 1532 yet, I have labeled the 60min/daily chart in green. The DOW has made a new high and appears ready to move higher. With an extension possibly underway, what was labeled Minor wave 5, would now only be the first wave up of Minor 5. In other words, Minor wave 5 would be subdividing into five smaller waves labeled Minute waves one thru five. The SPX 1532 high would be Minute wave one, the SPX 1505 low Minute wave two, and we are currently rallying in Minute wave three. With this extension, I would now expect the SPX to reach the all time high of 1553. The extension is not confirmed, of course, until the SPX exceeds 1532.43. Looks like another extended uptrend in this ongoing bull market. Best to your evening!
MEDIUM TERM: moving neutral to positive
LONG TERM: bullish.