SHORT TERM: downtrend makes slightly lower lows, DOW -427
Overnight the Asian markets ignored the rally in the US yesterday and were mostly lower. Europe opened lower and closed -4.85%. US index futures were lower overnight, and at 8:30 the CPI was reported to have dropped 1%, the largest monthly drop on record. The Core CPI turned negative for the first time since 1982 at -0.1%. Also at 8:30 Housing starts reportedly dropped to 791K v. 828K, this is the lowest level since 1959. At 9:00 the FED vice chairman Kohn’s speech was released: http://www.federalreserve.gov/newsevents/speech/kohn20081119a.htm. The market bounced around at the open and moved higher to SPX 864. It then pulled back to 850 by 10:00, and rallied to its high for the day at SPX 867 nearing 10:30. After that there was a sharp selloff to SPX 827, yesterday’s lows, by 12:30. The market bounced to 840 by 1:00, and then made at low at 822 right after the FOMC minutes were released: http://www.federalreserve.gov/monetarypolicy/fomcminutes20081029.htm. A rally attempt followed, but by 3:00 the SPX hit 836 and then headed lower hitting SPX 806 nearing the close. The downtrend continues, and the DOW closed under 8,000 for the first time since March 2003. At the close the SPX/DOW were -5.60%, and the NDX/NAZ were -6.20%. Bonds were up 1 point again today, Crude slipped $1.25, Gold dropped $5.75 and the Euro was lower. Tomorrow, weekly Jobless claims at 8:30, then the Philly FED along with Leading indicators at 10:00. Friday is options expiration. Support for the SPX drops to 789 and then 768, with resistance at 848 and then 912. Short term momentum was oversold at the close.
We now have double positive divergences on the hourly charts, and divergences on every time frame in the major indices. The pivot at SPX 789 should provide the low for this downtrend, unless of course, these divergences fail. Best to your trading!
MEDIUM TERM: downtrend makes new low at SPX 806
LONG TERM: bear market