wednesday update

SHORT TERM: market pulls back, DOW -13

Overnight the Asian markets were mostly higher. Europe opened higher, but closed -1.10%. US index futures were slightly lower overnight, and at 8:30 Housing starts were reported lower: 529K vs 555K, plus Building permits were reported higher: 635K vs 530K. The market opened slightly to the downside at SPX  1294 and then bounced back in the opening minutes to unchanged at 1295. After that the market started to pullback. Around 11:00 the SPX hit short term support at 1285, bounced a few points, then rolled over again after noon. At 1:00 the SPX hit 1283, just outside of the OEW 1291 pivot range. Another bounced followed to SPX 1286 by 1:30, but the SPX headed lower yet again. Around 3:30 the SPX hit its low for the day at 1279, and bounced to close at 1282.

For the day the SPX/DOW were -0.55%, and the NDX/NAZ were -1.30%. Bonds gained 5 ticks, Crude slipped 60 cents, Gold added $1.00, and the USD was lower. Support for the SPX drops back to 1261 and then 1240, with resistance now at 1291 and then 1303. Short term momentum is quite oversold. Tomorrow, weekly Jobless claims at 8:30. Then Existing home sales at 10:00, along with the BEA Leading indicators and the Philly FED.

The Minor wave 5 rally, from the Minor 4 low at SPX 1262, displays five waves into yesterday’s 1296 high: wave 1 1277, wave 2 1270, wave 3 1287, wave 4 1280 and wave 5 1296. This may have been the top of the six month uptrend. During the entire Intermediate wave five advance, from the Int. wave four low at SPX 1173, the largest pullbacks have been between 13 and 16 points. Should this pullback significantly exceed this range the probablility of an uptrend top at SPX 1296 increases substantially. Keep in mind the SPX has been recently trading into a heavy Fibonacci resistance cluster between 1289 and 1306. The short term OEW charts have swung to negative for the first time since the rally off the Minor wave 4 low. This typically indicates a five wave structure of some degree has just completed. Objectively, short term support is now at SPX 1262 which also coincides with the OEW 1261 pivot. A break below this support area would display a full retracement of Minor wave 5, adding more OEW evidence to an uptrend top. We continue to remain cautious on the market medium term. Best to your trading!    

MEDIUM TERM: uptrend may have topped

LONG TERM: bull market

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987