SHORT TERM: market rebound nearly fully retraced, DOW -279
Overnight the Asian markets were mixed. Europe opened lower and lost 1.05%. US index futures were lower overnight, and at 8:15 the ADP index was reported much lower than expected: +38K vs +179K. The market opened at SPX 1345, where it closed yesterday, but immediately headed lower. At 10:00 ISM manufacturing came in lower: 53.5 vs 60.4, and Construction spending remained positive: +0.4% vs +1.4%. Also at 10:00 the FED reported the following: http://www.federalreserve.gov/newsevents/press/bcreg/20110601a.htm. The pullback continued until about 11:00 when the SPX hit 1328, wiping out all of yesterday’s gain. After a 5 point bounce to SPX 1333 by 11:30 the market headed lower again. In the afternoon Ford reported flat monthly sales, and GM reported sales -1.2%. Around 2:00 FED general counsel Alvarez’s Congressional testimony was released: http://www.federalreserve.gov/newsevents/testimony/alvarez20110601a.htm. The market continued lower right into the close when it nearly wiped out the entire three day rally from SPX 1312. After hitting SPX 1314 the market closed at 1315.
For the day the SPX/DOW were -2.25%, and the NDX/NAZ were -2.20%. Bonds gained 28 ticks, Crude dropped $2.55, Gold added $3.00, and the USD was marginally higher. Support for the SPX remains at 1313 and then 1303, with resistance at 1363 and then 1372. Short term momentum hit quite oversold in the afternoon. Tomorrow, weekly Jobless claims and Q1 Productivity at 8:30, then Factory orders at 10:00.
Talk about a complete reversal. Yesterday the market gapped up 10 SPX points, pulled back, and then closed at the high for the day SPX 1345. Today the market opens flat, then sells off wiping out all of yesterday’s gains and then most of the three day rally from SPX 1312. Risk trade on, risk trade off. With the break through support at SPX 1331 this morning, the recent rally looks more like a B wave in an abc-x-abc correction (DOW hourly chart). And/or, the double three count on the SPX hourly chart. Good support is at the OEW 1313 pivot, then the 1303 and 1291 pivots below that. Overhead resistance now around SPX 1330, then the 1363 and 1372 pivots above that. The DOW is displaying a positive divergence. Let’s see if this holds and is followed by the same in the SPX. Best to your trading!
MEDIUM TERM: downtrend low SPX 1312
LONG TERM: bull market