SHORT TERM: market rallies strongly, DOW +110
Overnight the Asian markets were all higher. This is the first time this has occurred all month. Europe opened higher and closed +1.65%. US index futures were higher overnight as well. The market gapped up at the open to SPX 1283. The market had closed at SPX 1278 yesterday. After the open the market continued to rally. At 10:00 Existing home sales were reported lower: 4.81 mln vs 5.05 mln. The rally continued until the SPX hit 1295 around 11:30. After that a small pullback followed to SPX 1292 by 2:00. Then the market rallied higher, hitting SPX 1298 by 2:30. Then the market pulled back into a SPX 1296 close.
For the day the SPX/DOW were +1.10%, and the NDX/NAZ were +2.15%. Bonds lost 3 ticks, Crude added 45 cents, Gold rallied $9.00, and the USD was lower. Support for the SPX has moved up to 1291 and then 1261, with resistance now at 1303 and then 1313. Short term momentum is still quite overbought. Tomorrow, FHFA housing index at 10:00 and around 2:15 the FOMC statement.
The market gapped up again today for the second time in three days. The first gap up was on Options Expiration friday and the market hit SPX 1280 off of thursday’s downtrend low at SPX 1258. The market then sold off until nearing the close - closing the gap. But it rallied in the last half hour to close higher on the day. Monday the market rallied back to SPX 1280 and closed at 1278. Today the market gapped right through 1280, opening at 1283, and continued on until hitting the next resistance area: the OEW 1291 pivot range. All in all, the current rally (SPX 1258-1298) is the best one the market has had since we were in the Mar-May uptrend.
The inter-index divergences have been displaying some internal strength. The DOW failing to make a new low with thursday’s SPX 1258 low displayed some strength. And the failure of this market to make a new downtrend low after a 10+ point rally, first time this month, also displayed some underlying strength. The short term wave count also suggests a potential downtrend low at SPX 1258 with the end of Minute wave five. The tide may have turned.
The next objective for this market is to clear the OEW 1291 pivot range. Ever since the market broke below SPX 1300 in early June, every decent rally has failed within the 1291 pivot’s range. Clearing this pivot (1284-1298) would be another positive. The market did hit the upper limit today before pulling back into the close. Early this morning we posted a tentative ‘green’ Major wave 2 at the SPX 1258 low when the market gapped up over 1280. Several positive technicals are now in place suggesting the downtrend has ended. The ‘buy the dip’ mentality may be back on the table, with a mental stop at the recent lows. Best to your trading!
MEDIUM TERM: downtrend may have ended, low SPX 1258
LONG TERM: bull market