monday update

SHORT TERM: market gaps up on European rally, DOW +291

Overnight the Asian markets gained 2.3%. Europe markets opened higher and gained 4.3%. US index futures gapped up at the open to start last night’s trading and continued higher. At the open for trading the market gapped up to SPX 1176 and continued to rally. The SPX had closed at 1159 on friday. By 10:30 the SPX had cleared the 1168, 1176 and 1187 pivots when it hit 1197. A 3.3% rally in one hour of trading. Then slightly overbought the market pulled back to 1184 by 3:00 before rallying into a SPX 1193 close.

For the day the SPX/DOW were +2.75%, and the NDX/NAZ were +3.45%. Bonds were flat, Crude gained $1.15, Gold rallied $30.00, and the USD was lower. Support for the SPX jumps to 1187 and then 1176, with resistance now at 1222 and then 1240. Short term momentum went from a positive oversold divergence to slightly overbought. Tomorrow, Case-Shiller at 9:00, then Consumer confidence and FHFA home prices at 10:00. Also, FED vice chair Yellen gives a speech at the SF FED at 11:30.

The market gapped up today on rumors of another potential sovereign debt fix in the European Union. This has been a news driven market for months now. The gap up and rally took the SPX up to the OEW 1187 pivot and into resistance in the upper 1190′s. This helped confirm a Minute wave iii low on friday at SPX 1159. This rally should now be Minute wave iv. Should the SPX drop below the OEW 1187 pivot range (1180) Minute wave v, to a lower low, would likely be underway. If this occurs, without too much price damage, the market could set up a more meaningful positive RSI divergence on the daily chart with an oversold weekly RSI. All the ingredients of a downtrend low completing. Short term support is at the 1168, 1176, 1187 pivot cluster with overhead resistance in the upper 1190′s and around 1210.

Today we extended OEW coverage from 15 to 20 international equity markets. We added, between pages 7 and 10 on our public stockcharts, France’s (CAC), India’s (Nifty) thanks to Vishal’s suggestion, S. Korea’s (Kospi) thanks to Anando’s suggestion, Singapore’s (STI) and Italy’s (MIB). With equity markets worldwide now generally acting as one market this should give us a broader perspective on the global market. After our historical analysis we observed the Kospi providing some very clear OEW patterns in the past. Best to your trading!

MEDIUM TERM: downtrend likely to be confirmed shortly

LONG TERM: neutral

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