wednesday update

SHORT TERM: pullback continues, DOW -131

Overnight the Asian markets lost 0.2%. Europe opened higher but closed -2.3%. US index futures were lower overnight, and at 8:30 Export prices were reported negative again: -0.1% vs -1.5%, as were Import prices: -0.2% vs -0.2%. The market opened lower at SPX 1220, bounced to 1224 in the opening minutes, and then broke through the OEW 1222 pivot on its way to 1213 by 10:00. Not a good sign medium term. After a rally attempt ended at SPX 1218 by 10:30, the market made a lower low at 1210 by 11:30. Another rally attempt followed as the SPX hit 1220 by 1:30. But it ended with the same result, a lower low at SPX 1209 by 3:00. In the last hour the SPX bounced to 1215 and ended the day at 1212.

For the day the SPX/DOW were -1.10%, and the NDX/NAZ were -1.55%. Bonds gained 9 ticks, Crude dropped $5.20, Gold fell $54.00, and the USD was higher. Support for the SPX drops to 1187 and then 1176, with resistance now at 1222 and then 1240. Short term momentum is getting extremely oversold. Tomorrow, weekly Jobless claims at 8:30, along with the PPI and NY FED. At 9:15 Industrial production, and then at 10:00 the Philly FED.

When we did our weekend update everything seemed to be in order despite the 36 point pullback between wednesday and thursday: SPX 1267-1231. This was a normal pullback during the previous uptrend. We also had noted; “At this stage of the uptrend we can not rule out a retest of the low 1230′s. But a drop into the 1222 pivot area would be considered a negative both short and medium term.” This week our short term, (FOMC low), and medium term guideposts, (max uptrend pullback 36 points), began to breakdown. This market continues to decline despite the FOMC statement yesterday, which for many months has created a short term low. And the pullback, from SPX 1267, has now extended to nearly 60 points. When we add the fact the Crude has already dropped 5% this week, and Gold 7%, we see the ‘risk off’ trade is back in vogue.

While this market has pulled back to a 50% retracement of the uptrend: SPX 1213. It could pullback further to a 61.8% retracement: SPX 1200. Anything beyond that would suggest this market is no longer in an uptrend. Right now we can count an ABC down from the SPX 1267 high. Short term momentum has hit extremely oversold, and the daily RSI is nearly oversold. Under normal bull markets the SPX would be close to a low and preparing to rally. With lots of economic data tomorrow and options expiration on friday we may need to wait until early next week to get a clearer short/medium term picture. Short term support is at SPX 1200 and then the 1187/1176 pivot cluster. Resistance is now at the 1222 pivot range, the low 1230′s, then the 1240 pivot range. Best to your trading!

MEDIUM TERM: DOW in confirmed uptrend, SPX/NDX/NAZ are not

LONG TERM: OEW wave patterns bullish, but market is fragmented

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