wednesday update

SHORT TERM: new high then pullback, DOW -53

Overnight the Asian markets were mostly higher: +0.4%. European markets opened lower, rallied after LTRO 2 tranche 2 was announced at $530 bln Euros, then closed lower: -0.5%. US index futures were higher overnight on this busy wednesday. At 8:30 Q4 GDP was revised upward: +3.0% vs +2.8%. The market opened at a new uptrend high, SPX 1374, and continued to rally. At 9:45 the Chicago PMI was reported higher: 64.0 vs 60.2. At 10:00 FED chairman Bernanke’s congressional testimony was released: http://www.federalreserve.gov/newsevents/testimony/bernanke20120229a.htm, and the SPX hit 1378. As he began to testify the market started to pullback. Around 11:00 the SPX hit 1365, bounced to 1370, then retested 1365 by 11:30. With another modest pullback of 13 points the market tried to rally. At 2:00 the FED’s beige book was released: http://www.federalreserve.gov/fomc/beigebook/2012/20120229/default.htm. The market hit SPX 1373 at that point and started to pullback again. Heading into the close the SPx hit 1364 and bounced to end the day at 1366.

For the day the SPX/DOW were -0.45%, and the NDX/NAZ were -0.55%. Bonds lost 12 ticks, Crude gained 30 cents, Gold plunged $91, and the USD was higher. Support for the SPX drops back to the 1363 and 1313 pivots, with resistance at the 1372 and 1386 pivots. Short term momentum hit quite overbought during this morning’s rally and then turned lower. Tomorrow another busy day. Weekly Jobless claims at 8:30, along with Personal income/spending, and PCE prices. At 10:00 ISM manufacturing and Construction spending. Then in the afternoon Auto sales.

Interesting day, and not too unexpected. The market started the day at a new uptrend high and continued higher. The overnight news was the huge $530 bln Euro LTRO tranche 2. This will help risk assets longer term. After a rally in the first half hour to new SPX uptrend highs, the biggest beneficiaries of the of the devaluing fiat currencies, the precious metals, began to sell off. First silver, then gold, and then equities sold off. The metals ended the day with their biggest drop since the uptrend began in December. A downtrend is very likely underway now.

The SPX, however, did not break like the precious metals. It held within the OEW 1372 pivot range (+/- 7 pts) during the rally and pullback in the morning. After a rally attempt in the afternoon to SPX 1373 it pulled back again heading into the close, and then broke through the 1372 pivot range to 1364. Finding support at the 1363 pivot. The risk asset reaction today looks somewhat like the risk asset reaction, when QE 1 and QE 2 were about to end, during 2010 and 2011.

For now, the pullback in the SPX is a moderate 14 points, which is quite normal for this uptrend. Should the pullback extend to over 20 points, i.e. SPX 1357, and break important support at 1352, then a downtrend is likely underway. Short term support is at the 1363 pivot, then SPX 1352 and 1341. Overhead resistance is at the 1372 and 1386 pivots. Short term momentum is declining after today’s overbought condition. The short term OEW charts are still positive with support at the 1363 pivot. The next two days could be quite telling. Best to your trading!

MEDIUM TERM: uptrend high SPX 1378

LONG TERM: bull market

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