SHORT TERM: gap up opening, DOW +20
Overnight the Asian markets were mostly lower: losing 0.5%. Europe opened higher, dipped, then closed up 0.5%. US index futures were higher overnight. At 8:30 weekly Jobless claims were reported higher: 367K vs 365K, the Trade deficit rose: -$51.8 bln vs -$46.0 bln, and both Export (+0.2% vs +0.5%) and Import (+0.1% vs +0.5%) prices declined. Then at 9:30 FED chairman Bernanke’s speech was released: http://www.federalreserve.gov/newsevents/speech/bernanke20120510a.htm. The market gapped up at the open to SPX 1361 and continued to rally. The SPX had closed at 1355 yesterday. By 10:00 the SPX hit 1366, tuesday’s high, and then began to pullback. Around 11:30 the SPX nearly closed the gap when hitting 1357. It then rallied to SPX 1362 by 11:30, pulled back to 1357 again by 12:00, and started to rally again. At 1:30 the SPX hit 1365 and began to pullback. At 2:00 the Budget deficit came in as expected, a surplus: +$59.0 bln vs -$40.4 bln. Heading into the close the SPX closed the gap at 1355, then bounced to close at 1358.
For the day the SPX/DOW were +0.20%, and the NDX/NAZ were -0.10%. Bonds lost 4 ticks, Crude slipped 5 cents, Gold rose $3.00, and the USD was higher. Support for the SPX remains at the 1313 and 1303 pivots, with resistance at the 1363 and 1372 pivots. Short term momentum remained around neutral for most of the day. Tomorrow, the PPI will be reported at 8:30, then Consumer sentiment at 10:00.
The market broke the streak of four gap down days in a row today, with a gap up. The rally carried the SPX back to tuesday’s high at 1366. In fact, the highs for the past three days have been 1366, 1364 and 1366. The OEW 1363 pivot. There is a short term count suggesting all the market activity from tuesday’s SPX 1348 low could have formed a B wave contracting triangle. With the three hits at the 1363 pivot as the a-c-e waves. The lower uptrend line, in this potential triangle, has already been broken to the downside. If it is the current working count the market should immediately head lower. Overall, we are still expecting the market to make lower lows before this correction ends.
Short term support is around SPX 134o and the 1313 pivot. Overhead resistance is at the 1363 and 1372 pivots. The short term OEW charts remain negatively biased from SPX 1395 with the swing point now at the 1372 pivot. Best to your trading!
MEDIUM TERM: downtrending
LONG TERM: bull market