SHORT TERM: market gaps down again, DOW -125
Overnight the Asian markets were mostly lower losing 0.5%. Europe opened lower and lost 2.1%. US index futures were lower overnight, and the market gapped down for the sixth time is seven trading days. At the open the SPX traded at 1343 and continued to decline. Around 10:30 the SPX hit a new downtrend low at 1337, was extremely oversold, and tried to rally. At 11:00 the FED issued the following two press releases: http://www.federalreserve.gov/newsevents/press/bcreg/20120514a.htm, and http://www.federalreserve.gov/newsevents/press/bcreg/20120514b.htm. The rally chopped its way higher, hitting SPX 1347 by 2:00. Then the market began to pullback. Heading into the close the SPX hit 1338 and closed there.
For the day the SPX/DOW were -1.05%, and the NDX/NAZ were -1.00%. Bonds gained 13 ticks, Crude slid $1.95, Gold dropped $23.00, 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 hit extremely oversold then bounced. Tomorrow, Retail sales, the CPI and the NY FED at 8:30. Then at 10:00 Business inventories and the NAHB index.
The market sold off early today and entered the SPX 1300 to 1340 Major wave 4 support zone. The DOW even made a new correction low. And yes, as expected, the DOW confirmed a downtrend. All four major indices are now in line to end this one month correction. We did some calculations earlier today and uncovered a cluster of wave relationships at the SPX 1321/1322 level: 38.2% retracement of Major 3, Int. C = 1.50 Int. A, and Minor C = 0.618 Minor A. Another gap down opening could near this level tomorrow.
We have been waiting patiently for the DOW to confirm a downtrend suggesting that the end of the correction is near. Now it’s time to start looking for the low. Short term support is at SPX 1337, 1322 and the OEW 1313 pivot, with resistance at SPX 1347 and the OEW 1363 pivot. Short term OEW charts remain negatively biased. Best to your trading!
MEDIUM TERM: downtrending
LONG TERM: bull market