SHORT TERM: consolidation day with lower low, DOW -63
Overnight the Asian markets were mostly higher gaining 0.2%. Europe opened higher but ended lower losing 0.6%. US index futures were higher overnight then reversed heading into the open. At 8:30 Retail sales were reported lower: +0.1% vs +0.8%, the CPI was reported lower: 0.0% vs +0.3%, but the NY FED was reported higher: 17.1 vs 6.6. The market opened relatively flat, just one point under yesterday’s SPX 1338 close. Then it tried to rally. Right after the open FED governor Duke’s speech was released: http://www.federalreserve.gov/newsevents/speech/duke20120515a.htm. At 10:00 Business inventories were reported lower +0.3% vs +0.6%, but the NAHB index was reported higher 29 vs 25. Around 10:30 the SPX hit 1344 and began to pullback. The pullback ended with a new downtrend low at SPX 1336 at 11:00, and the market tried to rally again. Around noon the SPX hit 1345 and began to pullback. The pullback worked its way lower, all afternoon, to a new downtrend low at SPX 1328 by 3:30. a bounce into the close ended the day at SPX 1331.
For the day the SPX/DOW were -0.55%, and the NDX/NAZ were -0.35%. Bonds gained 1 tick, Crude dropped $1.50, Gold fell $16.00, 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 is displaying a positive divergence. Tomorrow, Housing starts and Building permits at 8:30, Industrial production at 9:15, then the FOMC minutes at 2:00.
The market traded higher overnight, opened flat, but still tried to rally before rolling over late in the day to a new downtrend low at SPX 1328. After hitting SPX 1336 the market displayed a slight positive divergence, but could only rally 9 points and hit neutral momentum before heading lower. The market, however, does appear to be working its way toward the fibonacci price cluster at SPX 1321/1322.
When we counted Minor A of this decline, (SPX 1415-1343), we observed an abA-B-abC pattern. After the rally last week to SPX 1366, Minor B, we are now again observing a similar pattern. From SPX 1366 we can count 1337-1347-1336 for the abA, then a B at 1345 today. Now this late decline could be ‘a’ of the last abC wave. The next 8+ rally would be ‘b’, and then the next decline would end C and the entire pattern. Short term support is at SPX 1322 and the 1313 pivot, with resistance at SPX 1337 and 1347. Short term momentum is still displaying a positive divergence. A rally to the OEW 1363 pivot would suggest the correction has ended. Best to your trading!