SHORT TERM: downtrend may be bottoming, DOW -33
Overnight the Asian markets were mostly lower losing 2.0%. Europe firmed after being lower as well losing 0.2%. US index futures were higher overnight, and at 8:30 Housing starts were reported higher: 717K vs 654K, but Building permits were lower: 715K vs 747K. Then at 9:15 Industrial production was reported higher: +1.1% vs 0.0%. The market opened higher at SPX 1335 and continued to rally. The SPX had closed at 1331 yesterday. At 10:00 FED director Gibson’s senate testimony was released: http://www.federalreserve.gov/newsevents/testimony/gibson20120516a.htm. The market continued to rally until about 10:30 when the SPX hit 1342. Then it started to pullback. At 11:30 it closed the small gap up opening by hitting yesterday’s close at SPX 1331. A rally to SPX 1336 followed by noon, then a new downtrend low at 1327 by 1:30. Another rally attempt followed to SPX 1333 by 2:00. At that time the FOMC minutes were released: http://www.federalreserve.gov/newsevents/press/monetary/20120516a.htm, and this: http://www.federalreserve.gov/newsevents/press/monetary/20120516b.htm. The market then pulled back into the close ending at the low for the day: SPX 1325.
For the day the SPX/DOW were -0.35%, and the NDX/NAZ were -0.70%. Bonds gained 3 ticks, Crude lost $1.40, Gold slipped $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 continues to display a positive divergence. Tomorrow, weekly Jobless claims at 8:30, then the Philly FED and Leading indicators at 10:00. Also at 10:00 there is congressional testimony from FED director Alvarez.
The market started off the day to the upside. This fit with the short term abA-B-abC count, from SPX 1415, noted yesterday. Apparently yesterday’s SPX 1328 low did end wave ‘a’, and it appears wave ‘b’ ended at today’s 1342 high. Wave ‘c’, to complete the pattern, should be underway now. We do have a fibonacci price cluster right at SPX 1321/1322.
Technically, the SPX/DOW display a short term positive divergence, and are currently at the most oversold condition since August 2011. Plus the NDX/NAZ just broke through Intermediate wave iv support, today, and are also the most oversold since August 2011. This market appears very close to a downtrend low.
Short term support is at SPX 1322 and the OEW 1313 pivot. Short term resistance is at SPX 1342/1347 and the OEW 1363 pivot. The short term OEW charts remains with a negative bias from SPX 1395 with the swing point in the low 1350′s. Should the market rally to that level a new uptrend is likely underway. Best to your trading!