SHORT TERM: downtrend extending, DOW -156
Overnight the Asian markets gained 0.3%. European markets, however, continued to decline losing 1.2%. US index futures were higher then flat overnight, and at 8:30 weekly Jobless claims were reported higher: 370K vs 367K. The market opened flat at SPX 1325, touched 1326, and then started to pullback. At 10:00 the SPX hit 1315, the Philly FED was reported lower: -5.8 vs 8.1, Leading indicators were reported lower: -0.1% vs +0.3%, and FED director Alvarez’s congressional testimony was released: http://www.federalreserve.gov/newsevents/testimony/alvarez20120517a.htm. The market tried to rally on the news, reaching SPX 1324 by 10:00, but then pulled back to 1311 by noon. Another rally attempt carried the SPX to 1319 by 1:30, but that failed as well. Heading into the close the SPX hit 1305 and closed there.
For the day the SPX/DOW were -1.35%, and the NDX/NAZ were -2.05%. Bonds gained 11 ticks, Crude slipped 30 cents, Gold rallied $34.00, and the USD was lower. Support for the SPX drops to the 1303 and 1291 pivots, with resistance at the 1313 and 1363 pivots. Short term momentum ended the day at extremely oversold. Tomorrow, options expiration and the Facebook IPO.
The market opened flat today, then broke through our SPX 1321/1322 fibonacci support price cluster before 10:00. After that it found support within the OEW 1313 pivot range. This market has now declined over 100 SPX points, (1422-1305), which is the range of a normal correction. At 10:00 it looked like our abA-B-abC pattern had completed. The market did rally, but only after 9 points it rolled over again to a lower low. The pattern, from SPX 1415 is extending. There are a few alternate counts that are now gaining some traction, if the SPX drops below 1293. We will cover these in the weekend update. Late in the day the market broke through the 1313 pivot and found support at the 1303 pivot. This correction has declined more than expected.
Short term support is now at the 1303 and 1291 pivots, with resistance at the 1313 pivot and SPX 1326. Short term momentum is extremely oversold. The short term OEW charts remain with a negative bias since SPX 1395, and now have a swing point in the low 1340′s. Best to your trading!
MEDIUM TERM: downtrending
LONG TERM: bull market