SHORT TERM: oversold rally starts week, DOW +135
Overnight the Asian markets ended about unchanged. European markets opened lower but ended +0.3%. US index futures were higher overnight, and the market opened higher at SPX 1298. The SPX had closed at 1295 on friday. Within the first few minutes the SPX rose to 1301 and then pulled back to 1296 by 10:00. Then it started to rally. The rally continued all day, with only minor 3-4 point pullbacks, until the SPX hit 1316 in the closing hour. And, closed there.
For the day the SPX/DOW were +1.35%, and the NDX/NAZ were +2.60%. Bonds lost 8 ticks, Crude gained $1.50, Gold added $1.00, and the USD was lower. Support for the SPX jumps to the 1313 and 1303 pivots, with resistance now at the 1363 and 1372 pivots. Short term momentum rose from a positive divergence to slightly overbought. Tomorrow, Existing home sales at 10:00.
The market opened slightly higher today, pulled back a bit in the opening half hour, then rallied to SPX 1316. This 24 point rally, from friday’s SPX 1292 low, is the best advance since the Minor wave C (1366-1292) decline began. And also, the best advance since the Intermediate wave C (1415-1292) decline began. This may be an early indication that the Major wave 4 downtrend has concluded.
We did note in the weekend report we could get a good bounce, then a slightly lower low into the upper 1280′s area to complete the downtrend. Today’s rally was more than high enough to make that scenario unlikely. Short term support is at the 1313 and 1303 pivots, with resistance at SPX 1319, 1324 and 1342. Short term momentum is rising. The short term OEW charts remain on a negative bias from SPX 1395, with the swing point now at 1329. Should the market get into the SPX 1330′s the downtrend is likely over. Keep in mind, the last three times, (2009, 2010 and 2011), the market was this oversold, on a medium term basis, the SPX rallied 90+ points in less than 2 weeks. Best to your trading!
MEDIUM TERM: downtrend may have bottomed
LONG TERM: bull market