SHORT TERM: after gap up opening a decline, DOW -143
Overnight the Asian markets were +1.7%. Europe opened higher but closed -0.1%. US index futures gapped up overnight but began to fade heading into the open. At the open the market gapped up to SPX 1336, a new high for the rally, but that was the high for the day. The market then began to pullback from a slightly overbought condition, and a negative divergence. Around 11:30 the SPX hit 1320 and tried to rally. By 1:30 it had hit SPX 1326 and rolled over again. Heading into the close the SPX hit 1308, then ended the day at 1309.
For the day the SPX/DOW were -1.20%, and the NDX/NAZ were -1.65%. Bonds gained 12 ticks, Crude dropped $2.60, Gold gained $6.00, and the USD was higher. Support for the SPX drops to the 1303 and 1291 pivots, with resistance now at the 1313 and 1363 pivots. Short term momentum declined from a negative divergence and hit quite oversold. Tomorrow, Export/Import prices at 8:30, then the Budget deficit at 2:00. Also at 11:30 there is a speech from FED governor Tarullo at the S.F. FED.
The market gapped up at the open for the third time in four trading days. Today, again, the gap up was faded and the market declined all day. The previous gap up opening, on thursday, also received the same response. Today’s decline, from SPX 1336 to 1308, is in line with the previous significant pullback: SPX 1329-1308. We were counting Minor wave 2 completed at SPX 1308, with Minor 1 at 1329, so this decline was somewhat of a surprise.
The rally from last week’s SPX 1267 low can still be counted as a Minor 1 @ SPX 1329, then an irregular Minor wave 2 (1308-1336-130x). Or, it can be counted as a zigzag up to SPX 1336 (1329-1308-1336). The deciding factor will be if the market holds the 1303 pivot, or declines to the 1291 pivot and breaks through. The former would be bullish medium term, the latter somewhat bearish. Short term support is at the 1303 and 1291 pivots, with resistance now at the 1313 pivot and SPX 1328/35. Short term momentum is quite oversold. The short term OEW charts have moved to neutral with today’s decline. Best to your trading!
MEDIUM TERM: uptrend may be underway
LONG TERM: bull market