SHORT TERM: SPX hits uptrend high, DOW +103
Overnight the Asian markets were -0.3%. Europe opened higher and ended +1.5%. US index futures were lower overnight. At 8:30 Housing starts were reported higher: 760K vs 708K, but Building permits slipped: 755K vs 780K. The market opened lower at SPX 1360, and dipped to 1359 in the first few minutes. The SPX had closed at 1364 yesterday. Right after the open the SOX index (semiconductors) started to rally, and the stock market went right with it. We have been tracking the SOX lately, waiting for the two-year cycle low. Around 12:30 the SOX was up over 4.0%, and the SPX retested its 1375 uptrend high. Then the market started to pullback. At 2:00 the FED released its beige book: http://www.federalreserve.gov/monetarypolicy/beigebook/beigebook201207.htm. The pullback continued until 2:30 when the SPX hit 1369. The market then tried to resume its rally, but ended the day at SPX 1373 nudging just above the next pivot.
For the day the SPX/DOW were +0.75%, and the NDX/NAZ were +1.20%. Bonds gained 3 ticks, Crude added 65 cents, Gold slipped $4, and the USD was lower. Support for the SPX moves up to the 1372 and 1363 pivots, with resistance now at the 1386 pivot and SPX 1402/03. Short term momentum was again quite overbought today before turning lower. Tomorrow, weekly Jobless claims at 8:30, then the Philly FED, Leading indicators and Existing home sales at 10:00.
Interesting day, and maybe a key one at that. After a lower opening the market started to rally along with the semiconductor SOX index. That index was +3.6% today. We have been waiting for the two year cycle low in the Tech stocks. Typically, the SOX index rises about 50%, over a 6 to 12 month period, after the cycle bottoms. And, it takes the Tech sector with it. This is usually quite a positive event for the general stock market as well. Major wave 3, of Primary I, kicked into gear after the last two year tech cycle low. Today’s action in the SOX suggests that low might have occurred yesterday. Suggest, as we noted in the comments this AM, everyone keep an eye on the SOX over the next several days.
As a result of today’s action we have upgraded the DOW charts to reflect a more positive count. We are no longer expecting a new downtrend to eventually unfold and retest the SPX 1267 low. Worse case scenario, at this point, would be a retest of SPX 1309 to complete an irregular Intermediate wave ii. However if the SOX index continues its rally, then the current count posted on the SPX charts would likely be correct. We are now giving equal weight to both of the posted SPX and DOW counts.
Short term support for the SPX is at the 1372 and 1363 pivots then SPX 1342/47. Overhead resistance is at the 1386 pivot, SPX 1402/03 and SPX 1422. Short term momentum ended the day near overbought. The short term OEW charts remain positive with the swing point now at SPX 1355. Best to your trading!
MEDIUM TERM: choppy uptrend continues
LONG TERM: bull market