SHORT TERM: pullback or correction, DOW -129
Overnight the Asian markets declined 1.0%. European markets opened lower and closed -0.5%. US index futures were relatively flat overnight and opened unchanged at SPX 1441. After a tick up to SPX 1442 the market pulled back to 1437 by 10:00. At 10:00 Wholesale inventories were reported positive: +0.5% vs +0.7%. The market then tried to rally but could only gain 6 points, to SPX 1443, by 10:30. Another pullback followed, breaking through the OEW 1440 pivot range, and hitting SPX 1431 by 1:00. Another rally attempt followed. At 2:00 the FED released its Beige book: http://federalreserve.gov/monetarypolicy/beigebook/beigebook201210.htm. Right after the report the SPX hit 1435, retested 1431 by 3:30, then bounced to 1433 at the close.
For the day the SPX/DOW were -0.80%, and the NDX/NAZ were -0.45%. Bonds gained 7 ticks, Crude slid $1.00, Gold slipped $1, and the USD was lower. Medium term support drops to the 1386 and 1372 pivots, with resistance now at the 1440 and 1499 pivots. After the close there is a speech from FED governor Tarullo. Overnight there is also a speech from FED vice chair Yellen in Japan. Tomorrow, weekly Jobless claims, Export/Import prices and the Trade deficit all at 8:30. Then another speech at 10:00 from FED governor Stein.
The market opened flat today, at yesterday’s low tick close, then continued lower. By 1:00 the SPX had broken below the OEW 1440 pivot range and hit 1431, the Intermediate wave iv low. This three day decline has now retraced the entire rally from SPX 1431 to 1471. During the decline the biggest rally has only been six points. That happened early today between SPX 1437 and 1443, as the market tried to hold the 1440 pivot.
Some could consider this last decline completing a flat from the Intermediate wave iii high at SPX 1475: 1431-1471-1431. The problem with this count is the Tech sector, NDX/NAZ, is downtrending. It would be quite unusual for the cyclicals to continue higher without some support of the tech/growth sector. When we review the bellwether DOW charts we observe a recent new high: 13,662 vs 13,653. This suggests this last rally could have completed a weak Intermediate wave v on friday, ending the uptrend from the early June low. This morning we posted some tentative green labels, on the SPX/DOW, suggesting the four month uptrend has ended. Should this be correct, this was quite a weak uptrend ending following the FED’s QE 3 announcement just a few weeks ago.
Short term support is now at SPX 1422/27 and SPX 1413/16, with resistance at the 1440 pivot and SPX 1463/64. Short term momentum displays a positive divergence. The short term OEW charts remain in the negative mode with the swing level now at SPX 1448. Best to your trading!
MEDIUM TERM: uptrend in jeopardy
LONG TERM: bull market