SHORT TERM: gap down post election decline, DOW -313
Overnight the President was re-elected. Asian markets gained 0.4%. European markets opened higher, but lost 2.9%. US index futures were sharply lower when it appeared BHO would be re-elected, rallied to positive overnight, and then were sharply lower heading into the open. At the open the SPX gapped down to 1416, declined to 1406, bounced to 1411, and then made lower lows. All in the first half hour of trading. The SPX had closed at 1428 yesterday. Around 11:30 the market had declined to SPX 1388, the 1386 pivot range, and then started to rally. At 2:00 the SPX hit 1402, pulled by to 1397 by 3:00, then rallied to 1403 by 3:30. At 3:00 Consumer credit was reported still expanding: $11.4 bln vs $18.1 bln. Then heading into the close the SPX declined to 1395 and closed there.
For the day the SPX/DOW were -2.35%, and the NDX/NAZ were -2.50%. Bonds gained 26 ticks, Crude dropped $4.10, Gold added $2, and the USD was higher. Medium term support remains at the 1386 and 1372 pivots, with resistance at the 1440 and 1499 pivots. Tomorrow: the ECB meets before the open (rate cut?), then weekly Jobless claims and the Trade deficit are reported at 8:30.
The market gapped down at the open today and continued to fall until it hit medium term support in the OEW 1386 pivot range. The short term support area, SPX 1422/27, was gapped over. Then the other short term supports at SPX 1413/16, 1402/03 and 1396/98 all gave way before 11:30. The SPX has declined 45 points from yesterday’s SPX 1433 high at 12:00 to this mornings low at SPX 1388. The last time a 24 hour decline of this magnitude occurred, was the day before the Major wave 2 low in early June. That decline was 43 SPX points. And, the downtrend bottomed the next day.
We have been looking for a lower low so that all four major US indices could get realigned before the next uptrend got underway. We thought thursday/friday’s rally to SPX 1434 was a bit out of the ordinary, and it was sold off. And, monday/tuesday’s rally to SPX 1433 was as well. It was sold off today. Now our short/medium term counts are in alignment.
This downtrend has now hit the first important level of support at the OEW 1386 pivot. At this level the SPX has now retraced 38.2% of the previous uptrend, and Minor wave C = 1.618 Minor wave A. After monitoring the charts today we observe positive divergences on the DOW hourly chart, the SPX/DOW/NDX/NAZ daily charts, and oversold conditions on the weekly charts. Since we have been expecting a downtrend low to occur right around Election day, this could be it.
Looking ahead. We would like to see the OEW 1386 pivot range, SPX 1379-1393, hold support. Then the market rally back into the SPX 1430′s again. This should indicate the downtrend is over. Should the 1386 pivot fail, we have lower support at the 1372 pivot and the 1363 pivot. Worse case support is at SPX 1345/46. We continue to count this downtrend as Intermediate wave ii of Major wave 3.
Short term support is at the 1386 and 1372 pivots, with resistance at SPX 1396/98 and 1402/03. Short term momentum was quite oversold today and remained oversold at the close. The Short term OEW charts swung negative again at the open, with the swing level now around SPX 1417. Best to your trading!
MEDIUM TERM: downtrend may be bottoming
LONG TERM: bull market