SHORT TERM: volatile FOMC day after QE3+, DOW -3
Overnight the Asian markets gained 0.4%. Europe opened higher and gained 0.4% as well. US index futures were higher overnight, and at 8:30 both Export (-0.7% vs +0.2%)/Import (-0.2% vs +0.3%) prices were reported negative. The market opened higher at SPX 1432, moved to 1433 by 10:00, and then pulled back to 1429 by 10:30. Ahead of the FOMC statement: http://www.federalreserve.gov/newsevents/press/monetary/20121212a.htm, the market drifted higher until the statement was released at 12:30. Initially, after the report, the market rallied to SPX 1434, then dropped to 1429 before rallying again. Around 1:30 the SPX hit a new uptrend high at 1439, set up a negative divergence, and started to pullback. At 2:00 the Budget deficit widened: -$172.1 bln vs -$137.3 bln, and the FED released: http://www.federalreserve.gov/newsevents/press/monetary/20121212b.htm. The pullback continued through FED chairman Bernake’s press conference. Around 3:30 the SPX hit 1427, then bounced to close at 1428.
For the day the SPX/DOW were mixed, and the NDX/NAZ were -0.30%. Bonds lost 14 ticks, Crude gained $1.00, Gold added $1, and the USD was lower. Medium term support remains at the 1386 and 1372 pivots, with resistance at the 1440 and 1499 pivots. Tomorrow: weekly Jobless claims, Retail sales and the PPI all at 8:30. Then Business inventories at 10:00.
The FED officially bumped QE 3 to $85 bln/month. The market rallied a bit, to make a new uptrend high, but then sold off in a volatile FOMC day. If you recall the market was not too impressed with QE 3 when it was first announced on September 13th. Then the SPX rallied for one day, hit 1475, went sideways for a month, then entered the downtrend to 1343. Today the FED effectively doubled QE 3 and the market closed flat.
The bullish perspective suggests Minor wave 3 is still underway, and this recent five wave rally from SPX 1398 ended Minute wave i at SPX 1439. Minute wave ii could now pullback to possibly the SPX 1413/1416 short term support area, if the 1422/27 area is exceeded. The bearish perspective also allows for a pullback into the same support areas, as wave 2 of C unfolds. However, if SPX 1398 is broken to the downside, at any time, the probabilites greatly increase for the alternate bear market scenario. The market has set its parameters.
Short term support remains at SPX 1422/27 and 1413/16, with resistance still at the 1440 pivot and SPX 1463/64. Short term momentum made a negative divergence at today’s high and ended the day below neutral. The short term OEW charts remain positive with the swing level now around SPX 1419. With the market hitting the bull/bear inflection range: SPX 1434-1462, how it deals with this is quite important heading into 2013. Best to your trading!
MEDIUM TERM: uptrend
LONG TERM: bull/bear inflection range hit