monday update

SHORT TERM: gap down opening again, DOW -42

Overnight the Asian markets lost 0.5%. European markets opened lower and lost 0.5% too. US index futures were much lower overnight. At 8:30 Personal income (+0.3% v +0.2%)/spending (+0.5% v -0.1%) were higher, and the PCE was higher: +0.1% v +0.1%. The market gapped down at the open to SPX 1967, continued to 1964 to put the low in for the day, and then started to rally. The SPX had closed at 1983 on Friday. At 10am Pending home sales were reported lower: -0.1% v +3.2%. The market then rallied to SPX 1980 by 11:30am. Then after a pullback to 1972 by 12:30, a bounce to 1978 by 1:30, and then a lower low at 1971 by 2:30 the market tried to rally again. At 3:30 the market hit its high for the day at SPX 1981, then pulled back to close at 1978.

For the day the SPX/DOW were -0.25%, and the NDX/NAZ were -0.15%. Bonds gained 13 ticks, Crude rallied 90 cents, Gold lost $1, and the USD was lower. Medium term support remains at the 1973 and 1956 pivots, with resistance at the 2019 and 2070 pivots. Tomorrow: Case-Shiller at 9am, the Chicago PMI at 9:45, Consumer confidence at 10am, and a speech by FED governor Powell at 10:45.

The market had a gap opening today for the fourth time in the past five trading days: 3 down, 1 up. The last time we had this kind of activity after an all time high we were entering a downtrend. Right after the open the SPX broke below the OEW 1973 pivot range (1966-1980), then quickly recovered and staged a rally. Nevertheless the market has now triggered three of the five criteria we have been observing for the potential Primary wave IV scenario. The two that are left are a downtrend confirmation and a break of the 1956 pivot range. At today’s low the DOW was well into another triple digit move, but the market recovered and the DOW triple digit streak ended at five days.

From the SPX 2019 high we see five overlapping waves down: 1979-2000-1966-1986-1964. We are labeling that decline as an A-B-abC to complete either: an ‘a’ wave under the bearish scenario, or a Minor 2 under the bullish scenario. After that we have a rally to SPX 1980, pullback to 1971, and then a rally to 1981 so far. This could be the resumption of the uptrend, or a three wave B under the bearish scenario. Since the market has triggered three of our five parameters, we are now favoring the Primary IV scenario 65%-35%. Short term support is at the 1973 pivot and SPX 1964, with resistance at SPX 1986 and SPX 2000. Short term momentum, despite the early selloff and rebound, spent the day vacillating the neutral line. Best to your trading!

MEDIUM TERM: uptrend in jeopardy

LONG TERM: bull market

CHARTS: http://stockcharts.com/public/1269446/tenpp