SHORT TERM: market gaps down following China/Europe
Overnight the Asian markets were lower as China’s volatile SSEC dropped nearly 9%, and the other indices had just minor declines. Europe came in 2% lower, pressuring our stock index futures, and most futures markets except Bonds. At the open stocks gapped lower, and found some support within the first 15 minutes. From the short term oversold levels created by this push down the indices have rallied a bit. At the lows the SPX retested the 1432 level, which has been the typical reaction, (2% decline), after achieving a long term EW pivot point. Which it did recently when it hit 1462. Also it represents the previous support level established about two weeks ago. At the lows, the NDX touched that acceleration gap it had about two weeks ago, around the 1785-1793 area. It is important that these two levels hold any potential additional selling. The NDX acceleration gap and the subsequent rally in the techs was one of the positives driving this market higher. Also, when the SPX touched the 1432 level this morning, it also touched the 3-month rising trend line, that has provided support for the market in recent months. If these supports levels do not hold, it would then be likely that the ongoing rising wedge in the SPX has effectively terminated the uptrend, and a correction will most likely follow. The SPX has not had a meaningful correction in seven months. Bonds are up about 1/2 point, Crude is 20 cents lower, Gold is $8.00 lower, and the Euro is rallying. It was reported this morning that Durable goods orders declined a bit more than expected, but New home sales rose higher than expected. Watching those support levels. Best to your day!
MEDIUM TERM: bullish
LONG TERM: bullish.