SHORT TERM: stocks rally in choppy day
The market started the week on a positive, rallying from the opening bell. But ran into short term overhead resistance at SPX 1522 around 11:30, and then turned lower. The intraday pullback lasted until about 2:00, when most of the indices were lower on the day. The SPX hit 1512. Then a late afternoon rally again pushed the market up into a positive close. At the close the SPX/DOW were 0.15% higher, and the NDX/NAZ rose 0.55%. Bonds traded a few ticks lower, Crude lost $1.85, Gold gained $1.00 and the Euro ended flat. The Tech sector appears to be providing support for the market, as both GOOG and AAPL have been rallying of late. While the Cyclicals appear ready to more lower. If this uptrend is going to extend higher, the Techs look like they will lead the way, until the Cyclicals break to new highs. If not, the bottom should fall out shortly.
If you recall, when the market extended through two long term EW pivot points last year, SPX 1383 and 1438. The Techs and Cyclicals took turns supporting the market. When the SPX hit 1383 it had only ended Minor wave 3. A quick pullback to 1361 then followed, Minor wave 4. Then a rally to new highs by Thanksgiving should have ended that uptrend. The Techs broke lower, but the Cyclicals supported the market until the Techs recovered after the New Year began. This time however, the SPX pivot at 1530 appears to have ended Minor wave 5, and there is no reason for any further upside. Yet, another "tug of war" between tech and cyclical traders is underway. The market did react, as it often does when reaching a long term pivot, by pulling back quickly to the recent low of SPX 1505. Since then it has rallied in what appears to be an ABC to this morning’s high of 1522. With the long term 1530 pivot hit, and the typical 1% – 2% reaction out of the way, the stage is set for a medium term decision. Which should occur this week. Short term momentum is just above neutral, so tomorrow’s opening can go either way.
MEDIUM TERM: neutral, SPX/DOW targets have been hit
LONG TERM: bullish.