SHORT TERM: market opens mixed on FOMC day
Overnight the Asian markets were strong, except for China’s SSEC which dropped 4%. Europe came in about 0.85% higher responding to our late afternoon rally. Stocks opened mixed after the Q1 GDP revision was reported as expected: +0.7%. Bonds are down a couple of ticks, Crude is up 85 cents, Gold is rallying $5.00, and the Euro is higher. Yesterday’s early morning selling created a short term double bottom in both the SPX/DOW. The potential for this type of event, after spending several weeks in a trading range, is bullish. Thus far from the lows, the indices have been impulsing higher. But I feel it’s far too early to get excited. The market still needs to make it through today, and most likely tomorrow’s volatility, due to the FOMC.
After several weeks of volatility, and three attempts by the SPX/DOW to enter a correction. The Cyclicals appear to have created, at least, a short term bottom accompanied by positive RSI divergences at the lows. Considering the EW pattern of the entire uptrend thus far. This double bottom low, an EW flat, might have just completed Minor waves 1 and 2 of the Intermediate wave 5 uptrend. Naturally, this could be quite bullish. Supporting this possibile scenario, is the fact that the NDX/NAZ have continued to uptrend, with continuous higher lows, while the SPX/DOW were trying to break down. The current count on the NDX/NAZ places these indices at the early stages of a Minute wave three. This so happens, to coincide with a potential Minor wave 3 in the SPX/DOW. In other words, after several weeks of volatility, this market may now be prepared to resume its uptrend by extending the advance. The next several days will be extremely important to this potential scenario. An uptrend extension from current levels would certainly reach SPX 1553, and likely higher. Until the probabilities increase for this scenario, we will remain at medium term "neutral", as we have since SPX 1532.
Short term momentum is overbought. Support for the SPX is at 1505 and then 1493, with resistance at 1522. Thus far today, the market has opened mixed, and has been vacillating around the 1505 short term pivot. I would expect the market to remain relatively quiet until the FED makes its statement at 2:15. Best to your trading!
MEDIUM TERM: neutral
LONG TERM: bullish.