thursday morning

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.

About tony caldaro

Investor
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10 Responses to thursday morning

  1. tony says:

    Hi Steve,
     
    I too sensed a more restrictive policy.
    Looks like the FED will continue to choke the RE market, and eventually the economy.
    cheers!

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  2. Steve Osborne says:

    Tony,
    The spontaneous reaction to leaving interest rates flat was the same it was most of the time during the past 9 months but this time it didn\’t take long for stocks and oil to reverse and to go down on the possibility that interest policy might now be too restritive.  Regardless of the final assessment of monetary policy by markets, it would be very difficult for oil to move and stay above $70 in current conditions. I still expect bonds to continue their uptrend.

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  3. tony says:

    Hi Cheng,
     
    Can certainly appreciate your concern. It\’s shared by many here.
    Housing will continue to head lower, without the help of the FED.
    The recent rise in long term rates are increasing the ARMS rates … more subprime lending problems ahead.
    Technically, I see the Commodities in a bear market. Have no idea why Crude is at $70.00, while Gas is making two year lows.
    This market is ripe for a correction, as you mentioned.
    Certainly watching the short term activity in the Techs to determine when.
    cheers!  
     

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  4. tony says:

    Hi Mike,
     
    The Techs (NDX/NAZ) have been the leaders during the past several weeks.
    The Cyclicals (SPX/DOW) have been trying to correct, but the Techs have pulled them up every time.
    Just reported a potential diagonal triangle forming in the NDX/NAZ. Those trendlines are very important, as reported.

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  5. tony says:

    Hi Frank,
     
    Noticed Bonds making daily lows after the FED report.
    Stocks (cyclicals) will not like higher rates.

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  6. tony says:

    Hi Amit,
     
    At least one that I know, sold out before the FED report.
    The others I have not heard from. Quite wild!
    cheers!

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  7. Anonymous says:

    hi Tony,
     
    there is a lot of catalyst that could drive mkt down right now..
    and in fact if we want to see leadership change from commodities and uitlities to technology which looks like what has been happening..we need to see a correction..so we get oil and gold and all other commodity stocsk going down..that wouldbring s&p down since more than 10% of s&p are oil stocks..also, wer have TNX oversold and looks like it could break out after last months run up..we have yen carry trade..so there is a lot catalysts that could trigger that….but want to know how all these ups and down would fit the OEW if OEW could actually tell the activitiy happening during extension of major wave 3..thanks
     
    Cheng

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  8. Anonymous says:

    Tiony:
     
    this mkt is very slow..we are range bound action between 1485- 1540..we are simply stuck in this range for over a month..how long does extension of this major wave 3 could last? do you think major wave 4 might have started since the mkt didn\’t go anywhere despite good words from fed?
     
    *also, at this point, what would be signs that we have topped out and major wave 4 has started?
    thnx
     
    mike
     

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  9. Frank says:

    Hi Tony,
     
    $TNX closed on high note today.  It seems $TNX tested the gap yesterday, maybe on it\’s way up again.  Wonder how marekt would fair under higher $TNX…
     
    Frank

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  10. Amit says:

    Hi Tony,
    Whoa what a market, swings 100 points within 5 mins 🙂 Just wonder how the daytraders would be fairing.
     
    Warm regards
    Amit.

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