thursday morning

SHORT TERM: stocks gap down on European selloff

Overnight the Asian markets were mixed, but Europe came in about 1.75% lower. Stock index futures were pressured throughout the night after rallying strongly on AAPL’s earnings report. At the open the market gapped down as the SPX hit 1496, a new low for the decline. At 8:30 durables goods were reported lower than expected (+1.4%), and at 10:00 new home sales were reported also lower than expected (-6%). AAPL, the Tech leader, in the meantime is making new highs. Bonds are up nearly 1/2 point, Crude is 85 cents higher, Gold is off $2.50 and the Euro is higher on the day. The DOW 13,670 level we have been watching was broken today to the downside, as the DOW has traded as low as 13,626. This re-enforces the failed fifth wave scenario, when the DOW topped just above 14,000. Also, the NAZ displays a potential medium term top as well. The SPX which has been quite choppy for the past many weeks, never did get through 1560, hitting only 1556. As a result of all these technicals it would appear this uptrend has run its course. Support for the SPX is at 1493 and then 1482, with resistance now at 1505 and then 1522. Short term momentum is displaying another positive divergence at these new lows. Maybe another rally attempt. Looking out over the next several weeks to months I’m expecting this choppiness to continue with a gradual downside bias. The DOW/NAZ/NDX support a Minor wave 3 top scenario, while the SPX supports a Major wave 3 top scenario. A Minor wave 3 would suggest a normal correction of less than 6%, while a Major wave 3 scenario would suggests something much much greater. More on this later. Best to your day!

MEDIUM TERM: neutral

LONG TERM: bullish.