SHORT TERM: stocks gap up on European buying
Overnight most of the Asian markets were higher, with the exception Japan’s NIKK. China’s SSEC made another all time new high. Europe came in quite a bit higher, +1.9%, rebounding from oversold conditions. At 8:30 the Commerce Department reported Core PCE inflation +0.1%, lowering the yearly rate to 1.9%, the lowest in three years. Core inflation excludes food and energy. The market gapped up at the opening as the DOW rallied over 100 points, and the SPX hit 1488. Bonds are up over 1/4 point, Crude is 60 cents higher, Gold is flat, and the Euro is higher. This mornings gap up in stocks alleviates the short term oversold condition, as stocks are now overbought. The rally also pushed the SPX to the first level of resistance at 1484, the June lows, as noted yesterday. Currently, the market has pulled back substantially from the 10:00 highs, as the NDX/NAZ have actually turned negative, and the SPX is at 1477. After analyzing the wave structure and the MMI I’ve set the target for this correction to SPX 1364. This target is noted on the SPX charts. SPX 1364 represents the lows of Intermediate wave four, the first level of a lesser degree of Major wave three. The long term EW pivots should be key during this correction: 1462, 1438, 1383 and 1316. SPX 1364 rests in between the two lower ones, and that level might be enough to reach the necessary oversold condition projected by the MMI. The Yen, which represents a cost to carry by many hedge funds, is now uptrending. As this uptrend unfolds, it might force additional stock liquidations. Also, in our 2007 to 1998 comparison. After the first selloff in 1998, the market had a two day rally, and then turned lower. Our market is experiencing that two day rally now. For the SPX support is at 1462 and then 1438, with overhead reistance at 1484 and 1506. Best to your trading!
MEDIUM TERM: market in correction, target SPX 1364
LONG TERM: bullish.