SHORT TERM: another volatile day, DOW +100 early, nearly -150 at the close
Stocks gapped up at the opening today on European buying and a good core PCE inflation report. Consumer confidence was reported to be at its highest level since 9/11. Around 10:00, however, the SPX posted its high for the day at 1488, right around the 1484 short term June pivot. A pullback until 11:00 was followed with another attempt to break through that overhead resistance level. Just pass 1:00 it failed, and the market trended lower for the rest of the day. At the close the SPX/DOW lost 1.2%, and the NDX/NAZ were 1.8% lower. Bonds rallied over 1/2 point, Crude gained another $1.10, Gold added $1.90, and the Euro ended flat.
After penetrating support at SPX 1462 early monday, stocks rallied for the rest of the day, as the DOW/NAZ held their support levels. The rally continued into this morning, as the SPX tried to break through the short term pivot at 1484. Then, having failed, the SPX pulled back into early monday’s lows at 1454, closing at 1455. Short term momentum did get overbought this morning, and was just starting to get oversold at the close. Europe rallied 2.2% today from oversold levels. Will be interesting to see how it reacts to our late day selloff. For the SPX support is at the long term EW pivots 1462 and 1438, with resistance at 1484. This correction should probably not end until October. Since Major wave 2, which ended in April 2005 was a zigzag, alternation suggests that Major wave 4 will be a flat. The potential scenario we are observing is an important low in August, then a good rally for 2 – 3 weeks into September, followed by a retest of the lows in October. This type of wave activity is known as a "flat". Where the first leg down should hit around SPX 1364, then a rally, to be followed by a retest of that low, or slightly lower in October. Thus far, the 2007 market is following the 1998 Major wave 4 scenario, which was also a flat. Best to your evening!
MEDIUM TERM: correction underway target SPX 1364
LONG TERM: bullish.