SHORT TERM: Q1 GDP revised upward to +0.9% market rallies, DOW +52
Overnight the Asian markets were mixed, but Europe closed +0.15%. US index futures traded lower overnight but rallied at 8:30 when Q1 GDP was revised upward from +0.6% to +0.9%, and unemployment claims rose several thousand. At the open the SPX hit 1389 and hovered around that level for about an hour. The market then rallied for the next few hours hitting 1406 by about 2:30. At that time FED chairman Bernanke’s speech was released from Switerland. It was the same speech he had already given two weeks ago: http://www.federalreserve.gov/newsevents/speech/bernanke20080513.htm. The market pulled back on the redundancy into the close. For the day the SPX/DOW were +0.45%, and the NDX/NAZ were +0.90%. Bonds lost about 1/2 point, Crude dropped $4.50, Gold slid $25.00, and the Euro was lower. Support for the SPX remains at 1383 and then 1364, with resistance at 1410 and then 1438. Short term momentum was quite overbought at the highs and has since pulled back some. The near term indicators were also approaching an overbought condition. Tomorrow at 8:30 the PCE index, and then at around 10:00 Chicago PMI and Consumer sentiment. The recent decline from SPX 1440 was a bit shorter than the usual wave one declines of this bear market, but the DOW did drop nearly 700 points. This decline is typical for the first wave of a new downtrend in the DOW. As such, we’ve labeled wave 1 on the SPX hourly chart, and anticipate this current rally to be wave 2, before the downtrend resumes in earnest. First waves of this bear market have been largely retraced by second waves. This would project about DOW 12,900 or less, and SPX 1420 or so. Since the recent decline completed between the 1364 and 1383 pivots, this rally should complete marginally above the 1410 pivot. Professor Shiller just completed an analysis of Housing price changes since 1920. The chart is self-explanatory. Best toyour trading!
MEDIUM TERM: uptrend should have ended at SPX 1440
LONG TERM: bear market