friday update

SHORT TERM: Crude continues higher, stocks continue lower, DOW -107
Overnight the Asian markets were all lower, with China’s SSEC and India’s BSE taking the biggest hits. Europe opened slightly higher, and closed mixed. US index futures traded lower overnight, and got a boost when the Commerce Dept reported some government biased consumer income numbers. At the open the SPX hit 1286, then quickly dropped at 1280, a new low for the downtrend. The market then rallied to 1289 by 10:00, when the core PCE was reported +0.1%, and the FED released the minutes of their two meetings in mid-March regarding the BSC meltdown: http://www.federalreserve.gov/newsevents/press/other/other20080627a1.pdf, and http://www.federalreserve.gov/newsevents/press/other/other20080627a2.pdf. The market responded by selliing off on the news as the SPX hit 1278 by 11:00. A bounce into the noon hour was quickly erased, when Crude started rallying. By 2:00 the SPX hit its low for the day at 1272, then the market rallied fairly well into the close as Crude turned around and went lower. At the close the SPX/DOW were -0.65%, and the NDX/NAZ were mixed. Bonds were up 1/4 point, Crude gained $1.00, Gold added $14.00, and the Euro turned higher. Support for the SPX remains at 1261 and then 1240, with resistance at 1287 and then 1316. The OEW pivot at 1287 was tested early today, and the market failed to break through. Short term momentum was oversold at the lows and edged up a bit into the close. The near term indicators made new lows this morning, and are more oversold now that they were at waves 1 and 3 for the SPX. This would indicate the market should get some sort of bounce soon.
On the surface it appears we have a conundrum, Greenspan would be proud. The SPX looks like 1-2-3-4-i-ii and now in iii. The DOW looks like 1-2-i-ii-iii-iv and now in v:3. The SPX needs to complete iii-iv-v:5, and the DOW 3-4-5. So actually it’s really not a problem, and the DOW did well in signalling the extension. Reviewing the SPX W1 = 67pts, W3 = 75pts, W5 is already at 1367 – 1272 = 95pts. So if W5 will not equal W’s 1 or 3, then possibly W’s 1 thru 3 = 109pts. Subtracting 1367 – 109 = 1258, three points under the 1261 OEW pivot. Near term the market is quite oversold, but might hit the January 1270 low before bouncing. That would end Wiii, and force Wiv, while the DOW does W4. Then possibly a final washout into the lows, just shy of the Mar 1257 low. Enjoy the weekend!
MEDIUM TERM: downtrend continues
LONG TERM: bear market

About tony caldaro

Investor
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15 Responses to friday update

  1. Unknown says:

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  3. Forkoholic says:

    Stu,
    basically we have 2-2.5 days to complete this drop.
    Many will take Thursday off so traders will leave mid Wedensday
    Strictly from patriotic point of view PPT can prop markets on the 3rd – the volume will be light so it\’s easy to do

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  4. Steph says:

    http://www.flickr.com/photos/25052392@N05/2614366544/sizes/o/The SPX 5th wave ED scenario charted yesterday is still alive but on life support, while my Scenario 2 from Wednesday (irregular flat) is gone, Scenario 1 (doomsday 1-2-1-2) is still highly unlikely and Scenario 4 (extended 5th, I\’ll call it X5) jumped to the forefront. I like Tony\’s count for that. The targets for the ED or X5 are only marginally different. Here they are…ED Scenario: The drop to 1272 today slightly steepened the angle of the ED and now realistically requires an abc move (d wave) just above 1304 by Tuesday open. If 1304 is not reached, this scenario is technically eliminated but the difference with the X5 scenario could be as small as 1 point. The "d" target is 1304-1308 Monday. The "e" target is between today\’s low (1272) and 1% below the wedge bottom at approximately 1251 Tuesday close, 1242 Wednesday close or 1233 Thursday close.X5 Scenario: It is interesting that SPX dropped to EXACTLY the level it needed to leave open all X5 variations. Wave i (1367-1304)=63 and now Wave iii (1336-1272)=64 which allows Wave v to be any size including a failed 5th or a mini X5. The Wave iv target should be 1287-1296 (38% retrace of iii) although 1303 is allowed and may be a necessary Fib .5 retrace if Dow plans to retrace 3% back to its previous wave 4. Since I\’m expecting either a daily positive divergence or a capitulation at the final bottom from 1440, I expect the Wave v target to be below 1272. However, the 1256-1272 area almost seems too obvious, and it is quite apparent with CPC and ISE that a lot of bulls are expecting a double/triple bottom. So, let\’s look at a few lower ideas in case sentiment is not bearish enough. 1287-1296 minus 63 (matching waves i and iii) would be 1224-1233. There is also a long-term trend line crossing about 1220. 67-73 points would match waves 1 & 3 down from 1440 and reach 1214-1229. Thus, if 1256 is breached by more than a couple points, I like 1215-1230 as a strong target since it would be supported by either ED or X5 next Wed/Thu.Based on all this, I will sell my 1/2 long position (from 1287) once I see a potentially complete abc bounce Mon/Tue likely to 1287-1308 but I\’m prepared to take a loss. I will be quick on the trigger knowing capitulation down is possible, and, in fact, I will reestablish a 1-3 day short position waiting for positive divergence, capitulation or strength at my targets before closing that position. Looking out a few days further, a furious 8-10 day rally should ensue as analyzed previously. Yesterday, I calculated SPX targets in the 1330s-1380s if 1270ish ends up being the low. The numbers would be 1320s-1370s if 1256 became the low. However, due to the bearish tint this market has taken on, I think the critical 1360-1370 area may be in the rearview mirror for a while, and I forsee a struggle to get above the 1316-1331 congestion zone. Of course, that zone fits the low-end retrace from a 1256-1272 bottom, but a retrace from my 1215-1230 target area would allow for a 50% retrace without exceeding the 1330s.In any case, today did not really change the big picture which supports one small SPX rally imminently before another lower low…possibly a lot lower. The Dow and BKX breakdowns combined with gold and oil breakouts probably have a little further to run before retests of the break lines in July. Good luck.

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  5. Forkoholic says:

    oops I mean SPR not SPM
     

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