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