SHORT TERM: Crude drops market rallies, DOW +266
Overnight all the Asian markets were lower, Europe opened lower but closed +0.45%. US index futures held steady overnight, despite MER announcing after the close they were selling a $30Bn par value CDO for less than $8Bn, and will offer stock to raise another $8Bn. After months of claiming they had no need to raise capital, they join the long list of just another financial company spinning the facts. At 9:00 reality continued in the real estate sector, as Case-Shiller reported home prices continue to decline and have dropped 15.8% nationwide in the past twelve months. That puts the total drop at 18.4% since July 2006. At the open the market was unphased by that news gapping up a few points to SPX 1238, and began to rally. At 10:00 the Conference board announced that consumer confidence had edged up in July. Inspired by that news and a resumption of the selling in Crude, the market continued higher. By 2:00 the SPX hit 1257, retracing nearly all of yesterdays loses, and pulled back to 1250 by 2:30. Another surge followed into the close as financials continued to edge higher, and Crude remained down on the day. At the close the SPX/DOW were +2.35%, and the NDX/NAZ were +2.40%. Bonds lost 8 ticks, Crude dropped $2.90, Gold slipped $8.00, and the Euro was lower. With todays rally, support for the SPX jumps back up to 1261 and then 1240, with resistance at 1287 and then 1316. Short term momentum, which was very oversold at the close yesterday, is starting to get overbought. The near term indicators bounced back to neutral from an oversold condition as well. Tomorrow the only economic report is the questionable ADP employment index at 8:15.
Yesterday, at the close, the SPX hit the maximum downside limit for the 1240 pivot at 1234. Today, the market gapped up slightly at the open, and then resumed the rally from the SPX 1200 lows, breaking through the 1240 pivot at 10:30, and then the 1261 pivot near the close. Thus far, this rally continues to move along as expected. The original projection was for the SPX to rally in an ‘abc’ from the 1200 low, with the pivots at 1287 – 1240 – 1327 limiting the moves. Thus far this has been exactly what has happened, as the rally has unfolded 1291 – 1234 —-. Posted a fibonacci relationship between these Minor waves on the SPX hourly chart. Chart link below. At SPX 1290 wave c = 0.618 wave a, and at SPX 1325 wave c = wave a. The rally should continue for a few more days into next week. Let’s not forget that bear market rallies are selling opportunities. The bear market is not over yet. Best to your trading!
MEDIUM TERM: downtrend bottomed at SPX 1200
LONG TERM: bear market