SHORT TERM: market holds support after Republican surprise, DOW +119
After six days of hearings and negotiations, the "bailout plan" was in its final stages of being completed. Then in a "political theatrical stunt", with six weeks before the national elections, the leading Republicans proposed an alternate plan in the last hour of negotiations. Politics first, country a distant second. Around 7:00 PM Washington Mutual failed. The 13th bank to fail this year, and the largest in US history. JPM bought its good assets for a song. Overnight the Asian markets all retreated, Europe opened lower and closed -1.90%. At 2:00 AM the FED issued the following release: http://www.federalreserve.gov/newsevents/press/monetary/20080926a.htm. US index futures were lower overnight on the disappointing news. At 8:30 Q2 GDP was revised downward from 3.3% to 2.8% growth. The market gapped down at the open as the SPX hit 1188 within the opening minutes. That was the low for the day. After a small rally to 1198 by 10:00, consumer sentiment was reported to have declined from 73.1 to 70.3. By 10:30 the SPX hit 1193 and then rallied to 1201 by 11:00. Another pullback this time to 1189, while the market was short term oversold, was followed by a decent rally to 1206 by 1:30. The market pulled back to 1195 by 3:00, and then rallied to 1216 near the close. There was no selloff in the last hour for the first time this week. Congress certainly needs to deliver something solid by sunday. For the day the SPX/DOW were +0.70%, and the NDX/NAZ were -0.55%. Bonds gained eight ticks, Crude slipped 90 cents, Gold rallied $3.50, and the Euro was flat. Support for the SPX remains at 1179 and then 1168, with resistance at 1219 and then 1240. Short term momentum was oversold at today’s lows and was rising into the close. The near term indicators continue higher.
The market continues to remain patient while Congress gets their act together, despite the record level tightness in short term credit. The pivot at SPX 1179 continues to be important support for this market. Thus far the rally up from the lows at SPX 1134, looks like a 1-2, and wave 3 is trying to get started. Enjoy the weekend!
MEDIUM TERM: downtrend appears to have bottomed at 1134
LONG TERM: bullish for potential multi-month Primary wave B rally