SHORT TERM: market rebounds solidly on oversold rally, DOW +485
Overnight the Asian markets initially sold off and then recovered to close mixed. Europe opened lower, but recovered to close +1.05%. US index futures traded higher in the early hours, and continued higher when at 9:00 Case-Shiller reported the housing price decline steepened to 16.3% year over year. At the open the market gapped up to 1126 from yesterday’s close at 1106, and continued to rally. Nearing 10:00 the Chicago PMI was reported to have slipped lower, and Consumer confidence edged higher. The rally continued to around 11:00 when the SPX ran into the SPX 1146 pivot. For the next two hours the SPX tried to break above this resistance, and finally did around 1:30. The relief rally continued and closed in on the next pivot at SPX 1168 in the last half hour of trading. At 3:30 it hit 1168 and leveled off into the close. For the day the SPX/DOW gained 5.00%, and the NDX/NAZ gained 5.40%. Bonds dropped nearly two points, Crude rallied $5.25, Gold slid $20.75, and the Euro was lower. Support for the SPX ramps up to 1146 and then 1136, with resistance at 1168 and then 1179. Short term momentum was rising all day, and the near term indicators rose as well. Tomorrow, the ADP employment report at 8:30, then Construction spending and ISM at 10:00. This market clearly remains quite volatile.
At times like these it’s always best to step back and review the big picture. This has been a bear market since the October 2007 highs, and the next important support is the 61.8% retracement at SPX 1077. For Major wave C, if Int. C equals Int. A, the SPX should find support at SPX 1073. If the internal Int. C count is correct, then as Chris in our OEW group pointed out, wave 5 will equal waves 1 thru 3 at SPX 1086. The next lower pivots are 1090 and 1061. Therefore, we have three closely related support levels: 1073, 1077 and 1086, all between these two pivots. This analysis suggests Primary wave A is close to a bottom and support should arrive between 1073 and 1086. Best to your trading!
MEDIUM TERM: the downtrend low is thus far SPX 1106
LONG TERM: Neutral to bullish, Primary wave A close to ending