SHORT TERM: market rallies on Citigroup deal, DOW +397
Overnight the US government announced a deal to help stabilize the troubled financial giant Citigroup: http://www.federalreserve.gov/newsevents/press/bcreg/20081123a.htm. The Asian markets were relatively unaffected as they closed mixed. Europe, however, opened higher and closed +10.1% on the day. US index futures were higher overnight and the market gapped up at the open to SPX 818. After a small pullback to 10:00 and SPX 809, the NAR reported existing home sales fell to 4.98Mln v 5.18Mln. The market then resumed its rally. At noon the SPX hit 842, and while president-elect Obama was announcing his recent appointments, the market pulled back to 827 and then resumed its rally. Just past 3:00, the SPX broke through the 848 pivot, hit 866 and then pulled back into the close. The market has now rallied nicely for two days in a row. At the close the SPX/DOW were +5.70%, and the NDX/NAZ were +6.30%. Bonds lost over one point, Crude gained $4.70, Gold rallied $32.00, and the Euro rallied as well. Support for the SPX now pushes up to 848 and then 789, with resistance at 912 and then 935. Short term momentum is extremely overbought. Tomorrow, the first revision to Q3 GDP will be announced at 8:30, then Consumer confidence at 10:00.
The short term wave count we have been following recently, for the 5th wave of this downtrend, ran into trouble today when the SPX rallied above 849. It’s been very difficult to keep on top of the market during this prolonged downtrend. There appeared to be some buy orders at the close, as the SPX/DOW continued to edge higher long after the closing figures would be posted. First time this has occurred in a while. The market seems to be encouraged by the government’s response to the problems at Citigroup, and the positive DOW/NDX/NAZ divergence to the SPX after it broke its02 lows. May be signs of positive things to come. Best to your trading!
MEDIUM TERM: downtrend low at SPX 741
LONG TERM: bear market