SHORT TERM: market rallies on GDP data then pulls back after FOMC, DOW+169
Overnight the Asian markets were mostly higher. Europe opened higher and closed +2.2%. US index futures were higher overnight and at 8:30 preliminary Q1 GDP was announced at -6.1% v -6.3% last quarter. This is the worse back to back showing in 60 years. Nevertheless the market gapped up at the open to SPX 860 and continued to rally. While there were small pullbacks along the way the market remained in rally mode right into the FOMC announcement at 2:15: http://www.federalreserve.gov/newsevents/press/monetary/20090429a.htm. Shortly after the FED statement the SPX hit 882, a new high for the uptrend. Then the market pulled back into the close hitting 868 before bouncing late. For the day the SPX/DOW were +2.15%, and the NDX/NAZ were +1.90%. Bonds were down about 1/2 point, Crude rallied $1.00, Gold gained $7.00, and the Euro was higher. Support for the SPX remains at 848 and then 789, with resistance at 912 and then 935. Short term momentum was overbought at the highs. Tomorrow, the weekly Jobless claims will be announced at 8:30, along with the PCE and Consumer spending. Then the Chicago PMI at 9:45.
After the market appeared to have ended Major wave A at SPX 876 on April 17th, it sold off to SPX 827 by the 21st. While we were expecting a rally off that low, we hadn’t expected the rally to last this long, nor make new highs. Nonetheless, the wave structure of this B wave rally appears to have formed another triangle. A contracting one in the cash market and an expanding one in the futures market. Reviewing the historical Primary B waves we noted a relationship in time between the preceeding A wave and the B wave. In 1929 the A wave took 16 days and the B wave 10 days. In 1938 the A wave took 27 days and the B wave 13 days. Thus far in 2009, the A wave took 29 days and the B wave has taken 8 days. This suggests when this triangle completes we should get another down wave exceeding the recent SPX 827 low. Based on this analysis and the time factor we are upgrading the recent low to Intermediate wave A and this rally to Intermediate wave B. Intermediate wave C should follow to complete Major wave B. This also suggests a low some time in the latter part of next week. Best to your trading!
MEDIUM TERM: uptrend makes new high at SPX 882
LONG TERM: bear market