SHORT TERM: market surges after USD declines, DOW +173
Overnight the Asian markets were mostly higher. Europe opened lower and closed -0.70%. US index futures were higher overnight but pulled back when the weekly jobless claims were reported at 627K v 612K, and the Q1 GDP revision came in at -5.5% v -5.7%. The market bounced around at the open and hit yesterday’s low at 896 within the opening minutes. That was the low for the day. As the market started to rally FED chairman Bernanke’s testimony was released just past 10:00: http://www.federalreserve.gov/newsevents/testimony/bernanke20090625a.htm. At 10:30 the SPX hit 910, near the 912 pivot, and the USD started to rally. While the USD was rallying the SPX hardly budged, pulling back to 906 by 11:00. Then when the USD started to decline the SPX resumed its rally. At 12:00 the FED released the following statement: http://www.federalreserve.gov/newsevents/press/monetary/20090625a.htm. At 1:30 the SPX hit 921 and then began to pullback. This represents a 32 point rally from tuesday’s SPX 889 low, and it’s the biggest rally since the market started its decline from SPX 956. For the day the SPX/DOW were +2.10%, and the NDX/NAZ were +2.05%. Bonds were up a full point, Crude gained $1.50, Gold added $4.00, and the Euro was higher. Support for the SPX jumps up to 912 and then 848, with resistance at 935 and then 961. Short term momentum was again overbought at today’s highs after pulling back to neutral earlier. Tomorrow, Consumer income and Personal spending at 8:30, then a Consumer sentiment reading at 10:00.
We were a bit surprised by the strength of the market rally today. Yesterday the DOW made new lows for the decline and we expected downside momentum to continue. Instead the market retested the the 896 low and then rallied over 20 SPX points. Clearly Minor wave 3 was not underway. This became apparent when the SPX did not break as the USD rallied this morning. As a result of today’s activity it appears that the short term count has morphed into a slightly different count. We now consider the entire decline from SPX 956 to the recent low at SPX 889 as Minor wave 1. This choppy rally from that tuesday low is Minor wave 2. Resistance for Minor wave 2 would be at SPX 927 (the 4th wave) and the 935 OEW pivot. After this rally concludes, then Minor wave 3 should be underway. Best to your trading!
MEDIUM TERM: uptrend that may have topped
LONG TERM: bear market