SHORT TERM: market slides after economic reports, DOW -82
Overnight the Asian markets were again mixed. Europe opened higher but closed -1.3%. US index futures were relatively flat overnight, and at 9:00 Case-Shiller reported housing prices -0.6% month over month, and -18.1% year over year. This compares to an -18.7% rate year over year last month. The market opened relatively flat at SPX 927 and rallied a few points to 930 by 10:00. At that time the Chicago PMI was reported to have improved at 39.9% v 34.9%, but Consumer confidence dropped to 49.3% v 54.8%. The market immediately sold off on the news, and the USD started to rally. By 11:30 the SPX hit 913, below yesterdays low, and right at the 912 OEW pivot. When the USD started to pullback the market stabilized and tried to rally. At 3:30 it had managed to add eight points to SPX 921. At the close the SPX/DOW were -0.90%, and the NDX/NAZ were -0.45%. Bonds lost about 6 ticks, Crude lost $1.40, Gold dropped $13.00, and the Euro was lower. Tomorrow, the ADP employment index at 8:15, ISM manufacturing and Construction spending at 10:00, then Auto sales after noon. Support remains at SPX 912 and then 848, with resistance at 935 and then 961. Short term momentum went from overbought to oversold during the day, and then rose to neutral during the afternoon.
For the past three months the SPX/DOW, as well as the NDX/NAZ, have had strong month over month gains. That ended in June with the SPX/DOW mixed, and the NDX/NAZ +3.2%. Short term, the SPX failed to break through resistance at the OEW 935 pivot early this morning. SPX 930, btw, is the exact same level that the SPX hit in mid-May before hitting the 956 high in mid-June. Technically, as some in our group have pointed out, this is a potential head and shoulders topping formation. With today’s break through yesterday’s low (916) momentum is now to the downside. It would now take a rally over SPX 930 to reverse this. We continue to maintain the count of an uptrend high at SPX 956, a Minor wave 1 down to SPX 889, and a Minor wave 2 at today’s 930 high. A drop below the Minor wave 1 low would most likely confirm the downtrend. Best to your trading as we start the second half of the year.
MEDIUM TERM: uptrend but may have topped at SPX 956
LONG TERM: bear market