SHORT TERM: volatile day ends mixed, DOW -30
Overnight the Asian markets were mixed. Europe opened higher but closed -0.60%. Overnight US index futures were higher, and at 8:15 the ADP index was reported -254K v -277K, plus the Q2 GDP revision was -0.7% v -1.0%. The market opened slightly higher at SPX 1063. At 9:45 the Chicago PMI was reported contracting again 46.1% v 50.0%. The market immediately sold off on the news as expectations were above 50%. By 10:00 the SPX hit 1046, nearing the OEW 1041 pivot again. The market then stayed around that level until 10:30, and when the USD started to decline the SPX started to rally. Around 12:30 FED vice chairman Kohn’s speech was released: http://www.federalreserve.gov/newsevents/speech/kohn20090930a.htm. A few minutes later Kocherlakota was named head of the Minn. FED: http://www.minneapolisfed.org/news_events/rel/2009/093009.cfm. By 1:00 the SPX had retraced the entire early morning decline hitting 1063. As the market started to pullback the FED issued the HMDA report: http://www.federalreserve.gov/pubs/bulletin/2009/pdf/hmda08draft.pdf, and again a few minutes later Fed governor Tarullo’s Senate testimony was released: http://www.federalreserve.gov/newsevents/testimony/tarullo20090930a.htm. Seems to be feast or famine with the FED, especially during market declines. The market then stabilized at 1053 around 3:00 and edged higher into the close. For the day the SPX/DOW were -0.30%, and the NDX/NAZ were mixed. Bonds were up 1 tick, Crude rallied $3.60, Gold jumped $15.00, and the Euro was higher. Support for the SPX slips at 1041 and then 1018, with resistance at 1061 and then 1090. Short term momentum was oversold at today’s lows to rose past neutral during the day. Tomorrow, the weekly Jobless claims and Consumer income/spending at 8:30. At 9:00 FED chairman Bernanke gives testimony in Congress. Then at 10:00 ISM manufacturing, Construction spending and Pending home sales. Also later in the day, monthly Auto sales and the Foreign exchange rates.
Today’s decline pushed the SPX from 1070 at 10:00 yesterday to 1046 at 10:00. This pullback, and the previous one to SPX 1041, did not create an overlap between Minor wave 1 and Minor wave 4. However, there is now an overlap between Minor wave 1 and Minor wave 4 in the DOW. We’ve updated that chart to display an unfolding ending diagonal on the DOW charts. The wedge created by the DOW’s ending diagonal is not that much different in shape than a rising channel. In either of the two scenarios, an overlap (ending diagonal) or a non-overlap pullback, we’re still expecting new uptrend highs before the uptrend ends. This pullback from the uptrend high at SPX 1080 is beginning to look a lot like Minor waves 4 and 5 of the last uptrend (Mar-Jun). A choppy affair into that SPX 956 top. Lots of economic news tomorrow, best to your trading.
MEDIUM TERM: uptrend
LONG TERM: bear market