SHORT TERM: market retests 1090 pivot on pullback, DOW -101
Overnight the Asian markets were mixed. Europe opened higher but closed -1.10%. US index futures were flat to lower overnight. At 9:00 Case-Shiller reported home prices continued to decline: -0.2% v -0.2%. The market opened slightly lower at SPX 1105, and then bounced to 1109 by 10:00. At this time Consumer sentiment was reported sharply lower: 46.0% v 56.5%. The market immediately sold off, dropping below the OEW 1107 pivot, hitting SPX 1095 by 10:30. A small four point bounce followed to SPX 1099 by 11:00, and then the market headed lower again. Around 2:00 the SPX hit 1092, near the OEW 1090 pivot, and was quite oversold. A rally attempt, off the lows, reached 1097 and the market closed at SPX 1095.
For the day the SPX/DOW were -1.10%, and the NDX/NAZ -1.20%. Bonds gained 29 ticks, Crude dropped $1.60, Gold lost $11.00, and the USD was higher. Support for the SPX drops back to 1090 and then 1061, with resistance at 1107 and then 1133. Short term momentum was quite oversold at today’s lows. Tomorrow, New homes sales will be reported at 10:00. Also at 10:00 FED chairman Bernanke gives his Semi-Annual Monetary Report to Congress.
Today’s pullback follows the negative divergence created over the past few days when the SPX failed to break through the OEW 1107 pivot range. The pullback, however, found support at the OEW 1090 pivot and then tried to rally into the close. While this market is still in a confirmed OEW downtrend, the rally off the SPX 1045 low has now taken about as much time as the decline from 1150 to 1045, (13 trading days). If a retest of the lows, or lower is next, this selling pressure needs to continue. In an attempt to be totally objective we reviewed the beginning of the 1974-1976 bull market, and the 1982-1983 bull market. Both started with very sharp uptrends off of oversold conditions, like Mar 09. In both cases the first two downtrends, of those bull markets, had exactly the same wave pattern. Since these downtrends were all flats, it was easy to determine that the first uptrend was wave one, and the second uptrend was a subdivision of wave three. Today we posted a similar potential alternate bullish count on the DOW. This market continues to display lots of possibilities. Should the SPX break through the 1090 pivot range a retest of 1045 or lower is expected. If the market breaks through the 1107 pivot range the downtrend is likely over. Best to your trading!
MEDIUM TERM: downtrend at inflection point
LONG TERM: bear/bull inflection point