SHORT TERM: another trading range day, DOW +12
Overnight the Asian markets were again mostly higher. Europe opened higher but closed -0.45%. US index futures were moderately higher overnight and at 9:00 Case-Shiller reported housing prices continue to slide: -0.7% v -3.1%. The market opened relatively unchanged from yesterday’s SPX 1173 close but rallied to the high for the day at 1178 by 10:00. At that time Consumer confidence was reported higher: 52.5 v 46.4. The market then began to pullback from slightly overbought levels and by 11:30 the SPX hit 1169, the low for the day. After that the market rallied to SPX 1175 by about 3:30 and then eased back to close at 1173 again.
For the day the SPX/DOW were +0.05%, and the NDX/NAZ were +0.30%. Bonds was up 1 tick, Crude gained 25 cents, Gold lost $9.00, and the USD was higher. Support for the SPX remains at 1168 and then 1146, with resistance at 1176 and then 1187. Short term momentum was overbought early in the day and then turned lower to end the day around neutral. Tomorrow, the ADP index at 8:15, Chicago PMI at 9:00 and Factory orders at 10:00. There is also a speech by FED governor Duke at 12:30 in AZ.
In our efforts to broaden our OEW analysis we recently reviewed another fundamental aspect of the stock market, the economy. There are a few services that provide leading, coincident and lagging indicators on the economic cycles. We chose one and reviewed its data, which covers over 40 years. When comparing the economic cycle to the stock market we made some interesting observations. Leading indicators, when read within the proper context, can offer some insight into the longer investment psychology cycles known as bull/bear markets. Based upon our entire analysis we believe the economy will remain strong through the second quarter of this year. After that it should remain positive until at least the following quarter and likely throughout 2010. This recent analysis supports the bull market scenario. Remember public sentiment is only 38.6% bullish and they have been buying Bonds and not stocks. This is typical of the early to middle stages of a bull market as reported in the weekend update.
Today was another quiet day in the market. The SPX/DOW remain in a positive bias after yesterday’s rally. Important support continues to be the lower range of the OEW 1168 pivot, and resistance just overhead at the upper range of the 1176 pivot. The market has stayed within the ranges of these two pivots since a week ago monday. Until one or the other gives we may remain here throughout this holiday week. Best to your trading!
MEDIUM TERM: uptrend
LONG TERM: bull market