SHORT TERM: largest uptrend pullback underway, DOW -213
Overnight the Asian markets were mostly lower. Europe opened lower and closed -2.70%. US index futures were lower overnight, and at 9:00 the Case-Shiller index reported housing prices higher: +0.6% v -0.7%. The market opened lower at SPX 1206 after closing at 1212 yesterday. Then from a short term oversold condition the market started to rally. At 10:00 Consumer confidence was reported higher: 57.9 v 52.3, and FED chairman Bernanke’s speech was released: http://www.federalreserve.gov/newsevents/speech/bernanke20100427a.htm. Nearing 11:00 the SPX had rallied to 1211 near yesterday’s close, when GS CEO Blankfein started to testify before a Congressional committee. The market immediately went into a retreat. Just past 12:00 the SPX dropped 24 points to the OEW 1187 pivot. It held that support level and then started to rally. By 1:30 the SPX reached 1197 and then rolled over again. Heading into the close the SPX traded as low as 1182 before bouncing in the last few minutes to close at 1184.
For the day the SPX/DOW were -2.10%, and the NDX/NAZ were -2.05%. Bonds were up one point and 5 ticks, Crude lost $2.30, Gold rallied $18.00 and the USD rallied 1%. Support for the SPX drops to 1176 and then 1168, with resistance at 1187 and then 1222. Short term momentum declined from extremely overbought yesterday to extremely oversold today. Tomorrow, the FED ends its two day FOMC meeting with a statement after 2:00.
Today’s decline was sharp and quick. Yesterday at 11:00 the uptrend retested the SPX 1220 high. Then by 12:00 today it had declined 33 points to SPX 1187 for the largest point decline of the entire uptrend. Yesterday’s finish to Intermediate wave one was quite odd as it appeared to be a three wave pattern off last monday’s 1184 low. Also today’s risk aversion decline pushed Bonds and the USD higher, and Gold too. Odd day. In just the past 24 hours this market has entered a very interesting juncture. When we count an Intermediate wave one high at SPX 1220 we would next expect the most significant pullback of the entire uptrend for Intermediate wave two. And it’s underway. We have been covering this pullback scenario in the weekend updates. During the previous two uptrends, Mar09-Jun09 and July09-Jan10, these pullbacks have been between 3.5% and 6.5%. This would suggest a pullback from the SPX 1220 high into the SPX 1140 to SPX 1177 range. Since we have OEW pivots at 1136 and 1176 the range fits quite nicely. There is another potential situation unfolding as well. Should the SPX break substantially below the 1177 pivot we could get an OEW downtrend confirmation. Which would suggest that this short term pullback could turn into a multi-week correction. With today’s low at SPX 1182 we now have a 38 point pullback (-3.1%) in the SPX in just 24 hours. We’ll have to mark the uptrend in jeopardy at this point. The overall count remains the same whether or not a downtrend is confirmed is the coming days/weeks. Best to your trading!
MEDIUM TERM: uptrend in jeopardy
LONG TERM: bull market