SHORT TERM: foreign markets roll over, DOW -268
Overnight the Asian markets were all lower. Europe opened lower and closed -3.20%. US index futures were lower overnight, and at 9:00 Case-Shiller reported a rise in housing prices: +3.8% v +2.4%. The market gapped down at the open to SPX 1064. It had closed at SPX 1075 yesterday. Taking out friday’s SPX 1068 low the market headed lower. At 10:00 Consumer confidence reportedly plummeted: 52.9% v 63.3%. The market continued lower. Around 10:30 the SPX hit 1043, one point shy of the early June low and two points shy of the downtrend low at SPX 1041. The market then bounced to SPX 1051 by 11:00 and then turned lower again. The decline this time was more gradual as the market was already extremely oversold. Around 1:30 the SPX retested the downtrend low at the 1041 pivot. A rally followed, but it topped within an hour at SPX 1048. The decline resumed and the SPX traded as low at 1035 before bouncing to end the day at 1041.
For the day the SPX/DOW were -2.90%, and the NDX/NAZ were -3.90%. Bonds were up 14 ticks, Crude dropped $2.60, Gold added $1.00, and the USD was higher. Support for the SPX drops to 1041 and then 1032, with resistance at 1058 and then 1090. Short term momentum is extremely oversold. Tomorrow, the ADP index around 8:15. A speech by FED governor Duke on credit availability around 9:00. Then the Chicago PMI around 9:45.
Over the weekend we noted the relative strength abroad, and the potential for a more complex Major wave B. With the foreign markets rolling over last night and the lackluster rally in the US over the past two days, the stage was set for the US market to resume its decline sooner than later. When the market broke through the 1058 pivot this morning we noted the potential for a Major wave B top at SPX 1131. Then when the SPX fully retraced that 1042 to 1131 rally we updated the charts to display that Major wave B did complete at that high and Major wave C was underway.
A quick review of this Primary wave II correction.
Major wave A took the form of a double three (zigzag-flat) and corrected 178 points, (SPX 1220 to 1042).
Major wave B took the form of a simple zigzag, retraced exactly 50% of that decline with 89 points, (SPX 1042 to 1131).
Major wave C can either be simple or complex and could bottom in July. If Major C = Major A then, (SPX 1131-178) = SPX 953, which is near our OEW 944 targeted pivot.
Thus far the decline from SPX 1131 to 1035 looks like one wave. We have not observed any reversals in the short term OEW charts to suggest otherwise. When it does complete it will be an A wave of either Minor or Intermediate degree. We’ll keep you posted. Best to your trading!
MEDIUM TERM: downtrend low hits SPX 1035
LONG TERM: bull market in correction