SHORT TERM: consolidation/pullback continues, DOW -40
Overnight the Asian markets were mostly higher. Europe opened higher but closed -0.65%. US index futures were relatively flat overnight, and at 8:30 Durable goods orders were reported lower: -1.0% v -0.6%. The market opened slightly to the downside at SPX 1112 and then bounced to the high for the day at 1115 in the opening minutes. A pullback followed to the SPX 1107, three points below yesterday’s low, by 10:30. After hitting a slightly oversold short term condition at that point the market tried to rally. Around 1:00 the SPX hit 1112 and then started drifting down ahead of the release of the Beige book at 2:00: http://www.federalreserve.gov/fomc/beigebook/2010/20100728/default.htm. After the report the market headed lower, hitting SPX 1103 around 3:30 and then bounced a bit to close at 1106.
For the day the SPX/DOW were -0.55%, and the NDX/NAZ were -0.95%. Bonds gained 18 ticks, Crude dropped 75 cents, Gold added $5.00, and the USD was lower. Support for the SPX slips to 1090 and then 1058, with resistance at 1107 and then 1136. Short term momentum pulled back from extremely overbought early yesterday to slightly oversold today. Tomorrow, the weekly Jobless claims at 8:30.
The market continued to pullback today from the recent rally high at SPX 1121. When hitting today’s low at SPX 1103, this pullback (18 points) is now a bit more than the usual 10 – 15 point pullbacks that normally occur during good rallies. With the SPX yet to confirm an uptrend, and lots of green labels on its chart, we updated the already confirmed DOW hourly chart with a similar count and normal labels. The count remains the same: Int. waves i-ii and Minor waves 1-2. This recent high could be either the completion of Minor wave 3 or Minute wave one. We have posted both labels in green on the SPX/DOW hourly charts. It will take some additional market activity to determine which is the correct label. During this pullback the hourly chart RSI is now slightly oversold and the daily RSI has had a nice little pullback as well. This suggests the market should be close to ending this decline and should resume its advance shortly. Best to your trading!
MEDIUM TERM: DOW in uptrend
LONG TERM: bull market