SHORT TERM: market rebounds after early selling, DOW +46
Overnight all of the Asian markets were lower. Europe opened lower, but closed mixed. US index futures vacillated between positive and negative overnight. At 9:00 Case-Shiller reported housing prices continue to rise: +3.2% v +4.2%. At the open the market was relatively unchanged, opening at SPX 1143 vs. a SPX 1142 close yesterday. The market, however, immediately sold off hitting SPX 1132 by 10:00. The low for the day. At that time Consumer confidence was reported lower: 48.5 v 53.5, and the FED issued the following press release: http://www.federalreserve.gov/newsevents/press/bcreg/20100928a.htm. After touching slightly oversold on the short term momentum the market started to rally. By 11:30 it turned positive on the day as the SPX hit 1146. Then after a couple of hours of trading in a narrow two point range the SPX moved higher to 1148. A larger pullback followed to SPX 1142. Then the market rallied to SPX 1150, yesterday’s high, and closed at SPX 1148.
For the day the SPX/DOW were +0.45%, and the NDX/NAZ were +0.25%. Bonds gained 13 ticks, Crude lost 50 cents, Gold rallied $12.00, and the USD was lower. Support for the SPX notches back up to 1146 and then 1136, with resistance at 1168 and then 1176. Short term momentum was oversold early and then rose for the rest of the day. Tomorrow, MBA mortgage applications at 7:00. First time I’ve seen this being reported.
After opening flat the market continued yesterday’s last hour pullback. At 10:00 the SPX hit 1132 for an 18 point pullback, from yesterday’s high at 1150, in only 1.5 hours. As noted yesterday, a pullback towards the 1136 pivot would suggest that Minute wave one, of Minor wave 3, just completed at SPX 1150. We posted that wave labeling on the SPX hourly chart. Finding support at this pivot the market rallied higher. We then labeled the SPX 1132 as Minute wave two. This suggests that Minute wave three of Minor wave 3 should now be underway.
We also observed today an improvement in some cycle relationships that have longer term implications. We had already posted in May about the potential July 4-year presidential cycle low: http://caldaroew.spaces.live.com/blog/cns!D2CB8C5EBA2ADE86!78985.entry. We had also posted earlier this month about the potential 2-year tech cycle low: http://caldaroew.spaces.live.com/blog/cns!D2CB8C5EBA2ADE86!83561.entry. It appears the 4-year cycle bottomed in July, and now the 2-year tech cycle bottomed in August. This suggests both cycles should now be rising into the early 2012 time period. Chart below. Best to your trading!
MEDIUM TERM: uptrend
LONG TERM: bull market