SHORT TERM: market extends pullback, DOW -43
Overnight the Asian markets were mostly lower. Europe opened lower and closed -0.90%. US index futures were lower overnight as well. At 7:00 weekly Mortgage applications were reported higher: +3.2% v -10.5%. At 8:30 Durable goods orders were reported higher: +3.3% v -1.5%. Also at 8:30 PIMCO’s Bill Gross had this to say in his monthly article: http://www.pimco.com/Pages/RunTurkeyRun.aspx. The market gapped down at the open to SPX 1184 and continued to decline. At 10:00 New home sales were reported higher: 307K v 288K. The market continued lower until it hit SPX 1172 around 11:00. This represents a typical 24 point pullback from monday’s 1196 high. A rally attempt followed pushing the SPX to 1176 but the market turned over again. Around 1:30 the SPX retested 1172 and tried to rally again. This time it succeeded in making some upside progress. Heading into the close the SPX hit 1184, the opening level, and closed at 1182.
For the day the SPX/DOW were -0.35%, and the NDX/NAZ were +0.30%. Bonds lost 20 ticks, Crude slid 60 cents, Gold dropped $13.00, and the USD was higher. Support for the SPX remains at 1176 and then 1168, with resistance at 1187 and then 1222. Short term momentum dropped from neutral to oversold, and finished above neutral. Tomorrow, weekly Jobless claims at 8:30.
The market opened lower today and then continued the pullback from monday’s uptrend high at SPX 1196. Thus far, this pullback (24 points) has been similar to many of the pullbacks during the past couple of weeks, and during this Intermediate wave three rally which began in early September. The short term structure, starting in the second week of this month, has become quite complex. This creates a number of possibilities. For now, we’re continuing with what we consider the most probable.
We marked the SPX 1196 high as the potential end for Intermediate wave three. This would suggest the market is now in Intermediate wave four, with support between the 1136, 1146 and 1168 pivots. We also posted a potential count displaying that the market is still in Intermediate wave three and now Minute wave three of Minor wave 5. We also offer, however, another count on the DOW hourly chart. This suggests Intermediate wave three is still unfolding as well. Either way, the Major wave 1 July uptrend remains intact while the market works out these short term waves. Best to your trading!
MEDIUM TERM: uptrend
LONG TERM: bull market