SHORT TERM: downtrend makes lower low, DOW -41
Overnight the Asian markets were all lower. Also FED vice chair Yellen gave a speech in Japan: http://www.federalreserve.gov/newsevents/speech/yellen20110601a.htm. Europe opened lower and closed -1.70%. US index futures were higher overnight. At 8:30 weekly Jobless claims were reported about unchanged: 422K vs 424K, and Q1 Productivity was reported higher +1.8% vs +1.6%. The market opened slightly higher at SPX 1315. The SPX had closed at 1314 yesterday. Within the first half hour the SPX rallied to 1318 and then pulled back to 1310. Also at 10:00 Factory orders were reported negative: -1.2% vs +3.4%. After another rally to SPX 1318 the market rolled over and hit 1306 by around noon. That was the low for the day and a new downtrend low. After that the market rallied to SPX 1317 and eased back to close right at the OEW 1313 pivot.
For the day the SPX/DOW were -0.25%, and the NDX/NAZ were +0.15%. Bonds lost 12 ticks, Crude added 50 cents, Gold slid $5.00 and the USD was lower. Support for the SPX remains at 1313 and then 1303, with resistance at 1363 and then 1372. Short term momentum hit extremely oversold around noon and then bounced. Tomorrow, the monthly Payrolls report at 8:30 then at 10:00 ISM services. Also at 12:30 a speech from FED governor Tarullo in Wash, DC.
Today’s early selling pushed the SPX to a new downtrend low at 1306. This low is still within the 1313 pivot range, and also within the 1303 pivot range. The three OEW support pivots (1291, 1303 and 1313) are so closely bunched together they offer significant support. In fact, the SPX first entered the OEW 1313 pivot range over two weeks ago on May 17th. It has held support ever since despite the slightly lower lows.
Technically we are observing some interesting relationships at this juncture. The first decline, which we labeled Minor A on the SPX hourly chart, was 52 points (1371-1319). After a Minor B wave rally to SPX 1347 the market has done another ABC decline. This second decline would equal the first at SPX 1295 (1347-1295 = 52).
Another observation would suggest equality between the A and C waves of the two ABC’s. In the first ABC the A wave (42 pts.) was about equal to the C wave (40 pts.). In this second ABC, at SPX 1306 the C wave is 39 pts. while the A wave was 35 pts. Again near equality. Both relationships suggest support between SPX 1295 and today’s low.
Applying Fibonacci relationships suggests support at SPX 1310: a 50% retracement of the recent uptrend. Then support at SPX 1296: a 61.8% retracment of the uptrend. The last observation notes the positive divergences on the SPX/DOW daily charts, while the NDX/NAZ have failed to make new downtrend lows. Some positives and good support between the OEW 1291 and 1313 pivots. Best to your trading!
MEDIUM TERM: downtrend new low at SPX 1306
LONG TERM: bull market