SHORT TERM: gap up opening starts volatile session, DOW +143
Overnight the Asian markets were mixed. Europe opened lower, but closed mixed. Last night FED chairman Bernanke give the following speech: http://www.federalreserve.gov/newsevents/speech/bernanke20110928a.htm. US index futures were higher overnight. At 8:30 Q2 GDP was reported a tick higher than expected: +1.3% vs +1.2%, and weekly Jobless claims dropped under the 400K threshold for the first time in months: 391K vs 423K. The market gapped up at the open to SPX 1163 and continued to rally. The SPX had closed at 1151 yesterday. Around 10:00 the SPX hit its high for the day at 1176, and Pending home sales were reported negative again: -1.2% vs -1.3%. The market then pulled back to SPX 1156 by 11:00, rallied to 1165 by noon, and then closed the gap hitting 1140 around 3:00. Then with a short term positive divergence in place the market spiked into a SPX 1160 close. Twenty SPX points in one hour.
For the day the SPX/DOW were +1.05%, and the NDX/NAZ were -0.70%. Bonds gained 2 ticks, Crude rallied $1.45, Gold added $4.00, and even the USD was higher. Support for the SPX remains at 1146 and then 1136, with resistance at 1168 and then 1176. Short term momentum displayed a positive divergence at today’s low. Tomorrow, Personal income/spending at 8:30, along with PCE prices. Then the Chicago PMI at 9:45, followed by Consumer sentiment at 10:00.
The market gapped up today on news that Germany approved an expansion of the EFSF, and no further decline in Q2 GDP. This has been a news driven market for weeks. The gap up and rally lasted for a whole half hour before the market sold off, closed the gap, hit SPX 1140 and then rallied again. Short term OEW charts remained with a negative bias despite the gap up, and require a rally over the 1168 pivot to turn positive again. We maintain our count of a Minor 1-2 down from the SPX 1220 high. This market is quite volatile, however, and the count is tentatively labeled in green. Short term support remains in the 1136/1146 pivot range, with resistance is at the 1168/1176 pivot range. Tomorrow is end of month, end of quarter. Best to your trading!
MEDIUM TERM: downtrend low at SPX 1102
LONG TERM: bear market highly probable