SHORT TERM: solid gap up rally after ECU debt deal, DOW +340
Overnight, the Eurozone reached agreement on dealing with their credit crisis. Asian markets were all higher on the news. Europe opened higher and closed +4.2%. US index futures were higher overnight as well. At 8:30 Q3 GDP was reported higher than expected: +2.5% vs +1.3%, and weekly Jobless claims came in slightly lower: 402K vs 403K. The market gapped up at the open to SPX 1266 and continued to rally. The SPX had closed at 1242 yesterday. Within the opening minutes the SPX hit 1275 and then began to pullback. At 10:00 Pending home sales were reported lower: -4.6% vs -1.2%. The market pulled back to SPX 1265 by about 10:30, and then started to rally again. With several small pullbacks along the way the SPX rallied to 1293 by 3:30. Then a quick decline to SPX 1279 was followed by a bounce into a 1285 close.
For the day the SPX/DOW were +3.15%, and the NDX/NAZ were +3.05%. Bonds lost 36 ticks, Crude jumped $3.60, Gold rallied $18.00, and the USD was sharply lower. Support for the SPX jumps to 1261 and then 1240, with resistance at 1291 and then 1303. Short term momentum hit extremely overbought. Tomorrow, Personal income/spending at 8:30 along with PCE prices. Then at 10:00 Consumer sentiment.
Strong overnight buying in the SPX futures helped create a large gap up opening of about 2%, which jumped right over resistance between SPX 1257 and the OEW 1261 pivot. This type of activity has been a common occurrence over the past few months, both up and down. In the first few minutes the 1261 pivot was cleared, and then retested around 10:30. After that the market headed straight up to test the next resistance level at SPX 1284 and then the OEW 1291 pivot. Quite a rally! This market has now risen 20.3% since the Oct 4th SPX 1075 low. Hope many of you have caught some of this uptrend, even though we still consider it a bear market rally.
While we have been expecting another rally off of yesterday’s SPX 1221 low. One has to be impressed with today’s gap up and 3+% surge. We checked the pattern and found each of three previous zigzag rallies have been 96, 75 and 66 points respectively. This rally, which should be wave A of the last ABC zigzag, is currently 72 points. So it still fits within the range of the previous ones. With the SPX 1258 and 1284, 61.8% and 70.7% fibonacci retracement, levels being exceeded today, the next levels are at 1308 (78.6%) and 1337 (88.6%). Also, if the Int. wave C = 0.618 Int. wave A relationship at SPX 1284 does not hold. Then the next internal wave relationship is at Int. C = Int. A or SPX 1341. Quite a range of targets.
For now we expect a 20+ point pullback soon, and then another high. Short term support is at the 1261 and 1240 pivots, with overhead resistance at the 1291 and 1303 pivots. Short term momentum is extremely overbought. Best to your trading!
MEDIUM TERM: uptrend hits new high SPX 1293
LONG TERM: bear market highly probable