SHORT TERM: market gaps down in pullback, DOW -275
Overnight the Asian markets were all lower. Europe opened lower and closed -3.0%. US index futures were lower overnight as well. At the open the market gapped down to SPX 1276 and continued lower. The SPX had closed at 1285 on friday. At 9:45 the Chicago PMI was reported lower: 58.4 vs 60.4. Around 10:00 the SPX hit 1266, was slightly oversold, and tried to rally. At 10:30 the SPX hit 1271, in a choppy advance, and then headed lower again. Around 12:30 the SPX hit a lower low at 1263 and then began to rally. This one carried back to SPX 1271, and then the market headed lower again. Heading into the close the SPX hit 1253 and closed there.
For the day the SPX/DOW were -2.35%, and the NDX/NAZ were -1.85%. Bonds rallied 41 ticks, Crude slipped 65 cents, Gold dropped $25.00, and the USD was sharply higher after the BOJ Yen intervention. Support for the SPX drops to 1240 and then 1222, with resistance now at 1261 and then 1291. Short term momentum was quite oversold at the close. Tomorrow, the FED starts its 2 day FOMC meeting. At 10:00 ISM manufacturing and Construction spending will be released, then Auto sales in the afternoon.
The market gapped down at the open in response to an overbought technical condition and the BOJ Yen intervention. The pullback took the SPX down to 1253 breaking below the OEW 1261 support pivot. This represents a 40 point pullback from the recent 1293 high, and exceeds the 21-36 point pullback range of this entire uptrend.
The next thing we would expect, when this pullback concludes, is another rally. This would either complete the complex zigzag pattern on the SPX charts, extend Intermediate wave iii on the DOW charts, or end the Intermediate wave iv count before heading higher. Since FED/Bernanke statements have all been associated with lows for the past several months the market could be a bit choppy into wednesday. Best to your trading!
MEDIUM TERM: uptrend high SPX 1293
LONG TERM: neutral