SHORT TERM: gap down opening suggests trouble ahead, DOW -236
Last night the FED issued the following after the close: http://www.federalreserve.gov/newsevents/press/bcreg/20111122a.htm. Asian markets were all lower overnight, and Europe opened lower and closed -1.35%. US index futures were lower overnight as well. At 8:30 weekly Jobless claims rose: 393K vs 388K, and Personal income rose: +0.4% vs 0.1%, but Personal spending declined: +0.1% vs +0.6%. Also, PCE prices ticked higher: +0.1% vs +0.0%, and Durable goods orders declined: -0.7% vs -0.6%. The market gapped down at the open to SPX 1180 and continued to decline. The SPX had closed at 1188 yesterday. In the opening minutes the SPX broke through the OEW 1187 support pivot, then broke through the 1176 support pivot just past 10:00. Also at 10:00 Consumer sentiment was reported lower: 64.1 vs 64.2. The market continued to decline until 11:30 when it hit an exact 10% correction from the SPX 1293 uptrend high at 1164. Then with another short term positive divergence in place the market tried to rally. By 1:00 the market could only make it back to SPX 1171. There it stalled for an half hour and headed lower again. At 2:30 the SPX hit 1163, then rallied to 1172 by 3:30, but ended the day making a lower low at 1162, and closed there.
For the day the SPX/DOW were -2.15%, and the NDX/NAZ were -2.35%. Bonds gained 15 ticks, Crude lost $1.90, Gold dropped $5.00, and the USD was much higher. Support for the SPX drops to 1146 and 1136, with resistance now at 1168 and then 1176. Short term momentum displayed another positive divergence that failed as this third wave continues to extend. Tomorrow, the US markets are closed for the Thanksgiving holiday and reopen on friday for a short session.
We have been long term neutral, with a positive bias, while this correction from SPX 1293 has been unfolding. That bias changed to neutral today as this market has now corrected 10% from the uptrend high. We quote from the weekend report: Should the market drop more than 10% from the SPX 1293 high, or below SPX 1164, we believe there could be trouble ahead for the market and the bullish scenario. As long as the market remains above this 10% cutoff, and completes a corrective pattern, we see the possibility of the US bull market extending in the months ahead. The low today was SPX 1162.
The market did find support today at the 61.8% retracement level (SPX 1158), and within the 1168 pivot range. But the debt situation in Europe continues to deteriorate while the EU has not finalized, nor enacted, any of their sovereign/bank bailout plans. The market is obviously responding to the crisis and forcing the issue. Short term support is at the 1146, 1136 pivots with resistance at the 1168, 1176 pivots. Short term momentum is quite oversold. Enjoy your holiday, this market may be setting up for a turbulent holiday season. Best to your trading!
MEDIUM TERM: uptrend high SPX 1293
LONG TERM: neutral