wednesday update

SHORT TERM: positive news gap up opening, DOW +490

Overnight Europe finalized its EFSF program: http://www.efsf.europa.eu/mediacentre/news/2011/2011-015-maximising-efsfs-capacity-approved.htm. Asian markets were slightly lower losing 0.1%, and Europe opened lower. Then this AM China lowered its bank reserve requirements: http://www.marketwatch.com/story/us-stock-futures-gain-after-china-rrr-move-2011-11-30?siteid=bnbh. And, the FED announced another coordinated central bank currency swap program, which includes, if need be, all currencies not just USD: http://www.federalreserve.gov/newsevents/press/monetary/20111130a.htm. Europe surged and ended the day +4.5%. US index futures were also lower overnight, turned positive, and then surged after the FED announcement. At 8:15 ADP was reported higher: 206K vs 110K. The market gapped up at the open to SPX 1212 and continued to rally. The SPX had closed at 1195 yesterday. At 9:45 the Chicago PMI was reported higher: 62.6 vs 58.4. Then at 10:00 Pending home sales were reported higher: +10.4% vs -4.6%. Also at the 10:00 the FED released this: http://www.federalreserve.gov/newsevents/press/other/20111130a.htm. The market continued to surge until 11:00 when the SPX hit 1240. Then with an extremely short term overbought condition the market started to pullback. At 2:00 the FED released its beige book: http://www.federalreserve.gov/fomc/beigebook/2011/20111130/default.htm. The pullback continued until 3:00 when the SPX hit 1234. Then the buyers came back into the market and the SPX rallied to 1247 and closed there.

For the day the SPX/DOW were +4.30%, and the NDX/NAZ were +4.00%. Bonds lost 12 ticks, Crude added 50 cents, Gold rallied $34.00, and the USD was lower. Support for the SPX jumps to 1240 and then 1222, with resistance now at 1261 and then 1291. Short term momentum hit extremely overbought early, and ended slightly lower. Tomorrow, weekly Jobless claims at 8:30, ISM manufacturing and Construction spending at 10:00, then monthly Auto sales in the afternoon.

An EFSF plan, that could leverage that fund up to 1 tln Euros, and which can lend to/or buy sovereign debt with a 20%-30% tradeable safety net. A drop in reserve requirements, first since 2008, for China’s banks. And a new, central bank coordinated, multi-currency swap arrangement at lower rates. All within 12 hours. Add that to the IMF liquidity arrangements made only last tuesday, and FED vice chair Yellen’s statement of yesterday; “The Federal Reserve continues to provide highly accommodative monetary conditions to foster a stronger economic recovery in a context of price stability. Moreover, the scope remains to provide additional accommodation through enhanced guidance on the path of the federal funds rate or through additional purchases of longer-term financial assets.” And, we have a surging equity market in Europe and the US today.

The market gapped up from yesterday’s SPX 1195 close to a 1212 open. Then it continued higher through the OEW 1222 pivot and to the 1240 pivot all in the first hour and a half of trading. Then, for the rest of the day the market stayed within the 1240 pivot range. Quite impressive following the gap up rally on monday. Thus far this market has rallied nearly 7.6% in just three trading days. With the overlap of the SPX 1227 level that short term count 1-2-i-ii-iii-iv carried on the SPX charts was eliminated. The short term count carried on the DOW charts: A-B-i-ii-iii-iv was also eliminated. This leaves us with the newest short term count, only posted yesterday morning: an A-B-C ending at SPX 1159.

Oddly enough, as soon as we got an OEW downtrend confirmation we are now looking at a potential uptrend confirmation as well. This market has been quite volatile for the past several months confirming new trends nearly early month since May. We have lots of updating of the public stock charts ahead of us tonight. But for now we can state the uptrend from SPX 1075 to 1293 looked impulsive, and the downtrend from 1293-1159 looks corrective. Impulsive uptrends and corrective downtrends occur in bull markets, not bear. As soon as we get an uptrend confirmation, confirming the downtrend was corrective, we will shift to long term bullish.

Short term support is at the 1240 and 1222 pivots. Short term resistance is at the 1261 pivot and upper 1270’s. Short term momentum remains quite overbought, and may be setting up a negative RSI divergence. Tomorrow’s opening should be important short term. Best to your trading!

MEDIUM TERM: downtrend confirmed, uptrend confirmation should be next

LONG TERM: neutral

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987