SHORT TERM: market gaps up again but keeps going, DOW +194
Overnight the Asian markets were mostly lower but gained 0.3%. European markets opened lower but gained 2.4%. US index futures were higher overnight. At 8:30 Housing starts were reported lower: 654K vs 698K, but Building permits were reported higher: 747K vs 717K. At 9:15 Industrial production was reported flat: 0.0% vs 0.0%: http://www.federalreserve.gov/releases/g17/current/default.htm. The market gapped up at the open to SPX 1376 and continued to rally. The SPX had closed at 1370 yesterday. The market cleared the OEW 1372 pivot range around 10:30 and moved even higher. At 2:30, with small pullbacks along the way, the SPX hit 1393, the upper limit of the 1386 pivot range. A small dip into the close ended the day at SPX 1391.
For the day the SPX/DOW were +1.5%, and the NDX/NAZ were +1.9%. Bonds lost 7 ticks, Crude rallied $1.30, Gold slipped $2.00, and the USD was lower. Support for the SPX rises to the 1386 and 1372 pivots, with resistance now at the 1440 and 1499 pivots. Short term momentum is now quite overbought. Tomorrow, the ECB meets in Frankfurt.
The market gapped up again at the open and just kept on going today. While we saw a possible higher high than yesterday’s secondary rally to SPX 1376. We did not anticipate this much of a surge. When we review the action from the expected uptrend high at SPX 1422, we see seven waves down to 1357. After that we had an abc rally to SPX 1388, then an abc down to 1365 yesterday. Now we have had a rally from that SPX 1365 to 1393. This looks more like a larger abc up from SPX 1357: 1388-1365-1393.
Since the first decline, 1422-1357, took five tradings days. And this rally, 1357-1393, has also taken five trading days. They appear to be of the same wave degree. Therefore, we have upgraded the initial decline to an Intermediate wave A, and the current rally to Intermediate wave B. Project, monitor and adjust. This would suggest a declining Intermediate wave C should soon follow to end the correction. With Int. wave A travelling 65 points, Int. B could retrace 0.50% to 61.8% of the decline, or SPX 1390- 1397. The market hit that range today. Also, the upper limit of the 1386 pivot range is SPX 1393, which was today’s high. The next level to watch would be SPX 1402, or the high after the first three waves down from 1422. Short term support is at the 1386 and 1372 pivots, with resistance at SPX 1397, 1402, and then 1414. Short term momentum ended the day quite overbought. Best to your trading!
MEDIUM TERM: DOW downtrending, SPX will likely follow
LONG TERM: bull market