thursday update

SHORT TERM: rally continues, DOW+114

Overnight the Asian markets were mostly higher: +0.5%. European markets were mostly higher as well: +0.2%. US index futures were lower overnight, and at 8:30 weekly Jobless claims were reported higher: 388K vs 386K. The market opened lower at SPX 1388, then started to rally. The SPX had closed at 1391 yeaterday. At 10:00 Pending home sales were reported higher: +4.1% vs -0.5%. The rally continued, with small pullbacks along the way, clearing the OEW 1386 pivot just past 1:00. At 2:00 the FED issued the following: Around 3:30 the SPX hit 1402, then pulled back to close at 1400.

For the day the SPX/DOW were +0.75%, and the NDX/NAZ were +0.65%. Bonds gained 11 ticks, Crude added 30 cents, Gold rallied $14.00, and the USD was lower. Support for the SPX remains at the 1386 and 1372 pivots, with resistance at the 1440 and 1499 pivots. Short term momentum busted right through the slight negative divergence and hit extremely overbought. Tomorrow, Q1 GDP at 8:30, (estimates between +2.5% to +2.9%). Then Consumer sentiment around 10:00.

The market opened lower today, then resumed the recent rally from monday’s low. The SPX rise over 1400 today was quite steady, with pullbacks of only 3 points along the way. We’re obviously a bit surprised at the strength of this move. From an OEW perspective the DOW, and possibily the NAZ, have confirmed downtrends this month. While the futures driven SPX and NDX have not. This is the first time these four indices have had this type of divergence in seven years. During the 2004 and 2005 time period, a solo downtrend confirmation by the DOW confirmed only an A wave of a larger ABC correction. Then the four indices would rise together in a B wave, before they all confirmed downtrends in the C wave. It has been so long we really had not considered this possibility.

For now, we remain with our current count: Int. A concluded at SPX 1357, and Int. B currently underway in an expanding triangle. Should the market continue to rise, it could trigger a new uptrend confirmation in the DOW. This would setup the B wave uptrend scenario mentioned above. Under that condition the B wave could rise to new highs, but generally not greater than B = 1.382 A, i.e. DOW 13,520+. Then the C wave would follow back to the April lows or lower. Under our expanding triangle Int. B count the market should be topping out around the SPX 1402 area. This was the high of Minor wave B during the sharp Int. wave A decline from SPX 1422 to 1357. In essence the market has arrived at an inflection point. Long term it is just forming the waves of an ongoing bull market.

Short term support remains at the 1386 and 1372 pivots, with resistance now at SPX 1402, 1414, 1419 and 1422. Short term momentum hit its most overbought level since late March. We will examine some potential alternate counts, if need be, in the weekend update. Best to your trading!

MEDIUM TERM: DOW downtrending, SPX has not confirmed

LONG TERM: bull market


About tony caldaro

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80 Responses to thursday update

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  5. (my twitter account does not allow reply to threads)
    I really agree with rc1269 ‘s April 27, 2012 at 7:10 am quote.

    not too sure what we are going through right now. From the human factor description, we have spain joining Greece in the trouble corner which is quite worrying yet markets move up, this would resemble a wave5 description … Or perhaps a strong B, where no one wants to believe we are heading down.
    All my AI says we are going to 1417, followed by a 1355 on a weekly view.


  6. kvilia says:

    Time to short again.


  7. blubrd67 says:

    Tony, what’s the last time it was this overbought?
    But it can continue…


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