SHORT TERM: first of month rally, DOW +66
Overnight the Asian markets were mostly higher gaining 0.2%. Most of Europe was closed for May Day, but the FTSE gained 1.3%. US index futures were again relatively flat overnight. The market opened at SPX 1397, one point under yesterday’s 1398 close. In the first half hour of trading the market rose to SPX 1400, then dipped to 1396. At 10:00 ISM manufacturing was reported higher: 54.8 vs 53.4, and Construction spending turned positive: +0.1% vs -1.1%. Monthly Auto sales had been posted earlier with Ford -5.0%, and GM -8.2%. The market then spiked up after the ten o’clock reports and continued to rally. By 10:30 the SPX had cleared the previous rally high at 1407 and continued higher. Around noon the SPX hit 1415 and began to pullback. Heading into the close the SPX hit 1405 and closed at 1406.
For the day the SPX/DOW were +0.55%, and the NDX/NAZ were +0.10%. Bonds lost 11 ticks, Crude rallied $1.25, Gold slipped $6.00, and the USD was higher. Support for the SPX remains at the 1386 and 1372 pivots, with resistance at the 1440 and 1499 pivots. Short term momentum hit quite overbought today, set up a negative divergence, then declined. Tomorrow, the ADP index at 8:15, then Factory orders at 10:00. Also there is a speech from FED governor Tarullo at 8:00.
The market started off the week with three potential medium term scenarios, and one potential short term scenario. See weekend update. The short term, expanding triangle scenario, was eliminated today with the rally over SPX 1407. The three medium term scenarios were all suggesting higher prices ahead, and that occurred today. The three scenarios: the DOW Intermediate wave B of Major 4 count, the SPX Intermediate wave v of Major wave 3 count, and the NAZ Major wave 5 count, all differ somewhat in the strength of the current advance. The first two have an 80% probablity: this advance should not exceed DOW 13,520 and the SPX 1440 pivot respectively. The NAZ count has a 20% probability, and comes into play only if those levels are exceeded. We currently have the SPX/DOW/NDX in confirmed uptrends, with only the NAZ lagging.
Short term it has been important to observe how this advance is unfolding. Thus far it looks impulsive. The SPX has rallied in 5 waves up from 1359 to 1407. It then pulled back to SPX 1394 yesterday, and now today advanced to 1415. The rally from SPX 1394 can either unfold as a 3rd wave, or a C wave, as it works its way higher. This afternoon’s pullback to SPX 1405 also fits into the pattern. Short term, at least, this market should head higher.
Short term support is at SPX 1402, then the 1386 and 1372 pivot ranges. Resistance remains at SPX 1414, 1419 and 1422. Short term momentum dropped below neutral after a negative divergence at today’s high. Sorry about the delay, internet was down. Best to your trading!
MEDIUM TERM: uptrending, except NAZ
LONG TERM: bull market