wednesday update

SHORT TERM: gap down open, DOW -161

Overnight the Asian markets were lower losing 1.0%. Europe opened lower and closed down 1.9%. US index futures started heading lower late yesterday after the ECB declined to participate in the bailout of Spain’s Bankia. Heading into the open index futures were down substantially and the market gapped down to SPX 1322. The market had closed at SPX 1332 yesterday. After the market opened it continued to head lower. At 10:00 Pending home sales were reported lower: -5.5% vs +4.1%. At 11:00 the SPX hit 1313 and tried to rally. By 11:30 the rally ended at SPX 1318 and the market declined to 1311 by 12:30. At 12:00: http://www.federalreserve.gov/newsevents/press/bcreg/20120530a.htm, and at 1:00 http://www.federalreserve.gov/newsevents/press/other/20120530a.htm, the FED released these statements. After another rally attempt the SPX hit 1318 again and then headed lower. In the final hour the SPX hit 1311 again as well, bounced to 1316, and then closed at 1313.

For the day the SPX/DOW were -1.35%, and the NDX/NAZ were -1.00%. Bonds gained 27 ticks, Crude dropped $3.15, Gold rallied $9, and the USD was higher. Support for the SPX remains at the 1313 and 1303 pivots, with resistance at the 1363 and 1372 pivots. Short term momentum swung from slightly overbought yesterday to slightly oversold today. Tomorrow, Q1 GDP at 8:30 (estimates +1.9%), along with weekly Jobless claims. Then at 9:45 the Chicago PMI.

Yesterday we noted the recent rally from SPX 1297 looked a bit choppy. But it would be okay if the rally continued past 1335 quickly, or if any pullback held above the 1313 pivot range. Neither of those occurred as the market gapped down at the open, and quickly entered the OEW 1313 pivot range. The advance from the recent lows now looks corrective, which suggests a retest is possible shortly. With the GDP report tomorrow and Payrolls on friday, this could happen quite quickly. The recent action in many of the markets has not been that constructive. Recently the only positive markets have been US Bonds and the USD.

Short term support is at the 1313, 1303 pivots and then SPX 1292, with resistance at SPX 1324/28 and 1342/47. Short term momentum bounced off slightly oversold. The short term OEW charts turned negative again on the drop below SPX 1321, which is the swing point now. Best to your trading!

MEDIUM TERM: downtrend trying to bottom

LONG TERM: bull market

CHARTS: http://stockcharts.com/public/1269446/tenpp