SHORT TERM: gap up opening then pullback, DOW -60
Overnight the Asian markets lost 0.4%. European markets opened higher and gained 0.3%. US index futures were higher overnight, and the market gapped up at the open to SPX 1422. The market had closed at SPX 1416 on friday. In the first few minutes the SPX hit its high for the day at 1424, set up a negative short term divergence, and then began to pullback. At 10:00 ISM manufacturing was reported lower: 49.5 vs 51.7, but Construction spending was reported higher: +1.4% vs +0.6%. The market continued to pullback until 11:30 when the SPX hit 1414. Then after a bounce to SPX 1418 by noon the market started to pullback again. Around noon the FED released this: http://www.federalreserve.gov/newsevents/press/other/20121203a.htm. Just past 3:00 the SPX hit 1408. Then the market bounced to SPX 1413 by about 3:30, before closing at 1409.
For the day the SPX/DOW were -0.45%, and the NDX/NAZ were -0.25%. Bonds lost 5 ticks, Crude added 20 cents, Gold gained $1, and the USD was lower. Medium term support remains at the 1386 and 1372 pivots, with resistance at the 1440 and 1499 pivots. Tomorrow: a speech from FED governor Tarullo at 10:45.
Today the market gapped up to SPX 1422, hit a new rally high at 1424, then pulled back for the rest of the day. When considering the SPX had just done three waves up from 1385 this was not a good sign short term. When the market pulled back to 1414 we updated the hourly charts to display a potential five waves up from SPX 1343: 1409-1385-1420-1409-1424. We mentioned this possibility in the weekend update. But we thought the fourth wave, (1420-1409), could take a bit more time to unfold. Nevertheless, with today’s low at SPX 1408, we have a complete retracement of the recent SPX 1409-1424 rally. This suggests the market did complete the five waves up to complete Minor wave 1, and a possible pullback to the OEW 1386 pivot range is next. All labels remain tentative green.
Short term support drops to SPX 1402/03 and 1396/98, with resistance at SPX 1413/16 and 1422/27. Short term momentum displayed a negative divergence at today’s high, and ended the day slightly oversold. The short term OEW charts remain positive with the swing point now at SPX 1405. Best to your trading!
MEDIUM TERM: uptrend probably underway
LONG TERM: bull market nearing inflection point