SHORT TERM: market pullsback, DOW -99
Overnight the Asian markets gained 1.2%. European markets opened higher and gained 0.3%. US index futures were higher overnight. At 8:30 Housing starts were reported lower: 861K vs 894K , while Building permits were reported higher: 899K vs 866K. The market opened one point higher than yesterday’s SPX 1447 close, then began to pullback. At 10:00 the FED released this: http://www.federalreserve.gov/newsevents/press/bcreg/20121219a.htm. The pullback continued until 10:30 when the SPX hit 1442, and then it tried to rally. Around 11:00 the SPX hit 1446, stayed in a narrow range until 1:00, and then started to pullback further. Heading into the close the SPX hit 1436 and closed there.
For the day the SPX/DOW were -0.75%, and the NDX/NAZ were -0.35%. Bonds gained 5 ticks, Crude rallied $1.40, Gold slipped $4, and the USD was lower. Medium term support drops back to the OEW 1386 and 1372 pivots, with resistance at the 1440 and 1499 pivots. Tomorrow: Q3 GDP, (est. +2.7%), and weekly Jobless claims at 8:30. Then at 10:00 Existing home sales, the Philly FED, Leading indicators and the FHFA housing index.
Today’s pullback, from an extremly overbought condition, was to be expected. Yet the amount of the decline, 12 points, was more than expected. We had noted yesterday, we expected a higher high before such a pullback. As a result of today’s pullback there are two to three potential outcomes.
First, Minute wave iii of Minor 3 could be subdividing. This would suggest a fairly good rally should be underway shortly. Second, with the SPX hitting the exact middle of the inflection range yesterday/today there are some alternate bearish implications. At SPX 1448 Major C equalled exactly 0.618 Major A, suggesting the alternate C wave count and Major wave 2 may be over. Third, if it is a wave C it still unfolding, with one more rally, to complete occur to end a diagonal triangle. This has certainly been an interesting few weeks.
Short term support is at the SPX 1422/27 and 1413/16, with resistance at the 1440 pivot and SPX 1463/64. Short term momentum declined to oversold today. The short term OEW charts remain positive from SPX 1420 with the swing level now at 1429. Best to your trading!
MEDIUM TERM: uptrend
LONG TERM: bull/bear inflection range continues