SHORT TERM: gap up opening sold off, DOW -216
Overnight the Asian markets gained 0.9%: mostly Japan. European markets opened higher and gained 1.0%. US index futures were higher overnight, and the market gapped up at the open to SPX 1523. The market had closed at SPX 1516 on friday. In the opening minutes the SPX hit 1524, dipped to 1521, then rallied to 1526 by 10:00. That was the high for the day. Soon after the Euro started to sell off when concern arose about the Italian elections. European markets declined and the SPX followed. By 11:00 the SPX closed the opening gap when it hit 1514. The SPX bounced 1519 by 11:30, then dropped to 1508 by 12:00. Another rally attempt failed at SPX 1514 by 1:00, then the SPX dropped to 1502 by 2:00. One more rally attempt failed at SPX 1507 by 3:00, then the market dropped nearly 20 points to 1488 by the close.
For the day the SPX/DOW were -1.70%, and the NDX/NAZ were -1.40%. Bonds gained 27 ticks, Crude slid 80 cents, Gold rallied $13, and the USD was higher. Medium term support drops to the 1440 and 1386 pivots, with resistance now at the 1499 and 1523 pivots. Tomorrow: Case-Shiller and the FHFA housing index at 9:00, then New home sales and Consumer confidence at 10:00. Also at 10:00 FED chairman Bernanke presents the Semiannual Monetary Policy Report to the Senate.
The market gapped up at the open today for the second day in a row. This gap up, after hitting SPX 1526, was sold off nearly as quickly as it occurred. During the early morning surge the SPX came within 5 points of its uptrend high, while the DOW made a new high. The SPX ran into resistance at the 1523 pivot, the market then sold off throughout the day. At the end of the day the market had broken the 1499 pivot range and closed at SPX 1488.
Two potential scenarios come to mind. First, Minor wave 4 of this uptrend is still underway. Second, we just experienced another Minor wave 5 failure in the SPX. With the DOW making a new uptrend high today this would somewhat support the second scenario. Maybe we have just seen the uptrend high and are already in a correction. The timing is about right, but the uptrend is much shorter than expected. Unless Intermediate wave iii is subdividing. Which would appear quite unlikely considering the overall pattern of the bull market. The two options, from our perspective, are a difficult call at this time.
Short term support drops to SPX SPX 1463/64 and the 1440 pivot, with resistance at the 1499 and 1523 pivots. Short term momentum swung from extremely overbought to quite oversold in one day. The short term OEW charts turned negative in the morning with the reversal level now at SPX 1513. Best to your trading!
MEDIUM TERM: uptrend
LONG TERM: bull market