SHORT TERM: gap down opening then choppy, DOW -5
Last night the FED released governor Tarullo’s congressional Volcker rule testimony: http://www.federalreserve.gov/newsevents/testimony/tarullo20140205a.htm. The Asian markets gained 0.3%. Europe opened lower and finished mixed. US index futures were a bit volatile overnight, mostly lower, and at 8:15 the ADP index was reported lower: 175k v 238k. The market gapped down at the open to SPX 1749, bounced to 1752, then dropped to 1744 by 10am. The SPX had closed at 1755 yesterday. At 10am ISM services were reported higher: 54.0 v 53.0. The market spiked up to SPX 1754 right after the news, and then headed lower again. By 10:30 the SPX had made a new low for the entire decline at 1738. Then the market started to rebound. Just after 10:30 it hit SPX 1746, dipped to 1740 by 11am, then resumed its rally. At 2pm the SPX hit 1756. It then traded between SPX 1750 and 1756, closing at 1752.
For the day the SPX/DOW were -0.10%, and the NDX/NAZ were -0.45%. Bonds lost 9 ticks, Crude was flat, Gold rose $3, and the USD was lower. Medium term support remains at the 1699 and 1680 pivots, with resistance at the 1779 and 1828 pivots. Tomorrow: weekly Jobless claims and the Trade deficit at 8:30. At 10am there is Senate testimony on Dodd-Frank from FED governor Tarullo. Payrolls is Friday.
The market gapped down at the open, bounced around, and then made a new low at SPX 1738 for the entire decline from 1851. SPX 1759 was most likely the end of the 4th wave as we noted yesterday. The decline from that level to SPX 1738 looked a bit odd, with a ten minute 1744-1754 swing in the middle. Nevertheless with positive divergences on the hourly/daily charts, as many noted on the blog, the entire zigzag from 1851 could have ended at 1738. Since this would represent a 6.1% correction, we do not believe it would be the end of the downtrend. As a result we have labeled the decline from SPX 1851: 1770-1798-1738 with Minor waves, and a tentative green Intermediate wave A at the low. An Intermediate wave B rally could rally the market back to the SPX 1790’s, with the recently favorite 1794 level as a target. SPX 1759 would have to be exceeded to the upside to help confirm the Intermediate wave B.
Short term support remains at SPX 1746 and the 1699 pivot, with resistance at SPX 1768 and the 1779 pivot. Short term momentum displayed a positive divergence and has bounced to neutral. The short term OEW charts are still negative with the reversal level now SPX 1764. Best to your trading!
MEDIUM TERM: downtrend
LONG TERM: bull market