SHORT TERM: another bungee day, DOW +89
Overnight the Asian markets lost 0.5%. Europe opened lower and lost 1.1%. US index futures were higher overnight. At 8:15 FED chair Yellen’s speech was released: http://www.federalreserve.gov/newsevents/speech/yellen20140415a.htm. At 8:30 the CPI was reported higher: +0.2% v +0.1%, and the NY FED lower: 1.3 v 5.6. The market opened two points above yesterday’s SPX 1831 close and continued to rally. Before 10am the SPX hit 1844, and then began to pullback. At 10am the NAHB index was reported unchanged at 47. By 10:30 the SPX turned negative hitting 1827. After a bounce to SPX 1834 just past 10:30, the SPX pulled back to 1824 by 11am, bounced to 1832 by 11:30, and then hit 1816 by 1pm. After this stair step down into yesterday’s low the market started to rally. By 3pm the SPX hit 1841, dipped to 1836 just past 3pm, then rallied to 1844 again just before an 1843 close.
For the day the SPX/DOW were +0.60, and the NDX/NAZ were +0.30%. Bonds gained 1 tick, Crude lost 50 cents, Gold dropped $23, and the USD was higher. Medium term support rises to the 1841 and 1828 pivots, with resistance at the 1869 and 1901 pivots. Tomorrow: Housing starts, Building permits and a speech from FED governor Stein at 8:30, Industrial production at 9:15, a speech from FED chair Yellen at 12:30, then the FED’s Beige book at 2pm.
Yesterday the SPX gapped up from 1816 rallied to 1834, dropped to 1816, then closed at 1831. Today the market rallied to 1844, dropped back to 1816, then rallied back to 1844. While all these wild swings were occurring the NDX/NAX were making lower lows for their downtrend. Over the past few weeks, every rally in the SPX/DOW has ended with selling pressure in the NDX/NAZ.
Since the NDX/NAZ have been leading this market lower during their Int. wave four downtrend we decided to take a closer look at the cash NAZ. This downtrend from 4372 has unfolded in a complex a-b-c: wave a 4132, wave b 4286, and wave c 3946 thus far. Fibonacci relationships suggest the following support levels: @ 3925 c = 1.5 a, and @ 3895 c = 1.62 a. The two previous Int. four downtrends, during this bull market, have corrected 9.7% and 13.0%. This translates into the 3950 and 3805 levels. The 3950 level was actually hit today. Should this fail to hold support, then 3925 or 3895 would be next with a worse case level at 3805.
Short term support is at the 1841 and 1828 pivots, with resistance at the 1869 and 1901 pivots. Short term momentum hit overbought early, dropped to neutral, then was rising into the close. The short term OEW charts turned positive, negative, and ended positive again, with the reversal level now SPX 1838. We continue to monitor the NDX/NAZ intraday to get an edge short term. Best to your trading!