SHORT TERM: ECB surprises with ABS, DOW -9
Overnight the Asian markets lost 0.2%. Europe opened higher and gained 0.9%. US index futures were higher overnight as well. At 8:15 the ADP was reported lower: 204k v 218k. At 8:30 weekly Jobless claims were reported higher: 302k v 298k, and the Trade deficit narrowed some: -$40.5bn v -$41.5bn. Around this time ECB’s Draghi announced an ABS program will start in October. The market opened three points above yesterday’s SPX 2001 close. At 10am ISM services were reported higher: 59.6 v 58.7. The market continued to rally until hitting a new high at SPX 2011 around 11am. Then the market started to pullback. The pullback continued throughout the afternoon until the SPX hit 1993 around 3:30. Then a bounce into the close ended the day at SPX 1998.
For the day the SPX/DOW were -0.10%, and the NDX/NAZ were -0.15%. Bonds lost 10 ticks, Crude dropped 95 cents, Gold slipped $7, and the USD rallied. Medium term support remains at the 1973 and 1956 pivots, with resistance at the 2019 and 2070 pivots. Tonight there is a speech from FED governor Powell at 7pm. Tomorrow: Payrolls at 8:30 (est. +229K) and the Unemployment rate.
Before the open today the ECB announced they were starting a form of QE next month to raise their monetary base from 2.0 tn to 2.7 tn. Buying corporate debt instead of sovereign debt. Just as the FED is ending QE 3 the ECB starts another program. We reported on this possibility after the Jackson Hole symposium two weeks ago. For those that did not read it, or forgot, here is the link: https://caldaro.wordpress.com/2014/08/23/weekend-update-462/. The last section.
After reaching a new all time high at SPX 2011, the market started one of its largest pullbacks of the entire uptrend. It appears the choppy advance off the wave 4 low at SPX 1991 was a diagonal triangle fifth wave. We now have five waves up from the recent SPX downtrend low at 1905. For the bears, this could suggest a Primary wave III top. For the bulls, only wave one of a potentially extending uptrend. We currently give both the main count and the alternate count equal probability, while we await further price action in the indices and clarification of the ABS program. Obviously it was an emotional day for traders.
Short term support is at SPX 1991 and the 1973 pivot, with resistance at SPX 2011 and the 2019 pivot. Short term momentum dropped from overbought to oversold. The short term OEW charts flip-flopped again today, ending negative, with the reversal at SPX 2003. Best to your Payrolls trading day!
MEDIUM TERM: uptrend
LONG TERM: bull market