SHORT TERM: gap down then big rally, DOW +101
Overnight the Asian markets lost 0.8%. Europe opened lower and lost 0.3%. US index futures were lower overnight, and at 8:30 the PPI was reported unchanged: 0.0% v +0.1%. The market gapped down at the open to SPX 1979, then immediately started to rally. After hitting SPX 1989 just before 10:30, it pulled back four points by 11:30, and then resumed the rally. At 1:30 the SPX hit 2002, then drifted lower into a 1999 close.
For the day the SPX/DOW were +0.65%, and the NDX/NAZ were +0.85%. Bonds gained 2 ticks, Crude rallied $1.90, Gold added $2, and the USD was lower. Medium term support remains at the 1973 and 1956 pivots, with resistance at the 2019 and 2070 pivots. Tomorrow: the CPI at 8:30, the ECB starts their two day meeting, the NAHB index at 10am, then the FOMC statement at 2pm. With Friday’s OPEX, an interesting and potentially volatile three days ahead.
The market gapped down at the open today to SPX 1979, apparently completing the small ‘c’ wave we had been expecting from yesterday’s SPX 1987 high. While the decline was a bit smaller than expected, SPX 1973-ish, the ‘c’ wave apparently ended in a failure as it did not reach yesterday’s low of 1978. Nevertheless, the count we have been tracking appears complete: A 1990, B 2008, and then C (‘a’ 1991-2000-1983, ‘b’ 1997-1986-1998, ‘c’ 1978-1987-1979). This morning’s low should have concluded this somewhat complex a-b-c pullback.
During today’s rally, which is the strongest since the pullback began, the market broke out of a descending channel, the advance looked impulsive, and the laggard DOW made all time new highs. While we have placed a green Minor 2 label at today’s low on the SPX chart, we would like to see the SPX make new highs next to add confidence that an extension is underway. Short term support is at the 1973 and 1956 pivots, with resistance at SPX 2011 and the 2019 pivot. Short term momentum hit extremely overbought during today’s rally. Best to your FOMC trading!
MEDIUM TERM: uptrend
LONG TERM: bull market