thursday update

SHORT TERM: gap down decline, DOW -264

Overnight the Asian markets lost 0.1%. Europe opened higher but lost 1.3%. US index futures were lower overnight. At 8:30 weekly Jobless claims were reported higher: 293k v 280k, and Durable goods orders tumbled: -18.2% v +22.6%. The market gapped down at the open to SPX 1991 and continued to decline. The SPX had closed at 1998 yesterday. By 10:30 the SPX hit 1970, taking out yesterday’s 1979 low. After a bounce to SPX 1976 by 11:30, the market dipped to 1968 by 12:30, then bounced to 1973 by 1:30. After that the market hit SPX 1967 by 2:00, then started to rally. The rally topped out at exactly 1973 by 3:30, then the market declined to its lowest level of the day and closed there: SPX 1966.

For the day the SPX/DOW were -1.60%, and the NDX/NAZ were -2.05%. Bonds gained 16 ticks, Crude slipped 25 cents, Gold added $4, and the USD was higher. Medium term support drops to the 1956 and 1929 pivots, with resistance at the 1973 and 2019 pivots. Tomorrow: Q2 GDP (est. +4.6%) at 8:30, then Consumer sentiment at 10am.

The market gapped down at the open for the second time this week. While Tuesday’s gap down was closed in the first hour of trading, this one was not. In fact, by the first hour of trading today the SPX dropped below the important support level at 1979. Then for the rest of the day traded within the OEW 1973 pivot range (1966-1980). We noted yesterday that this level and pivot appear to be quite important: “The key level to watch now is SPX 1979 and the OEW 1973 pivot range. If the market heads back to that level and breaks that pivot, probabilities increase that Primary IV is underway.”  We will now add two more parameters to the potential Primary IV scenario: 1. a break of the OEW 1956 pivot, and 2. a downtrend confirmation.

The 1956 pivot is important because the rising support trend line for nearly all of Primary III is currently at that pivot. A break of that trend line would be another negative. A downtrend confirmation is important because we do not see any other counts, but a Primary IV underway, should we get one in the 19xx’s area. Since the market lost 23% during the five month Primary II, we would expect a similar decline but likely lasting only 2-3 months. We are certainly at an interesting juncture in this bull market. Short term support is at the 1956 and 1929 pivots, with resistance at the 1973 pivot and SPX 2000. Short term momentum is displaying a potential positive divergence. Best to your GDP trading tomorrow.

MEDIUM TERM: uptrend under pressure

LONG TERM: bull market

CHARTS: http://stockcharts.com/public/1269446/tenpp