SHORT TERM: gap down opening again, DOW -268
Overnight the Asian markets lost 0.7%. Europe opened higher but lost 0.4%. US index futures were lower overnight, and the market gapped down to SPX 2054 at the open. The SPX had closed at 2060 yesterday. The market continued to decline until about 10:30 when the SPX hit 2042. Then it spent the next three hours in a choppy pattern: 2049-2043-2048-2041-2047. At 1:30 the market started to break lower again. At 2pm the Budget deficit was reported in line with expectations: -$56.8bn v -$135.2bn. Around 3pm the SPX hit 2024, rallied to 2035 by 3:30, dropped to 2024 again, and then closed at 2026.
For the day the SPX/DOW lost 1.55%, and the NDX/NAZ lost 1.70%. Bonds gained 18 ticks, Crude lost $2.50, Gold slipped $2, and the USD was lower. Medium term support remains at the 2019 and 1973 pivots, with resistance at the 2070 and 2085 pivots. Tomorrow: weekly Jobless claims, Retail sales and Export/Import prices all at 8:30. Then Business inventories at 10am.
The market gapped down today for the third day in a row. Nothing like this has occurred since the market gapped down four days in a row in May 2012. The market opened at SPX 2054, dropped to 2042 in the first hour, bounced around for three hours between 2041 and 2049, then dropped to 2024 in the last hour of trading. Thus far, from the SPX 2079 high, the market has declined in five waves to 2034, rallied straight up to 2061, and now has declined straight down to 2024. We labeled the first decline with an ‘a’, the rally with a ‘b’, and we are now in wave ‘c’ of what appears to be the first decline of a new downtrend. Thus far the market has lost about 2.5% in three trading days. At today’s low the market entered the 2019 pivot range and displayed a short term positive divergence. We could count today’s decline from SPX 2061 to 2024 as a wave 1 of the next five waves down. Or, since it was straight down, the completion of wave ‘c’. This will depend on the market tomorrow. Should SPX 2024 hold then ‘c’ ended, if not, a third wave down from SPX 2061 is underway. Short term support is now at the 2019 and 1973 pivots, with resistance at SPX 2061 and the 2070 pivot. Short term momentum displayed a positive divergence at the low then bounced to neutral. Best to your trading!
MEDIUM TERM: uptrend may have topped
LONG TERM: bull market