Monday update

SHORT TERM: gap down opening, DOW -350

Over the weekend the likelihood of a Greece default increased dramatically. As a result the SPX futures gapped down nearly 30 points in overnight trading. After trading as low as 40 points down it started to recover. Overnight the Asian markets lost 2.1%. Europe opened lower and lost 3.1%. US index futures recovered some overnight, but were still down about 20 points when the market opened with a gap down at SPX 2083. After a tick down to SPX 2082 the market tried to rally. Just before 10am the SPX hit 2091 then started to pullback again. At 10am Pending home sales were reported higher: +0.9% v +3.4%. Around 11am the SPX dropped below the opening 2082 and headed even lower. At 2:30 the SPX hit 2064, bounced to 2070 just past 2:30, then hit 2057 just before a 2058 close.

For the day the SPX/DOW were -2.0%, and the NDX/NAZ were -2.4%. Bonds gained 41 ticks, Crude lost $1.45, Gold rose $5, and the USD was lower. Medium term support drops to the 2019 and 1972 pivots, with resistance at the 2070 and 2085 pivots. Tomorrow: Case-Shiller at 9am, then the Chicago PMI and Consumer confidence at 10am.

With the big gap down last night we knew the potential uptrend scenario – growth sector driving cyclicals higher – was in jeopardy. When the market opened below SPX 2089 that possibility became more of a reality. The sloppy potential uptrend activity, we noted on Thursday, has turned into a resumption of the downtrend today. Instead of growth leading the cyclicals higher, it appears the cyclicals are leading growth lower. This morning we updated the SPX charts to display this scenario. We would now expect the NDX/NAX to confirm downtrends, while the SPX looks for support in the lower 2040’s or 2019 pivot range. No change to the longer term count, as we are still expecting this correction to be Intermediate wave ii with an Intermediate wave iii uptrend to follow. Short term support is at SPX 2040 and the 2019, with resistance at the 2070 and 2085 pivots. Short term momentum ended extremely oversold. Best to your trading, and kudos to those that anticipated the cyclicals leading lower!

MEDIUM TERM: downtrend resumes

LONG TERM: bull market


About tony caldaro

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215 Responses to Monday update

  1. zepfan123 says:

    Well all we know is that SPX 2070 looks like it may now already be a resistance level instead of of a very strong support level, as it’s been for many months. I think that May ATH close of SPX 2131.82 will hold for a good while. i’ll give the market a few days into next week to see if it can push back up through 2070 with any velocity…but if it doesn’t,then I think we can talk seriously about going below that next big number of SPX 2040.


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