SHORT TERM: gap up opening crushed, DOW -365
Overnight the Asian markets gained 1.6%. Europe opened higher and gained 0.1%. US index futures were higher overnight, and the market gapped up to SPX 1948 at the open. The market had closed at SPX 1939 yesterday. In the first few minutes the market ticked up to SPX 1950 and then began to pullback. By 10:30 the SPX had hit 1931, bounced to 1941 by 11:30, and then the bottom fell out. After 2pm the FED released the Beige book: http://www.federalreserve.gov/monetarypolicy/beigebook/beigebook201601.htm. Plus the Budget deficit was reported larger: -$14.4B v +$1.9B. The market then broke the OEW 1901 pivot and traded down to SPX 1886 by 2:30. After a rally to SPX 1903 by 3:30 the market pulled back to close at 1890.
For the day the SPX/DOW lost 2.35%, and the NDX/NAZ lost 3.45%. Bonds gained 7 ticks, Crude added 35 cents, Gold rose $5, and the USD was lower. Medium term support drops to the 1869 and 1841 pivots, with resistance at the 1901 and 1929 pivots. Tomorrow: weekly Jobless claims, and Export/Import prices at 8:30.
In yesterday’s update we noted that the rally from Monday’s SPX 1901 low looked choppy: 1917-1905-1947-1914-1950. However, after the report we noted in the comments section that the rally could continue to the 2019 pivot, after the market had closed at 1939. The market only made it to the 1956 pivot this morning before breaking the recent SPX 1901 low. This does not look good for a continuing bull market. We had thought the 1901 pivot would provide support for this downtrend. While OEW has not confirmed a bear market yet, we believe it is prudent to offer this possibility on the charts. Even though we have never seen a failed fifth wave of this degree before, we, nor anyone else, have experienced this type of bull market before either. A drop below SPX 1867 will probably confirm a bear market is underway. Short term support is at the 1869 and 1841 pivots, with resistance at the 1901 and 1929 pivots. Short term momentum ended the day quite oversold. Best to your trading this volatile market!
MEDIUM TERM: downtrend
LONG TERM: bull/bear market at inflection point