REVIEW
Another boring week until Friday. The market started the week at SPX 2180. After opening at SPX 2184 on Tuesday, it dropped to 2175 in the first hour of trading, then hit a higher high at the close. On Wednesday the SPX hit the high for the week at 2188. After that it declined into the close on Friday. For the week the SPX/DOW lost 2.3%, and the NDX/NAZ lost 2.4%. Economic reports for the week were light and slightly positive. On the downtick: ISM services and the Q3 GDP estimate. On the uptick: consumer credit, investor confidence, and weekly jobless claims improved. Next week, another options expiration week, reports will be highlighted by industrial production, the CPI/PPI and retail sales. Best to your week!
LONG TERM: uptrend
Quite an interesting market. While the free market enthusiasts continue to complain about the central bank interventions. The bulls and the bears had been locked in a 1.5% trading range for the past eight weeks. Last Friday FED chair Yellen, in her Jackson Hole speech, suggested no rate hikes until at least December. Right after her speech, in an interview with vice chairman Fischer, he, and a chorus of other Fed officials this week, suggested a rate hike could be on the table as soon as this month. Then on Thursday, when the ECB president Mario Draghi failed to meet market expectations of an expansion in the EQE program, the markets began to selloff. Notice what is driving these markets. It’s not fundamentals, which remain moderately positive. It’s central bank rhetoric!
The long term view remains unchanged. The key US indices are in long term uptrends. While many of the foreign markets, and secondary US indices, appear to be in long term uptrends as well. We continue to carry three counts on the US markets displayed on the SPX, NYSE and DOW charts. Last week we upgraded the most bullish count to a 40% probability, and placed a 30% probability on the other two counts. See previous weekend updates for details. In summary.
The DOW count suggests a new bull market began in February 2016.
The SPX count suggests an irregular ongoing bear market has been underway since 2015.
The NYSE count suggests the bull market from 2009 is still underway, and will not likely end until this index makes new all time highs.
MEDIUM TERM: downtrend
As noted above. For the past eight weeks the SPX had remained in a record 1.5% trading range. This week the NDX/NAZ/NYSE all made new uptrend highs. Yet, the SPX/DOW had not made an uptrend high in nearly four weeks: since August 15th. When short term selling began on Thursday, due to the ECB disappointment, this negative divergence came into play. As a result the indices moved more in one day, than it had moved in the last eight weeks.
As a result of Friday’s selloff all four major indices are in confirmed downtrends. The uptrend from the late-June Br-exit low did complete five waves up, with the fifth wave ending in an expanding diagonal triangle. Friday’s selloff confirmed the count and this new pattern.
With a downtrend underway there are several levels of support right under the market. Fibonacci retracement levels suggest the following SPX: 2117 (38.2%), 2093 (50.0%) and 2069 (61.8%). Since the fifth wave was the weakest wave there is support between waves 1 and 2, SPX: 2074-2109. Then we have the OEW pivots. In our review of the 2015-2016 bear market we uncovered a few new pivots. Therefore pivot support is at SPX: 2116, 2085 and 2070. Combining all these levels the first support is the 2116 pivot range, second the 2085 pivot range, and third the 2070 pivot range. All that analysis and it still leads to the three pivots. Medium term support is at the 2116 and 2085 pivots, with resistance at the 2131 and 2177 pivots.
SHORT TERM
During the uptrend we had noticed that wave three was shorter than wave one. This suggested that wave five would be the shortest wave. And it was. What we didn’t figure was that it would be so short and take over one month to unfold. But I guess neither did anyone else.
Since Friday provided a very sharp selloff we do not think this downtrend is going to last too long. Hourly and daily RSI are already extremely oversold. Plus the weekly RSI is already close to the low of the last downtrend. Should the downtrend continue lower over the next day or so it could bottom. If the market bounces Monday/Tuesday it is likely to require a retest of the lows before bottoming. Either way next week could be a reversal week for the downtrend. Short term support is at the 2116 and 2085 pivots, with resistance at the 2131 and 2177 pivots. Short term momentum ended the week extremely oversold. Trade what’s in front of you!
FOREIGN MARKETS
Asian market were mixed on the week for a gain of 0.7%.
European markets were mostly lower for a loss of 0.8%.
The Commodity group were mixed and gained 0.6%.
The DJ World index lost 1.2%.
COMMODITIES
Bonds continue to downtrend and lost 0.4% on the week.
Crude appears to be in a volatile uptrend and gained 3.2%.
Gold appears to be in an uptrend too and gained 0.6%.
The USD is still in a downtrend and lost 0.6%.
NEXT WEEK
Monday: a speech from FED governor Brainard at 1:15. Tuesday: the budget deficit. Wednesday: export/import prices. Thursday: weekly jobless claims, retail sales, the PPI, the Philly/NY FED, industrial production and business inventories. Friday: the CPI, consumer sentiment and options expiration. Best to your weekend and week!
Perfect V shape rally.
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It is,no way they raise rates, shaking in there boots from Fridays blunder,should cross 2200 by 9/28 than maybe least 5% pullback if not more
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why not just listen to the market that tells us the odds which sits around 25% I believe? They will not surprise the markets.
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Thing is, a. 25 raise was already mentioned at Yellen’s party and the market didn’t really react to that. Only 2 raises were the scare factor. This drop is based on something else or just a technical PB.
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super Mario
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Well done cmucha if you caught it…..I was babysitting oil….well, next time x
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I went short on close Thursday with September 16, 2170 puts and out on close on Friday. Long from 2117 with September 16 (weekly calls) with 2130 strike. All ok for now. You will still have plenty of opportunities until end of year Fiona. Next time you are on board.
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And if the market opens down tomorrow, I will close my longs and go short on the close today.
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I doubt that you really trade.
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Back inside the BBs for both SP and Vix in one shot, impressive. Buy signals and NYMO divergence mentioned on Fri will be confirmed at the close.
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SP is still below the Centre line, back testing the breakout point and currently sitting at 61.8% fib of the 2 day move down. A few small hurdles yet.
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I’ve closed my S&P Long positions from Friday. There is something I don’t like about this move. Surely in terms of a pb that can’t be it?
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Hitting some resistance around here. Still think lower to come
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Vive – nicely done , kudos.
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Nice one. History suggests should stay long but I guess shouldn’t get greedy. Hope we drop now lol
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I will be surprised if we clear the 60 area well today
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I didn’t expect the bounce to be this strong.
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wave 1 target from 2120 bottom is 2158
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Fed strategy is just endless doublespeak by all their members. Anything is possible.
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Bounce was from exactly c=1.6 a, the 1st target
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/esz6
2142 short has traded
however
above 2153 /esz6
2234 target is back on the table
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2175 today?
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bullish above aggressive extension 2147.5 /esz6
until the extension fails the sky is the limit
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took profits on all shorts this am on break above 2117
could not find a good entry for longs so i missed this rally
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I missed the whole short also because of entry and risk reward problem lol
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I have to admit I struggle with swing trading. Physiologically scarred from being burnt shorting over the years. Prefer to wait on the sidelines until get substantial dips with the occasional short scalps. I really hope this is not the end of this one but if it I have to agree with Phil that the sky is the limit. By the way you’re trading is very nimble Phil. You do it for a living?
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vive
i trade to keep myself occupied and out of trouble
since the gub uhh mint cracked down on internet poker
this is my adrenaline fix
POKER is where i made real money..
like taking candy from a baby
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All internet gambling illegal? This country needs something similar. Gambling here is a joke. You get 2/3 bookmakers on every high street and advert after advert on sports betting.
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Move to NJ. You can play poker online all you want since internet gambling is legal here.
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poker online is legal in nevada new jersey and delaware
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Everything going exactly as I laid out so far which actually makes me more nervous. It may change, but hasn’t yet. If this is int iii of major 3, I want to see a strong close.
Fact of day: $SPX has never traded within .5% ATH and then dropped to 2 month low in 1 day. Welcome to the fed induced market!
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Also something I didn’t add this weekend is I want to see the Vix quickly close under 14.75ish this week – it’s long term rising trend line from its bull market low. This would imply a false breakout.
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I agree, 3 of 3’s are relentless
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Looking better as if this correct count each 5 min, but still 80 min to close
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