This holiday shortened week started at SPX 2275. The market opened lower on Tuesday, remained in the same lower range on Wednesday, dropped to SPX 2258 on Thursday, then rallied to 2277 on Friday, and ended the week at 2271. For the week the SPX/DOW lost 0.25% and the NDX/NAZ were mixed. On the economic front reports came in quite positive. On the downtick: the NY FED and the NAHB. On the uptick: the CPI, industrial production, capacity utilization, housing starts, building permits, the Philly FED, the WLEI, plus weekly jobless claims improved. Next week’s reports include: Q4 GDP, leading indicators and durable goods orders. Best to your weekend and week!
LONG TERM: uptrend
There is a new sheriff in town. Donald J Trump was sworn in Friday as the 45th President of the USA. The Trump rally, as this uptrend has been called, started just a couple of days before the election and continued into mid-December. Since then the market has made little progress either up or down during the past 5 weeks. Nevertheless the long term count remains unchanged.
We continue to label the May 2015 high as Primary I, and the February 2016 low as Primary II. A Primary III bull market has been underway since that February low at SPX 1810. Currently there are three sets of waves up from that low: Intermediate waves i and ii, Minor waves 1 and 2, and probably Minute waves i and ii. With Minute wave ii currently underway. When it concludes Minute iii should kick in to the upside and take the market to all-time new highs.
MEDIUM TERM: downtrend underway?
From the early November low at SPX 2084 the uptrend has progressed in five waves. The five waves are now best counted as SPX: 2147-2125-2214-2187-2278. The recent short term action in the SPX has not occurred during any uptrend in this bull market, only during pullbacks/corrections. As a result, the correct count appears to be the one we have been posting on the daily chart below.
This count suggests Minute wave i ended at SPX 2278. Then an A wave declined to SPX 2234, a B wave rallied to SPX 2282, and currently a C wave down is underway. It does not, however, conclude that the B wave ended at SPX 2282. It could go higher before the C wave down. In either case the C wave should end the pullback/correction in the coming weeks. Medium term support is at the 2270 and 2212 pivots, with resistance at the 2286 and 2321 pivots.
The preferred count, Minute wave i ending at SPX 2278, provides us with some definitive parameters going forward. Regardless of where the B wave ends the most common low for Minute wave ii would be to retest SPX 2234, to form an irregular flat. The next probable support levels, if the B wave ended at SPX 2282, would be the following.
If the C wave is 1.618 times the A wave, then the 2212 pivot would provide support. If the C is twice the A wave, then SPX 2194 would provide support. If the C is 2.618 times the A wave, then the 2177 pivot would provide support. Short term support is currently at the 2270 pivot and SPX 2254, with resistance at the 2286 and 2321 pivots. Short term momentum ended the week around neutral. Best to your trading next week!
Asian markets were mostly lower on the week for a net loss of 0.5%.
European markets were also mostly lower for a 1.2% loss.
The DJ World index lost 0.3%, and the NYSE index lost 0.3%.
Bonds appear to be in an uptrend but lost 0.2%.
Crude is in an uptrend and gained 1.6%.
Gold is in an uptrend too and gained 0.7%.
The USD appears to be in a downtrend and lost 0.4%.
Tuesday: existing home sales. Wednesday: the FHFA housing index. Thursday: weekly jobless claims, leading indicators and new home sales. Friday: Q4 GDP (est. +2.2%), durable goods and consumer sentiment.