An interesting end to a mostly choppy week. The market started the week at SPX 2439. After a tick up to the all-time high at SPX 2440 on Monday, the market pulled back to 2425 by Wednesday. Then after the ECB meeting, the much awaited Comey testimony, and the UK election fiasco, the SPX hit an all-time high at 2446 on Friday. After the high, however, the Tech sector went into freefall, pulling down the SPX to end the week at 2432. For the week the SPX/DOW were mixed, and the NDX/NAZ lost 2.0%. Economic reports for the week were mostly negative. On the downtick: ISM, factory orders, consumer credit, the WLEI and the Q2 GDP estimate. On the uptick: weekly jobless claims improved. Next week’s reports will be highlighted by the FOMC meeting, retail sales, and industrial production. Best to your week!
LONG TERM: uptrend
The long-term count remains unchanged. Super cycle wave 2 ended in 2009 at SPX 667. Primary I of Cycle wave I, during this new Super cycle wave 3, topped in 2015 at SPX 2135. Then after a bear market Primary wave II to SPX 1810 by early 2016, Primary wave III was underway.
Primary wave III is currently unfolding with Major 1 of the five Major waves. Major wave 1 has thus far divided into three of the five Intermediate waves. Intermediate waves i and ii ended in the spring of 2016. Then Intermediate iii started to subdivide into five Minor waves. Minor waves 1 and 2 ended in the fall of 2016, and Minor wave 3 and 4 ended in the spring of 2017. Minor wave 5 of Intermediate iii has been underway since April 2017.
MEDIUM TERM: uptrend
The Minor 5 uptrend has been rising since April at SPX 2329. It is subdividing into five Minute waves, as did Minor waves 1 and 3. Minute wave i ended in May at SPX 2406, and Minute wave ii also ended in May at SPX 2353. Minute wave iii appears to have just ended on Friday at SPX 2446, and Minute wave iv is likely underway now. When it concludes the SPX should again rally to all-time highs. There does appear to be, however, a slight problem.
The Tech sector, which has been driving the general market high since November appears to have ended its uptrend on Friday. We can count 13-waves up from Nov-Jun for its Intermediate wave iii. Certainly it could extend further, but this would be more of an exception to a normal probability. The NDX/NAZ both have weekly/daily negative divergences, have completed 13-waves up during a lengthy seven-month uptrend, and were down more than 3% from their all-time high at one point just on Friday.
This potential activity suggests the SPX/DOW can complete their uptrends, and their Intermediate wave iii, but without much support from the Tech sector. The likely outcome is limited new highs, while the NDX/NAZ rebound off their lows. As a result we are adding in one more pivot we had planned to ignore until Friday’s events: SPX 2456. Medium term support is now at the 2428 and 2411 pivots, with resistance at the 2444 and 2456 pivots.
From the Minor wave 4 downtrend low at SPX 2329 in April the market has progressed in three Minute waves up to SPX 2446. The first wave Minute i advanced in 9-waves on our shortest time-frame, and the third advanced in 5-waves on the same timeframe. Plus, wave i was 77 points (2329-2406), and wave iii was longer at 93 points (2353-2446). On Friday, after that SPX 2446 high, the market sold off to SPX 2416 in a matter of hours. This selloff looks like Minute wave iv underway.
During Minute ii the market declined from a SPX 2406 all-time high to 2353 in just two-days. Then Minute iii was underway. This suggests Minute wave iv may end quite quickly as well. Possibly Monday/Tuesday. Then Minute wave v should be underway to new highs. With the Tech sector unlikely to make new highs in the weeks ahead. The Cyclical sector is unlikely to get very far in its Minute wave v. Short term support is at the 2428 and 2411 pivots, with resistance at the 2444 and 2456 pivots. Short term momentum ended the week just below neutral. Trade what’s in front of you!
Asian markets for the week were mixed ending collectively unchanged.
European markets for the week were also mixed ending with a 0.1% loss.
The DJ World index lost 0.5%, while the NYSE gained 0.2%.
Bonds remain in an uptrend but lost 0.3%.
Crude remains in a downtrend and lost 3.8%.
Gold is in an uptrend but lost 0.7%.
The USD is in a downtrend but gained 0.2%.
Monday: Budget deficit at 2pm. Tuesday: the PPI. Wednesday: the CPI, retail sales, business inventories, and the FED is expected to raise rates 25 bps. Thursday: jobless claims, import/export prices, NY/Philly FED, industrial production, and the NAHB. Friday: housing starts, building permits, options expiration, and consumer sentiment. Best to your week.