The market started the week at SPX 2433. After a gap up opening on Monday, and a new all-time high to SPX 2454, the market pulled back to 2431 by Wednesday. After a rally to SPX 2442 on Thursday the market pulled back to 2431 again on Friday. Then ended the week at SPX 2438. For the week the SPX/DOW gained 0.15%, and the NDX/NAZ gained 1.95%. Economic reports for the week were slightly positive. On the downtick: weekly jobless claims and the WLEI. On the uptick: existing/new home sales and leading indicators. Next week’s reports will be highlighted by the Q1 GDP update and the Chicago PMI.
LONG TERM: uptrend
Not much has changed on the long-term count since April. We continue to label the SPX 1810 low as the end of Primary wave II, with the early stages of Primary III underway. From that low we have labeled Intermediate waves i and ii of Major 1 ending in the spring of 2016. Then we labeled Minor waves 1 and 2 of Intermediate iii ending in the summer of 2016. Next we have Minor waves 3 and 4 of Intermediate iii ending in the spring of 2017. This suggests the current uptrend is Minor wave 5 of Intermediate iii.
When this uptrend concludes an Intermediate wave iv downtrend will unfold. Since Intermediate iii took five waves/trends to unfold: June 2016 – June 2017. The downtrend/correction to follow could be the largest of the entire bull market. The corrections since February 2016 have been about 5%, and about 80-120 SPX points. If the recent high at SPX 2454 ended the uptrend, then initial support should be at the 2321, 2286 and 2270 pivots.
MEDIUM TERM: uptrend topped?
The uptrend that began at the Minor 4 low, SPX 2329, in mid-April has unfolded in five Minute waves: 2406-2353-2446-2416/2419-2454 thus far. If Minute iv ended with a failed flat at SPX 2419, then the rally to 2454 could have been all of Minute wave v. Especially if the SPX breaks that low in the coming days. If Minute iv was a simple zigzag to SPX 2416, then the rally to SPX 2454 unfolded in 3-waves: 2444-2419-2454, suggesting either a subdividing Minute v leading to new highs, or an ending diagonal leading to nominal new highs in the days ahead.
Technical indicators support the SPX 2454 uptrend high scenario. There are negative divergences on the daily RSI and MACD, and the weekly RSI/MACD as well. Typically that would be enough to suggest a downtrend is underway. Adding to this possibility is a possible end to the 7-month, Intermediate wave iii, uptrend in the NAZ at the recent high of 6342. It sold off rapidly after that high, and has negative divergences on both its daily and weekly RSI. The technicals support a correction scenario is next. Medium term support is at the 2428 and 2411 pivots, with resistance at the 2444 and 2456 pivots.
The short-term count has been fairly clear since the Minor wave 4 downtrend low at SPX 2329. Five waves up to SPX 2406, a pullback, five waves up to 2446, a pullback, and then one wave up to 2454. The problem at the moment is whether or not SPX 2416 ended the last pullback or SPX 2419. In either case a drop below SPX 2419, any time soon, resolves the problem to the downside. A rally above SPX 2454 suggests an ongoing uptrend. The past four days have traded between SPX 2431 and 2447.
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. Best to your trading!
Asian markets were mixed and gained 0.3%.
European markets were mostly lower and lost 0.2%.
The DJ World index gained 0.2%, and the NYSE lost 0.3%.
Bonds continue to uptrend but lost 0.1%.
Crude remains in a downtrend and lost 4.4%.
Gold is still in an uptrend and finished the week flat.
The USD remains in a downtrend but gained 0.1%.
Monday: durable goods at 8:30. Tuesday: Case-Shiller and consumer confidence. Wednesday: pending home sales. Thursday: Q1 GDP (est. 1.2%) and jobless claims. Friday: personal income/spending, the CPI, the Chicago PMI, and consumer sentiment.