Weekend update

REVIEW

The market started the week at SPX 2461. After a gap up opening on Monday the market rallied to an ATH on Tuesday. After that it did something quite odd. For three days, which included a Thursday/Friday options expiration. The SPX traded in a 9-point trading range, ending the week at the ATH SPX 2500. For the week the SPX/DOW gained 1.90%, and the NDX/NAZ gained 1.35%. Economic reports for the week were on the negative side. On the downtick: retail sales, the NY FED, industrial production, capacity utilization, consumer sentiment, the Q3 GDP estimate, plus the budget deficit increased. On the uptick: the CPI/PPI, business inventories, plus weekly jobless claims declined. Next week is FOMC week and mostly housing reports. Best to your week!

LONG TERM: uptrend

Continuing with our monitoring of potential long-term headwinds. This week the market resolved its multi-week inflection point to the upside, as the SPX broke out to new highs on Tuesday.

The bullish DOW continued to extend its Minor wave 5, as it made new ATHs as well. Very little chance of a bear market any time soon, as long as the DOW remains in the middle of its 5/9 wave bull market. One side note. The XLE sector confirmed an uptrend this week after a nasty 8-month downtrend (Dec.-Aug.). It is possible the cyclicals will assume leadership for a while.

The Transports also turned in a positive performance, gaining 1.7% on the week and confirming an uptrend. With the recent downtrend ending much above the 8744 level, this suggests the possibility of an extending Major wave 5. This type of event would extend the general bull market in time. New highs, above 9764, would suggest an extension is underway. Note the updated labeling on the chart.

The SPX chart looks quite similar to the DOW chart now. With Intermediate waves i and ii completed in the spring of 2016. Then five Minor waves, with Minor 5 still underway, creating Int. wave iii. When this uptrend does end, it will end Int. iii, then an Int. iv correction, similar to Int. ii, would be underway. After that an Int. v uptrend, or subdividing wave, will take the market to higher ATHs. Should the TRAN enter an extension to its bull market, the SPX will probably do so as well.

MEDIUM TERM: uptrend

With the breakout to new highs this week we updated the SPX daily chart to reflect the more positive count that was posted on the SPX hourly chart. From the Minor wave 4 low at SPX 2329 in April, we are tracking/labeling a subdividing Minor wave 5. Minute wave i completed at SPX 2454 with five Micro waves (orange). Then a Minute ii decline ended at SPX 2406/2408 in July. Minute iii of Minor 5 has been underway since then.

Thus far Minute iii looks like a bigger version of Minute i. Strong rally for Micro 1, big decline for Micro 2, then Micro 3 starts working its way higher. During Minute i, Micro 3 was longer than Micro 1 (93 v 77). With Micro 1, of Minute iii, 86-points, this suggests Micro 3 should hit the 2525 pivot range before any significant Micro 4 pullback occurs. Medium term support is at the 2479 and 2456 pivots, with resistance at the 2525 pivot.

SHORT TERM

Micro wave 3, which we think will reach the 2525 pivot range before a Micro 4 pullback, continues to work its way higher. The count we have been tracking for the sub-waves of Micro 3 remains unchanged: (1) 2455, (2) 2428, (3) 2480-2447-2500 so far. At Friday’s close the third wave of (3) is now longer than the first (53 v 52), setting up for a potential 10+ point pullback to occur at any time.

Short term support is at the 2479 and 2456 pivots, with resistance at the 2525 pivot. Short term momentum ended the week slightly overbought. Best to your trading!

FOREIGN MARKETS

Asian markets were mostly higher for a net gained of 0.8%.

European markets were also mostly higher and gained 0.9%.

The DJ World index gained 1.1%, and the NYSE gained 1.6%.

COMMODITIES

Bonds looks like they have rolled over into a downtrend losing 1.9% on the week.

Crude is uptrending again, gaining 5.1% on the week.

Gold is still in an uptrend but lost 1.9%.

The USD remains in a prolonged downtrend but gained 0.4%.

NEXT WEEK

Monday: the NAHB at 10am. Tuesday: housing starts, building permits and import prices. Wednesday: existing home sales, and the FOMC concludes with a speech from the FED chair. Thursday: jobless claims, the Philly FED and leading indicators.

CHARTS: https://stockcharts.com/public/1269446/tenpp