Weekend update

REVIEW

The week started at the all-time closing/print high of SPX 2873. After a gap down opening on Monday/Tuesday the SPX traded down to 2818. A gap up opening was sold off on Wednesday as the pullback dropped to a new low of SPX 2813. Thursday/Friday also had gap down openings, and the selling accelerated on Friday. After hitting SPX 2760 late Friday, the market ended the week at 2762 (-111 points). For the week the SPX/DOW lost 4.0%, and the NDX/NAZ lost 3.6%. On the economic front positive reports outpaced negative reports 11:3. On the downtick: the ADP, Chicago PMI and ISM. On the uptick: personal income/spending, the CPI, Case-Shiller, consumer confidence/sentiment, pending home sales, construction spending, monthly payrolls, factory orders, plus weekly jobless claims declined. Next week’s highlights: ISM services and consumer credit.

LONG TERM: uptrend

After a 10-month uptrend with nothing larger than a 1.43% weekly decline, and the market closing at its all-time high last Friday, the market sold off at the start of the week and continued declining right into the Friday close. Down 3.85% for the week. The largest weekly drop since January 2016. Intermediate iv underway? When we look back to previous corrections during this bull market we find them rather small: 72, 110 and 119 points. This decline is already 113 points, almost as large as the biggest correction of the bull market. In percentage terms the corrections have been a bit larger: 3.3%, 5.0% and 5.6%. This decline is already 3.9%. Lots of damage for just one week.

The long-term count remains unchanged. Major wave 1, of Primary III, bull market underway. Intermediate waves i and ii ended in the spring of 2016. Intermediate iii then subdivided. Minor waves 1 and 2 ended in the fall of 2016, and Minor waves 3 and 4 ended in the spring of 2017. Minor wave 5, and Intermediate iii, may have just ended a week ago Friday. If Int. iv is indeed underway, would not expect too much more than a 5% correction, before an Int. v uptrend carries the market to new highs.

MEDIUM TERM: downtrend underway ?

As noted above, the current pullback is acting more like a correction than a pullback in this bull market. Even though indices were extremely overbought, which they have been for weeks and weeks, and there were some daily negative divergences on the DOW/NAZ/NDX. There was little warning, if any, of what would happen this week.

What we did notice, as the decline was unfolding, is that on Wednesday the market confirmed 5 waves up from the Minute iv SPX 2557 low. We thought nothing of it since the five waves were clearly lopsided: 2590-2578-2658-2606-2873; wave 1 (33 pts.), wave 3 (80 pts.) and wave 5 (266 pts.). Also wave 3 was only 2 weeks, while wave 5 wave 2 months. Naturally we thought that 5th wave was actually a third wave of a larger structure. So much for that thinking. Medium term support is now at the 2731 and 2656 pivots, with resistance at the 2780 and 2798 pivots.

SHORT TERM

As you have probably noticed by now. The short term count we have been tracking is now the alternate count, posted on the hourly chart. And the primary count is that Intermediate wave iii has completed at SPX 2873, and is posted on the daily chart. Either way, short term, the market is extremely oversold and due for at least a bounce.

Short term support is at the 2731 and 2656 pivots, with resistance at the 2780 and 2798 pivots. Short term momentum ended the week extremely oversold. Best to your trading!

FOREIGN MARKETS

Asian markets were all lower and lost 1.4%.

European markets were all lower and lost 2.7%.

The DJ World index dropped 4.1%, and the NYSE dropped 4.1%.

COMMODITIES

Bonds continue to downtrend and lost 1.1% on the week.

Crude remains in an uptrend but lost 1.0% on the week.

Gold is still in an uptrend but lost 1.1%.

The USD remains in a downtrend and lost 0.4%.

NEXT WEEK

Monday: ISM services. Tuesday: the trade deficit. Wednesday: consumer credit. Thursday: weekly jobless claims.

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