Weekend update

REVIEW

The holiday shortened week started at SPX 2732. The market gapped down on Tuesday, traded down to SPX 2707, then rallied to 2748 by Wednesday. Another pullback took the SPX to 2698 by Thursday. Then the market rallied to close out the week, at the high of the week, SPX 2748. For the week the SPX/DOW gained 0.50%, and the NDX/NAZ gained 1.65%. Economic reports were sparse and mixed. On the downtick: existing home sales. On the uptick leading indicators, plus jobless claims were lower. Next week’s economic highlights: FED chair Powell’s congressional testimony and Q4 GDP (est. +2.5%).

LONG TERM: uptrend

After a ten month Minor wave 5 uptrend the market sold off for two weeks, losing nearly 12%. Its biggest decline in two years. Overall the decline was only a 38.2% retracement of the entire Intermediate wave iii. Quite a common retracement level – nothing unusual. At the low there were daily positive RSI divergences across all 4 major indices, oversold conditions on the weekly RSI, and even a positive RSI divergence on the SPX hourly chart. The typical downtrend low indications.

Overall the Major wave 1 bull market count remains the same. Intermediate waves i and ii ended in the spring of 2016. Intermediate iii then subdivided. Minor waves 1 and 2 completed in the fall of 2016. Minor waves 3 and 4 completed in the spring of 2017. Then Minor wave 5, Intermediate iii, completed in January. Thus far it looks like Intermediate iv completed in February at SPX 2533.

MEDIUM TERM: uptrend probably underway

After the zigzag low at SPX 2533 the market rallied strongly and hit 2754 just one week later. This week the market consolidated after that gain ending at the high for the week. A positive sign. With a WROC already triggered it looks like the Intermediate v uptrend is underway.

With an Intermediate wave v uptrend probably underway the Major wave 1 bull market is likely a lot closer to its end than its beginning. Int. wave v could subdivide into five Minor waves, which would have been the preferred scenario if Int. iv would have only dropped about 5%. But with a 12% drop it seems a one trend Int. v is more likely.

If a subdividing Int. v was likely, then a bull market upside target might have been well into the SPX 3000’s. With only one trend, however, the likely high may not be all that impressive. If this uptrend struggles as it rises, a marginal new high may be all there is for now. If the uptrend accelerates to the upside, then SPX 3000 is easily within reach. Medium term support is at the 2731 and 2656 pivots, with resistance at the 2780 and 2798 pivots.

SHORT TERM

The short term count for this potential uptrend has been fairly clear thus far. A Minor wave 1: SPX 2754, a Minor wave 2: 2707-2748-2698, and a Minor wave 3 underway now. Minor wave 1 began with a +div, then topped with a -div. Minor wave 3 recently began with a +div too. Let’s see if this pattern continues.

Looking ahead. Once the 2884 pivot is cleared, the next pivot is not until 3020. Short term support is at the 2731 and 2656 pivots, with resistance at the 2780 and 2798 pivots. Short term momentum ended the week overbought. Best to your trading!

FOREIGN MARKETS

Asian market were all higher and gained 1.3%.

European markets were mixed and gained 0.1%.

The DJ World index gained 0.4%, and the NYSE gained 0.1%.

COMMODITIES

Bonds remain in a downtrend but gained 0.2%.

Crude is also in a downtrend but gained 3.3%.

Gold appears to be heading into a downtrend and lost 1.9%.

The USD remains in a downtrend but gained 0.7%.

NEXT WEEK

Monday: new homes sales 10am. Tuesday: durable goods, Case-Shiller, consumer confidence and FED chair Powells’ testimony. Wednesday: Q4 GDP (est. 2.5%), the Chicago PMI and pending home sales. Thursday: jobless claims, personal income/spending, ISM, construction spending, and auto sales. Friday: consumer sentiment.

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