Another big down week for the market. The week started at SPX 2752. After a gap down opening on Monday the market traded below key support at SPX 2732, then dropped below 2700. By Wednesday the market had rallied to SPX 2738, then the big decline followed on Thursday/Friday. By late Friday the SPX had hit 2586, then ended the week at 2588. For the week the SPX/DOW lost 5.85%, and the NDX/NAZ lost 6.90%. Economic reports for the week were sparse and mixed. On the downtick: new home sales, plus weekly jobless claims rose. On the uptick: existing home sales, leading indicators and durable goods. Also, the FED raised short term rates, as expected, 25 basis points. Next week’s reports will be highlighted by the Q4 GDP report.
LONG TERM: uptrend
For most of 2017 the market did what was not expected: it continued to uptrend medium term. In fact the uptrend lasted from April 2017 to January 2018. One of the longest uptrends in 30 years. Since that uptrend high was made, in the closing days of January at SPX 2873, the market has been on a roller coaster ride. In fact, the volatility of the past two months has not been seen in 2 years: early 2016. The biggest medium term correction, since early 2016, had been only 5+% until recently. The current correction is close to 12%. In recent months this market has definitely done the unexpected.
The long term count, however, remains unchanged. A Major wave 1 bull market has been unfolding in five Intermediate waves. Intermediate waves i and ii concluded in the spring of 2016. Intermediate wave iii then started to subdivide. Minor waves 1 and 2 completed in the fall of 2016, and Minor waves 3 and 4 completed in the spring of 2017. Minor wave 5 , to end Int. iii, completed in January at SPX 2873. Since then, a complex Int. wave iv has been underway.
MEDIUM TERM: downtrend continues
By many OEW parameters this correction has been the exception rather than the rule. For example. All corrections in this bull market had been 5+% or less. This one is an outlier 12%. Then even after such a decline, a perfect technical setup occurred at the lows. All four major indices bottomed, advance strongly triggering a WROC, but only the NDX/NAZ confirm uptrends and make new bull market highs. The SPX/DOW retrace about 80% of the initial decline, and then head lower again. A WROC failure, which had a success rate of 96% over the past 50 years. A strange beginning to 2018.
Overall this Intermediate wave iv downtrend looks like it should end up at a flat configuration. It can also be a triangle, or something more complex, but a flat alternates with Int. wave ii. We can count the first decline, wave A (SPX 2873-2533), as a three wave pattern. Then after a pair of zigzags to SPX 2802 to form wave B, we have what appears to be a five wave decline underway for wave C. A flat is a 3-3-5. Medium term support is at the 2575 and 2525 pivots, with resistance at the 2594 and 2632 pivots.
After the Minor wave b high at SPX 2802 the decline started slowly, then picked up momentum as it continued. This is similar to the action from the all-time high at SPX 2873. At the final low for Minor wave ‘a’ a similar RSI +div appeared on the hourly chart as appears today. With an end of quarter and a holiday this week the market could be setting up for a downtrend low.
The quantified five waves down we have noted for Minor c, from Minor b SPX 2802: 2741-2762-2695-2739-2586 so far. The fifth wave is much longer than the first two declines, which are about equal. Fibonacci suggests the OEW 2575 pivot range could act as good support. And if it doesn’t hold a retest of SPX 2533 will likely follow. Best to your trading!
Asian markets were all lower ad lost 3.1%.
Europe markets were all lower and lost 3.7%.
The DJ World index lost 4.3%, and the NYSE lost 4.8%.
Bonds remain in a downtrend and lost 0.1%.
Crude appears to be uptrending and gained 5.6%.
Gold appears to be uptrending and gained 2.9%.
The USD also appears to be uptrending but lost 0.9%.
Tuesday: Case-Shiller and consumer confidence. Wednesday: Q4 GDP (est. 2.8%), pending home sales. Thursday: weekly jobless claims, personal income/spending, Chicago PMI, and consumer sentiment. Friday a national holiday.