Weekend update

REVIEW

The week started at SPX 2718. After a gap down opening on Monday to SPX 2699, the market rallied for the rest of this holiday week. Tuesday’s gap up opening carried the SPX to 2737. Then after a pullback to SPX 2713 by Tuesday’s close, the market gapped up again on Thursday. By Friday the SPX had hit 2764, then ended the week at 2760. For the week the SPX/DOW gained 1.15%, and the NDX/NAZ gained 2.4%. Economic reports for the week were mostly positive. On the downtick: the ADP, Payrolls, plus jobless claims increased. On the uptick: ISM manufacturing/services, construction spending, auto sales, factory orders, and the trade deficit improved. Next week’s reports will be highlighted by the CPI/PPI and export/import prices. Best to your week!

LONG TERM: uptrend

Trade and tariffs have in the news for weeks and months. In fact, the POTUS started this whole series of events back in January: https://www.nytimes.com/2018/01/22/business/trump-tariffs-washing-machines-solar-panels.html. Initially most stock markets fell: Dow Jones Global index dropped 11%. Since then most world markets have stabilized, except one: China. Since its January high it has dropped 24% in one continuous downtrend into a bear market. S. Korea, which is also mentioned in the article is only down 14% from January. And the US is currently down only about 5% from its January high. China is the clear loser in any trade war with the US.

Nothing has changed with the long-term view. Super cycle low 2009, Primary I high 2015, and Primary II low 2016. Primary III has been underway since then. Primary III is dividing into five Major waves. The first Major wave bull market is currently in its late stages. Major wave 1 has divided into five Intermediate waves. Int. waves i and ii completed in the spring of 2016. Int. iii then subdivided into five Minor waves. 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, completing Int. iii, took 10 months to unfold and completed in January. Since then a complex Int. iv has been underway. When it concludes Int. v should take the SPX to new highs.

MEDIUM TERM: downtrend probably underway

Last weekend, with the SPX at 2718, we expected the market to continue to decline until it hit the 2656 or 2632 pivots. The market opened on Monday at SPX 2699, but then immediately rallied after that and ended the week 2% higher at 2760. No decline, and no downtrend conformation. The choppiness continues.

We  continue to carry the triangle scenario on the SPX daily chart. Should/when we do see an OEW downtrend confirmation, then we can be relatively certain wave e, of the triangle, is underway. Until then this market is still in an uptrend, and only about 1% from a higher high (SPX 2791). It has been that kind of market. Medium term support is at the 2731 and 2656 pivots, with resistance at the 2780 and 2798 pivots.

SHORT TERM

Last weekend we posted this count on the hourly chart but spent little/no time discussing it. On Wednesday we noted that the SPX 2690’s were providing support, while the rallies had been topping at lower and lower levels: 2746, 2743, 2737. On Thursday the SPX hit 2738, before closing at 2737. Then on Friday, the market opened at SPX 2738 and rallied all the way to 2764, before closing at 2760. Clearly the short term pattern changed over the past two days.

What this suggests, is that a continuation of the uptrend is back on the table if SPX 2791 is exceeded. Other than that we are still expecting lower lows (SPX 2692) this month. Short term support is at the 2731 pivot and the SPX 2690’s, with resistance at the 2780 and 2798 pivots. Short term momentum ended the week extremely overbought. Best to your trading!

FOREIGN MARKETS

The Asian markets were mostly lower and lost 1.3%.

The European markets were mostly higher and gained 1.0%.

The DJ World index gained 0.9%, and the NYSE gained 1.3%.

COMMODITIES

Bonds are uptrending and gained 0.2% on the week.

Crude continues to uptrend but lost 0.5% on the week.

Gold continues to downtrend but gained 0.1% on the week.

The USD remains in an uptrend but lost 0.1%% on the week.

NEXT WEEK

Monday: consumer credit at 3pm. Wednesday: the PPI and wholesale inventories. Thursday: the CPI, weekly jobless claims, and the budget deficit. Friday: export/import prices and consumer sentiment.

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