The FED turns dovish and the market rallies. The week started off at SPX 2633. After a gap up opening on Monday the market rallied to SPX 2674. Tuesday had a gap down opening to SPX 2656, but the market reversed and rallied to 2683 by the close. Wednesday had another gap up opening as the market surged to SPX 2744. Thursday another gap down opening, this time to SPX 2723. But the market rallied to SPX 2754 before pulling back into the close. Friday had a quiet open, but rallied to SPX 2761 just before the close. For the week the SPX/DOW gained 5.05%, and the NDX/NAZ gained 6.05%. Economic reports for the week were mixed. On the downtick: Case Shiller, consumer confidence, new/pending home sales, plus weekly jobless claims rose. On the uptick: personal income/spending, the CPI, and the Chicago PMI. Next week’s reports will be highlighted by the Beige book, the payrolls report, and the ISMs. Best to your week!
LONG TERM: downtrend probable
The strong FED induced rally now has a number US indices in confirmed uptrends: TRAN, SOX, R2K, NYSE, HGX, XLB, XLF, XLI, XLP, XLV, and XLU. It might have also contributed to confirmed uptrends in the following foreign indices: Brazil, Canada, China, Hong Kong, India, Japan, Singapore, S. Korea, Spain, and Switzerland. This would suggest that Intermediate wave B is finally underway in the big four US indices. This weeks WROC signal, which sometimes occurs prior to uptrend confirmations, suggests the same. Meanwhile the ECRI continues to slip.
Our long term view remains unchanged. Primary wave I ended in 2015, and Primary wave II ended in 2016. After that Primary wave III was underway. The bull market from 2016-2018 was Major wave 1, of Primary III, and a bear market Major wave 2 should be underway now. Thus far the growth sector has taken the brunt of the selling, down 16% at the low. While the SPX was down 11.5% at its low. Once this potential uptrend concludes the market should decline in an Intermediate wave C to end the bear market.
MEDIUM TERM: uptrend potentially underway
With this weeks strong rally and WROC signal there is a good chance the Int. B uptrend is underway from last Friday’s low. So far we have one wave up and we would expect three, or something more complicated, before the uptrend ends. A normal retracement of Int. A would put the SPX right back around the 2815 area.
B wave retracements, in recent years, have been stronger than normal. This would suggest possibly the 2858 or 2884 pivots. For now let’s take it one pivot at a time. After Int. wave B concludes, Int. wave C should take the market to new lows for the bear market before it ends.
The one wave noted above, on a much shorter term basis, is actually nine waves up, and looks impulsive: 2672-2653-2754 (2674-2656-2744-2723-2754)-2733-2761. The waves within the parenthesis are the subdivisions of the third wave. All of the pullbacks during this rally have only been about 20 points.
With five waves up, a negative divergence on the hourly chart, and overbought on the daily chart, it’s possible for a bigger pullback early next week. Short term support is at the 2731 and 2656 pivots, with resistance at the 2780 and 2798 pivots. Best to your trading!
Asian markets were nearly all higher on the week for a gain of 1.7%.
European markets were all higher and gained 2.1%.
The DJ World index gained 3.2%, and the NYSE gained 3.5%.
Bonds continue to uptrend and gained 0.3%.
Crude remains in a downtrend but gained 1.0%.
Gold remains in a choppy uptrend and lost 0.3%.
The USD is still in an uptrend but lost 0.1%.
Monday: ISM and constructions pending at 10am. Tuesday: auto sales. Wednesday: ADP, ISM services, and the Beige book. Thursday: weekly jobless claims, the trade deficit, and factory orders. Friday: monthly payrolls, consumer sentiment, consumer credit, and wholesale inventories.