Provided by the OEW Group
July 27, 2019
This week opened higher, then quickly reversed to retest Friday’s close and make the low of the week at 2977 before noon on Monday. From there, SPX rallied Monday afternoon, gapped up on Tuesday and continued to rally through Wednesday to reach another all-time high at 3020 by the close on Wednesday. Thursday gapped down and declined to reach the low of the day at 2997 by early afternoon, then rallied and traded in a 10 point range to close the day at 3004. Friday had another gap up and proceeded to test 3020 within the first hour of trading, then continued to extend the rally to a high of 3028, before closing the week at yet another all-time high of 3026.
For the week, SPX/DOW gained 1.65%/0.14% while NDX/NAZ gained 2.32%/2.12%.
On the economic front, New Home Sales and FHFA Housing Price Index were higher, while Existing Home Sales, Mortgage Applications, and Crude Oil Inventories were lower.
Next week economic news comes from Personal Income and Spending, PCE Price Index and S&P Case-Shiller Price Index.
LONG TERM: Uptrend
In the US, the long-term count remains unchanged with the Super Cycle SC2 low in March 2009. The Primary wave I high occurred in May 2015 and Primary wave II low in February 2016. Primary wave III has been underway ever since. Major wave 1 high of Primary wave III occurred in October 2018 and Major wave 2 low in December 2018. Intermediate wave i of Major 3 is now underway and is subdividing into Minor waves.
MEDIUM TERM: Uptrend
The strong rally this week to new highs was sufficient to qualify last week’s low as a completed wave, which suggests SPX is working on the third wave up of this uptrend. As noted in last week’s report, the 45 point pullback is smaller than expected, which resulted in much discussion in the OEW group about how to count it. Nevertheless, our guidelines suggest it meets the criteria for a medium term subdivision, so we’ve updated the count accordingly. This suggests that we now have Minute waves i and ii complete, with Minute wave iii in progress. Still a little caution is advised, since DOW is lagging and was unable to make new highs. This rally needs to sustain through the next pivot or so to further confirm the third wave up. A reversal and drop below the prior low would suggest something else is in play. We will be watching the short term waves for any changes. The first logical target for Minor wave 3 completion remains above the 3300 level.
Medium term, RSI continues to build negative divergence at the high this week and MACD remains in a bearish cross.
We updated the short term count to our alternate contracting diagonal structure mentioned last week, which gives Minute wave i complete at 3018. We then have Minute wave ii as a slightly failed flat with Micro wave a = 2973, Micro wave b = 3006 and Micro wave c = 2976. Minute wave iii has been underway since then with a 52 point rally so far, off a failed double bottom. Minute wave ii never came close to either of the targets mentioned last week, 2963 or 2913, so risk of a potential failure remains. Key level to watch for next pullback is 2976. A drop below that suggests Minute wave ii may be subdividing instead.
Short term support is at the 2995 and 2984 pivots. Resistance is at the 3033 pivot. RSI ended the week overbought with a negative divergence.
Asian markets (using AAXJ as a proxy) lost 0.24%.
European markets (using FEZ as a proxy) gained 0.55%.
The DJ World index gained 0.73%, and the NYSE gained 0.94%.
Bonds are in an uptrend and lost 0.32%
Crude oil is in an uptrend and gained 0.79%
Gold is in an uptrend and lost 0.52%
GBTC is in an uptrend and lost 5.80%.
The USD is in an uptrend and gained 0.96%.
Have a good week!