Provided by the OEW Group
August 31 2019
SPX opened the week higher and rallied to finish Monday at 2878, up from last weeks close at 2847. Tuesday had a large gap up at the open, but quickly sold off into the early afternoon before a rally into the close at 2869. Wednesday gapped down and tested below Monday’s range, to make the low of the week at 2853 within the first 30 minutes of trade. From there, the market quickly reversed, rallying for the rest of the day to close higher on Wednesday, followed by gaps up both Thursday and Friday, to make the high of the week at 2940 within the first hour of Friday trade. SPX then pulled back and consolidated for the rest of the day to finish the week at 2926. The best week since the first of June!
For the week, SPX/DOW gained 2.79%/3.02% while NDX/NAZ gained 3.03%/2.72%.
On the economic front, Durable Goods, Personal Income and Spending, PCE and core PCE were all positive. Consumer Confidence and Sentiment both declined, however Consumer Sentiment is still bullish at 54.8 as we read it. GDP (2nd estimate) is +2.0% but was revised down slightly from the previous estimate.
The ECRI growth indicator declined and is now testing the higher low for the year.
LONG TERM: Uptrend may be weakening
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 and the Major wave 1 high of Primary wave III occurred in October 2018. As mentioned last week, we’ve opened up the possibility for an alternate outcome, which suggests that Major wave 2 may be extending with a possible retest of the lows established in December 2018. This more bearish view is posted on our DOW charts, which can be found in the public chart list via the link provided at the end of this report. This week price recovered to close above the long term EMA’s, which suggests the market may be firming up and supports our primary count that Intermediate wave i of Major wave 3 is underway from the Major wave 2 low in December 2018 and is subdividing into Minor and Minute waves, as shown on the SPX chart. We will continue to focus our attention on this more bullish view until it becomes invalidated by future price action.
MEDIUM TERM: Downtrend may be firming up
SPX started the week positive and continued to make a strong rally throughout the week with only one retest to a higher low at 2853 on Wednesday morning. It peeked Friday morning at 2940 to get the high of the week, but again ran into resistance only to fall back and consolidate just below our 2929 pivot, the same level it’s been battling to break out of all month. Similar price action to last week, however this time SPX was able to close in favorable territory, above both the medium and long term EMA’s. Although this typically suggests the downtrend has bottomed, we’re cautious until price can break out of the trading range. Consequently we’ve updated the medium term count such that Micro wave b is still underway and has now subdivided into three waves so far, 2939-2835-2940. Micro wave c is pending, with the next target for potential Minute wave ii extension down to 2815. Alternatively, a break above 2950 would suggest Minute wave ii bottom may be in.
Medium term, RSI is rising through the neutral zone and MACD has turned positive with a bullish cross.
For the third week in a row, SPX was unable to impulse higher off of the previous week’s low, and again stalled out in the same region, with an intraday high of 2940 at the open on Friday, before closing the week at 2926. This was the strongest weekly rally since coming off the Minor wave 2 low in early June. As mentioned, we still remain cautious until SPX can break out of the trading range and begin to show impulsive structure. There’s lots of short term counts to consider under this kind of price action. Some in our group have suggested a leading diagonal from 2822. Others have suggested a contracting triangle that may have ended at 2835. Some may see a possibility that an impulsive 1-2 sequence is underway from our original Minute wave ii low reported previously at 2826. However, until the rally proves itself, we’re taking the most conservative view which suggests Micro wave b may have extended. Using our short term techniques, we can count seven waves up from Micro wave a low at 2826, and have labeled that sequence as a double three pattern, Nano wave a 2931-2900-2939, Nano wave b 2835 and Nano wave c 2899-2853-2940. If the small pullback on Friday can hold and extend higher, then that would be the first chance for an impulsive rally since the downtrend began. Until then, we’re anticipating another retest of the low and possibly lower to complete Minute wave ii. Our next target below is 2815 which is taken as 0.618x Micro wave a.
Short term support is at the 2884 and 2858 pivots. Resistance is at 2929 and 2957 pivots. Short term RSI ended the week with a negative divergence.
Asian markets (using AAXJ as a proxy) gained 2.37%.
European markets (using FEZ as a proxy) gained 2.32%.
The DJ World index gained 1.83%, and the NYSE gained 2.58%.
Bonds are in an uptrend and gained 0.04%
Crude oil is in a downtrend and gained 1.72%
Gold is in an uptrend and lost 0.53%
GBTC is in a downtrend and lost 7.74%.
The USD is in an uptrend and gained 1.36%.
Have a good week!