Provided by the OEW Group
September 7 2019
SPX opened the week lower on Tuesday (post Labor Day Holiday) and made the low of the week at 2892 within the first hour of trading, then proceeded to rally back and finish the day at 2906, down from last weeks close at 2926. Wednesday had a gap up at the open to retest last weeks close and continued to rally for the rest of the day to reach the highest close since August 8th at 2938. Thursday saw an even larger gap up to make the high of the week at 2986 within the first hour of trade, then consolidated in a narrow trading range for the rest of the day and finish at 2976. Friday had a quiet open and continued to stay in that same narrow range for the remainder of the day before closing the week at 2979.
For the week, SPX/DOW gained 1.79%/1.49% while NDX/NAZ gained 2.10%/1.76%.
On the economic front, ISM non-Manufacturing increased and accelerated, while ISM-Manufacturing declined below 50%. Factory Orders, Unit Labor Costs, Payrolls, Hourly Earnings and Labor Force Participation Rate were all higher, while the rate of job growth slowed. Unemployment rate held steady at 3.7%.
Investor Confidence declined to the lowest reading since December, just below the bullish line and into the neutral range as we read the data. The ECRI growth indicator declined and is now extending the previous low further negative.
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. We continue to track our alternate count on DOW in the public chart list. No change to our long term count on SPX, as Intermediate wave i of Major wave 3 is underway from the Major wave 2 low in December 2018 and continues to subdivide into Minor and Minute waves.
MEDIUM TERM: Uptrend
SPX broke out on Thursday with a large gap over prior resistance established during the August trading range and reached the high of 2986, before settling in to close the week at 2979, which was sufficient to confirm a new uptrend is underway. We’ve updated the medium term status accordingly, which suggests Minute wave ii bottom has finally been established. Our cautionary posture proved wrong, as the favorable close mentioned last week turned out to be the correct signal that the downtrend was over. We have confirmed uptrends now on all four key US markets that we track as well as 5 of 9 US sectors and China too. However, there are notable laggards including RUT, TRAN, XLE, XLF, as well as some in Asia and Europe. We would expect most of these to confirm in the near future for our long term view to remain intact. There was much discussion and some disagreement within the group over various choices for counting the sideways chop in August. Regardless of the differences, there was strong consensus that Minute wave ii bottom occurred at one of the three lows, 2822, 2826 or 2835 and Minute wave iii is now underway. For now, we’re tracking that price action as a leading diagonal for Micro wave 1 of Minute wave iii from 2822 to 2940, followed by Micro wave 2 pullback to 2892, with Micro wave 3 in progress to 2986 so far. This price structure projects our nominal target for Minute wave iii at around 3200.
As mentioned last week, the group has come up with several counts to resolve the choppy price action in August, but all of these have various pros and cons relative to our OEW methodology. Some generate odd patterns and others don’t fit with our short term tracking techniques. Yet they all suggest the same basic outcome, which is that Micro waves 1 and 2 are complete and Micro wave 3 of Minute wave iii is underway with possibility of some small wave subdivisions developing. We’ve chosen the one that seems to fit best with our short term tracking techniques and will continue to monitor the other options as the trend evolves. We counted three corrective rallies off each of the August lows as Nano wave a = 2943, Nano wave c = 2939 and Nano wave e = 2940, which suggests the leading diagonal pattern shown for Micro wave 1. Then Micro wave 2 = 2892, which is pretty close to fib 38.2% retracement of the entire diagonal pattern. Micro wave 3 found resistance at our 2984 pivot and has consolidated just below there for the time being. We’re now watching for impulsive price action to continue. If it remains corrective, then something else may be in play. Our initial target for Micro wave 3 is up around 3080.
Short term support is at the 2957 and 2929 pivots. Resistance is at the 2984 and 2995 pivots. Short term RSI ended the week neutral after reaching overbought levels at the high.
Asian markets (using AAXJ as a proxy) gained 2.93%.
European markets (using FEZ as a proxy) gained 1.91%.
The DJ World index gained 1.89%, and the NYSE gained 1.54%.
Bonds are in an uptrend and lost 0.25%
Crude oil is in a downtrend and gained 2.58%
Gold is in an uptrend and lost 0.91%
GBTC is in a downtrend and gained 9.99%.
The USD is in an uptrend and lost 0.50%.
Have a good week!