Provided by the OEW Group
October 12 2019
SPX opened the week down, but rallied higher to reach 2960 in the afternoon, before closing Monday back down at 2938. Last weeks close was 2952. Tuesday opened with a large gap down and declined to reach 2897 by noon, then rallied up to 2925 by the late afternoon, but abruptly reversed to close on the low of the week at 2893 in the last hour of trade. Wednesday opened higher and rallied most of the day to finish at 2920. Thursday rallied up to 2948 before noon, then pulled back and leveled off to close at 2938. Friday opened with a big gap higher over Monday’s price range to reach the high of the week at 2993 by late morning, then proceeded to consolidate for the rest of the day, before selling off in the last half hour to close the week at 2970.
SPX/DOW gained 0.62%/0.91% while NDX/NAZ gained 1.16%/0.93%.
On the economic front, PPI and Core PPI declined. CPI was flat while core CPI was up slightly. Consumer Sentiment was higher and bullish at 61% as we read the data. The ECRI weekly growth indictor moved up for the fourth week in a row and remains above the zero line at +1.06%.
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. Our preferred long term count is posted on SPX, which reflects that Intermediate wave i of Major wave 3 is underway from the Major wave 2 low in December 2018 and continues to subdivide into Minor, Minute and now Micro waves. However, we maintain our cautious status that the uptrend may be weakening until Major wave 3 can clearly breakout of this overlapping structure. Consequently, we’re still tracking our alternate count on DOW in the public chart list.
MEDIUM TERM: Uptrend likely underway
SPX traded down to reach the low of the week at 2893 on Tuesday, then rallied for the rest of the week to achieve an intraday high of 2993 on Friday, followed by a pullback to close at 2970. Tuesday again produced the negative reversal as seen the last couple of weeks, but this time price held there with no follow through. This price action was constructive, establishing a higher low and supports the potentially completed zig zag pattern for this downtrend as discussed in the previous report. SPX tested the top of last week’s range and found resistance there at our 2995 pivot. But the rally was able to gap over EMA resistance and travel well beyond the 61.8% retracement level for this downtrend. Consequently, we’ve updated the medium status and identified a tentative Micro wave 2 at the 2856 low. From there, we now have qualified medium term subdivisions that suggest three waves up from the tentative Micro wave 2 low. This is a good start for an impulsive structure, however more price action is needed to further qualify it. An overlap back below 2960 would suggest an additional subdivision may be developing, while a large retrace back below 2893 would invalidate the impulse and extend the downtrend. Medium term RSI moved up in the neutral zone and MACD is beginning to turn back up.
Not much to add here as the short term waves currently track closely with the medium term subdivisions. We’ve updated the chart and scaled the three waves up as Nano wave i = 2960, Nano wave ii = 2893 and Nano wave iii in progress. We are now waiting to see if Nano wave iii can extend and/or subdivide to further confirm an impulsive structure. So far, the first and third waves of this rally are nearly equal at 104 and 100 points respectively, which could suggest a completed zig zag b-wave for a possible extension of the existing downtrend. We’ll just have to wait and see how the market resolves these short term patterns. RSI ended the week neutral after becoming overbought at the highs.
Short term support is at the 2957 and 2929 pivots. Resistance is at the 2984 and 2995 pivots.
Asian markets (using AAXJ as a proxy) gained 1.90%.
European markets (using FEZ as a proxy) gained 3.17%.
The DJ World index gained 1.20%, and the NYSE gained 0.74%.
Bonds are in a downtrend and lost 1.49%
Crude oil is in a downtrend and gained 3.58%
Gold is in an uptrend and lost 1.60%
GBTC is in a downtrend and gained 1.29%.
The USD is in an uptrend and lost 0.49%.
Have a good week!