Weekend update

REVIEW

The market started this roller coaster week at SPX 2633. After the low open on Monday the market dropped to its lowest level of Intermediate wave A at SPX 2583. After that the market rallied strongly, went higher Tuesday, and even higher Wednesday to SPX 2685, before it started to pullback. The pullback was just as fast to the downside as the SPX hit 2594 Friday afternoon, before closing at 2600. Down 50, up 100, down 90. For the week the SPX/DOW lost 1.25%, and the NDX/NAZ lost 0.55%. On the economic front positive reports outpaced negatives ones. On the downtick: import prices, plus the budget deficit increased. On the uptick: the PPI, retail sales, industrial production, capacity utilization, business inventories, plus jobless claims improved. The ECRI ticked up a bit this week. Next week’s reports will be highlighted by the FOMC meeting and Q3 GDP.

LONG TERM: downtrend probable

It seems every time the market has made a low during this downtrend, with positive hourly/daily divergences and a weekly oversold RSI, we expected the downtrend to have ended. The market then rallied for a period of time, only to roll over and make lower lows soon thereafter. Such was nearly the case again on Monday at the recent SPX 2583 low. The medium term Intermediate wave A downtrend continues.

Long term not much has changed. Five Intermediate waves up from SPX 1810 to SPX 2941. Int. iii subdivided into five Minor waves. All corrections, alternated with their corresponding wave degrees. An EW normality that has been nearly absent in recent years. With Major wave 1 completed, a Major wave 2 bear market is probably underway.

MEDIUM TERM: downtrend continues

As noted, we had thought Monday’s low was finally the end of this first bear market downtrend. We had labeled a tentative Int. A at its low. But after a 100 -point rally the market dropped nearly back to that low again on Friday. It would appear, as of Friday, all four indices will need to make that lower low before this downtrend can conclude. We still think the SPX 2577 level should hold. If not SPX 2550.

The downtrend pattern remains the same: an a-b-c down A, an a-b-c up B, and now an a-b-c down C. The entire pattern appears to be a complex 3-3-3 taking the form of a flat. Thus far it looks somewhat similar to Primary 2, only shorter in duration. P2 had a 4-month downtrend, a 1-month uptrend, then another 4-month downtrend. This first downtrend is currently just 2-months.

SHORT TERM

After Monday’s low we tracked the advance from SPX 2583 to 2685 as 5 choppy waves up: 2674-2621-2660-2637-2685. The decline from that high has been 5 choppy waves down: 2650-2670-2637-2656-2594. Since the declines have recently been 7 choppy waves down. We expect a short 20-point rally soon and another low to end this wave. Then another attempt at Intermediate wave B?

Technically a small rally, then decline could setup another hourly positive divergence. The weekly RSI is already sitting at a positive divergence. Maybe the FED will be the catalyst to put in the final low, and get Int. wave B underway. Short term support is at the 2594 and 2575 pivots, with resistance at the 2632 and 2656 pivots. Short term momentum ended the week oversold. Best to your options expiration trading!

FOREIGN MARKETS

Asian markets were mostly lower on the week for a net 0.5% loss.

European markets were mixed and gained 0.3%.

The DJ World index lost 1.2%, and the NYSE lost 1.6%.

COMMODITIES

Bonds continue to uptrend but lost 0.3% on the week.

Crude remains in a downtrend and lost 2.7% on the week.

Gold remains in an uptrend but lost 0.9% on the week.

The USD continues to uptrend and gained 0.6% on the week.

NEXT WEEK

Monday: NY FED at 8:30 and NAHB at 10am. Tuesday: housing starts and building permits. Wednesday: existing home sales and FOMC statement. Thursday: jobless claims, leading indicators, and Philly FED. Friday: Q3 GDP, durable goods, personal income/spending, consumer sentiment, and options expiration.

CHARTS: https://stockcharts.com/public/1269446/tenpp