Weekend update

REVIEW

The week started off at SPX 2723. It was a strong week to the upside until the FED announced on Thursday a rate increase is likely next month, and three more in 2019. The market gapped up on Monday, continued higher on Tuesday, then gapped up again post mid-term elections on Wednesday. At Wednesday’s high the SPX hit 2815. After a small pullback and another rally to SPX 2815 the market began to pullback. A gap down opening on Friday took the SPX to 2764, then the market bounced to end the week at 2781. For the week the SPX/DOW gained 2.45%, and the NDX/NAZ gained 0.90%. Economic reports for the week were mixed. On the downtick: ISM services, consumer credit and consumer sentiment. On the uptick: the PPI, wholesale inventories and weekly jobless claims improved. Next week’s reports will be highlighted by industrial production, retail sales and the CPI. Best to your week!

LONG TERM: downtrend probable

The market continues to generally track as expected. After a five wave bull market, with a subdividing third wave, from SPX 1810 to SPX 2941, the market reversed and appears to be in a potentially short-lived bear market. The first decline of this bear market bottomed in October at SPX 2604. Currently it looks like the market has been in a counter-trend rally, and has already retraced 61.8% of that entire initial decline.

Since we are expecting a three wave bear market we are labeling the first decline as Intermediate wave A, and the current rally as Intermediate wave B. Intermediate wave C should naturally follow once this rally/uptrend concludes. During the C we are expecting the SPX to break through the recent lows with a maximum downside target around SPX 2400 (green line). After that the next bull market should begin. Keep in mind we are in a Secular generational bull market, and we are not expecting it to top until the early 2030’s.

MEDIUM TERM: uptrend probable

We are currently working with a couple of variables as is normally the case when one trend appears done and a new one underway. We refer to the downtrend from SPX 2941-2604 as probably being completed at that low, and a counter-trend uptrend now underway. The second variable is the degree of the waves. Are they Minor or Intermediate? What occurs in the next couple of weeks/months should determine that. But we will go with Intermediate scenario for now since the initial decline was quite steep.

From the SPX 2941/2940 bull market high we labeled the first decline in three Minor waves: 2711-2817-2604, as Int. A. Off that low it appears that Minor wave A, of Int. B, has completed at SPX 2815, which we labeled with a tentative green label. If this is correct we now would expect a decline to around SPX 2700 for Minor wave B. When that concludes, a Minor C rally should take the market back to SPX 2815, or a bit higher, to end the Intermediate wave B uptrend. After that an Intermediate wave C downtrend should take over.

SHORT TERM

While the Intermediate wave A downtrend was quite volatile, creating many waves. This uptrend has been a bit more subdued. Off the SPX 2604 low we tracked 5 waves up to 2737, a pullback to 2709, then a rally to 2757. Then after a decline to SPX 2700 the market streaked higher to SPX 2815. The entire movement can be considered a zigzag: 2757-2700-2815. Next a pullback to around SPX 2700 would fit as it matches the B wave of the zigzag.

Short term support is at the 2780 and 2731 pivots, with resistance at the 2798 and 2835 pivots. Short term momentum ended the week heading toward neutral. Best to your trading!

FOREIGN MARKETS

Asian markets were mixed on the week for a net 0.8% loss.

European markets were all higher for a 1.3% gain.

The DJ World index gained 0.8%, and the NYSE gained 1.8%.

COMMODITIES

Bonds are in a downtrend but gained 0.1%.

Crude remains in a downtrend and lost 4.7%.

Gold appears to be heading into a downtrend and lost 2.0%.

The USD is still in an uptrend and gained 0.2%.

NEXT WEEK

Monday: Veterans Day. Tuesday: Budget deficit. Wednesday: the CPI. Thursday: jobless claims, retail sales, business inventories, export/import prices, the NY/Philly FED. Friday: industrial production, capacity utilization, and options expiration.

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