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monday update
Jul 08, 2008

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SHORT TERM: market closes lower in volatile session, DOW -57

Overnight most of the Asian markets were higher, with the one exception Australia's ASX. Europe opened higher and closed +1.90%. US index futures traded higher overnight and gapped up slightly at the open as Crude was down about $4.00. By 10:00 the SPX hit 1274, the high for the day, fridays close was 1263. Then after trading in a tight range until 11:30 the market started to break lower. Just past 12:00 the SPX broke below the 1261 pivot, and by 1:00 it took out the downtrend low at 1252. At 2:00 the SPX found support at the 1240 pivot, when it hit 1241. After a retest of the low the market rallied strongly, right up to the 1261 pivot, before fading into the close. At the close the SPX/DOW were -0.70%, and the NDX/NAZ were mixed. Bonds gained about 1/2 point, Crude lost $3.40, Gold dropped $7.00 and the Euro was higher. Support for the SPX now notches down to 1240 and then 1219, with resistance at 1261 and then 1287. Short term momentum is displaying a positive divergence, as it the near term indicators. Tomorrow FED chair Bernanke speaks at the FDIC forum at 8:00. Then at 10:00 May pending home sales and wholesale inventories. At 3:00 the FED's consumer credit report. Interesting day. Crude sells off overnight, the market rallies at the open but closes lower, even though Crude was down all day. Was today's selling the final washout of the downtrend? Let's examine the evidence.
The weekly charts, which are more illustrative of downtrends, display an oversold DOW on both the RSI/MACD, and the SPX is oversold on the RSI. The daily charts display both the SPX/DOW oversold on both the RSI/MACD. The hourly charts are displaying a positive divergence at todays lows on both the DOW/SPX. Also at today's lows the SPX has declined nearly 200 points since the 1440 May high, and the DOW has declined 2,000 points. A fibonacci relationship (W5 = 1.618 W3) is also in place. The SPX 1240 pivot now becomes a very important support area. A break below this area could force the SPX to drop below 1200 in the coming week(s). Best to your trading!
MEDIUM TERM: downtrend hits SPX 1241
LONG TERM: bear market

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