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thursday update

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SHORT TERM: AIG report and financials drag market lower, DOW -225

Overnight the Asian markets were mostly higher, but Europe opened lower and closed -0.20%. After the close yesterday AIG reported disappointing earnings and the index futures sold off on the news. This morning at 8:30 the weekly unemployment report continued to slip lower -455K. At the open the market gapped down from yesterdays SPX 1289 close, opening at 1282. Within the first few minutes it hit 1273, but steadied and started to rally. At 10:00 pending home sales were reported +5.3%, mostly foreclosure bargain hunting. By 10:30 the SPX hit 1282, pulled back to 1276 by 12:00, and then rallied back to 1283 by 1:00. Failing to break through the 1287 pivot, which it closed above yesterday, the market again headed lower. By 3:00 the SPX broke through the lows for the day, and headed to the 1261 pivot, hitting 1264 at 3:30. Considering the market only spent an hour at 1292 yesterday, this was a fairly quick reversal. At the close the SPX/DOW were -1.85%, and the NDX/NAZ were -0.85%. Bonds rallied over one point, Crude gained $1.25, Gold lost $2.00, and the Euro was lower. Support for the SPX drops down to 1261 and then 1240, with resistance at 1287 and then 1316. Short term momentum put in a negative divergence yesterday at the highs, and is now already oversold. The near term indicators are now declining as well, and displaying negative divergences. SPX 1261 becomes an even more important pivot if this uptrend is going to continue. Tomorrow at 8:30 Q2 productivity and unit labor costs, then at 10:00 wholesale inventories.
Typically at the uptrend tops in this bear market, first the financials start to break down from their highs. Then the general market starts to weaken, but is supported by a rally in the techs. Then when the techs turn over the entire market moves lower. Today, the financials started to break lower. Let's see if the techs can rally from here and support the general market for a few days. If not, SPX 1261 will probably fail to hold support and the uptrend will have likely ended yesterday. Best to your trading!
MEDIUM TERM: uptrend being tested after just one day at SPX 1292
LONG TERM: bear market

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