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thursday update
Nov 21, 2008

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SHORT TERM: SPX breaks through 2002 lows, DOW -445

Overnight the Asian markets were all substantially lower. Europe opened lower and closed -3.15%. US index futures were flat to higher overnight, and at 8:30 the weekly Jobless claims were reported at their highest level since 1992 at 542K v. 515K. The market opened lower at SPX 801 and then continued trading lower. At 10:00 the Philly FED was released and is continuing to contract -39.5 v. -37.5, and Leading indicators turned negative -0.8% v. +0.1%. Also at 10:00 FED governor Kroszner's testimony in Congress was released: http://www.federalreserve.gov/newsevents/testimony/kroszner20081120a.htm, and Deputy Director Parkinson released his testimony before Congress as well: http://www.federalreserve.gov/newsevents/testimony/parkinson20081120a.htm. The market made a low at SPX 777 by 10:30, breaking through the 789 pivot. When news was released that the Senate had come to a 'bailout' deal regarding the Automakers the market rallied. By 11:00 the SPX hit 809 just above yesterday's close. Then pulled back to 787, near the 789 pivot, by 12:00. A another rally followed to the highs of the day at SPX 821. Then news came out that there was no Automakers deal. The market headed south. At 2:00 the FED announced that it was going to extend the FOMC meeting in December to two days: http://www.federalreserve.gov/newsevents/press/monetary/20081120a.htm. As the selling accelerated in the last hour of trading the SPX broke through the 789 pivot again. Then broke through the 2002 low 768 pivot, and continued lower hitting SPX 748 just before the close. The five-year bull market, from 2002-2007, has been wiped out in just 13 months. At the close the SPX/DOW were -6.10%, and the NDX/NAZ were -4.90%. Bonds soared 2 points, Crude lost $4.75, Gold gained $9.50, and the Euro was lower. Support for the SPX drops to 734 and then 717, with resistance now at 768 and then 789. Short term momentum was oversold at the lows, as the positive divergences continue to build. Tomorrow options expiration friday.
This morning one of the commenters Joe, sent me a question regarding the short term wave count for this fifth wave of the downtrend. After reviewing the charts my response was that if those two important pivots (789 and 768) failed to hold, a series of 1-2's could be counted from the SPX 1008 high at the beginning of November. I posted the count on the SPX hourly chart at that time. Now it appears it is the working count. If we take SPX 1008 as the end of wave 4 for this downtrend, then we can count the following for wave 5: wave i SPX 900, wave ii SPX 952, then wave iii subdivides: wave 1 SPX 819, wave 2 SPX 917 and wave 3 of iii underway. Hope this helps your trading. This count is posted in the link below.  
MEDIUM TERM: downtrend makes new lows at SPX 748
LONG TERM: bear market

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