thursday morning SHORT TERM: China raises their key lending rate 1/4%. Crazy morning! Overnight everything looked normal, the Asian markets were generally higher. After the close China's NDRC (their FED) raised their key lending rate 1/4% to 5.85%, their first increase since 2004. This was in response to their economy growing at a stronger than expected 10.2% rate. Slightly above their anticipated 10% targeted rate. Also, loan demand for economic expansion exceeded expectations by nearly 100% in the first quarter. We should have such problems! Europe reacted to the news by selling off and came in over 1% lower. Following their their lead we gapped down at the open in an attempt to test the lower EW pivots: SPX 1292, NDX 1684 and NAZ 2300. At 10AM Fed Chairman Bernanke spoke before Congress, stating that the FED will now take a look and see approach to dealing with inflation, rather than raising rates at every meeting. But he emphasized that if they stop for a meeting or two it does not mean that they are done. The market reversed immediately on the news. Thus far this morning, we made the lows around 9:45 AM and then went on a torrid rally till about 10:15 AM. Right now we're off the highs but rising again after a pullback. Short term momentum is around neutral and additional positive divergences have set up. It would be nice to see a trending market again. As of this moment the stock indices are right about where they closed on friday! Still optimistic short term. INTERMEDIATE TERM: uptrend LONG TERM: bullish
The uptrend is still intact in all four of the major indices: NAZ/NDX/SPX/DOW, with the cyclical DOW showing the most strength. However, on an intermediate term basis I have to be concerned about the uptrend because of this lack of upside momentum. Especially since the NDX has failed to make new highs after a seven week advance. In OEW terms, we are not getting momentum confirmation of the uptrend in the NAZ/NDX/SPX only in the DOW, and not with their recent new highs either. On an intermediate term basis this is not constructive. Therefore I am moving to a neutral stance until the NDX either resolves the situation by making new highs, or a confirmed trend reversal occurs.
Thank you. Just trying to present what I see in the waves/ technicals. It's been a tough market to call. Appreciate your comments.
Tony, Which index are you referring to? I thought you mentioned the Dow had another leg to run during 06..
Hi! They all do. Just think we might be in store for a correction here, if the NDX doesn't get in gear now. The bull market is by no means over.
I am just wondering why give so much weight to one narrow index? If all the other indexes, broader (spx, russells) and narrower (dow) are looking much healthier and in synch shouldn't that be more significant than the one that is stumbling a bit?
One would think so. But the SPX/NDX futures pit do help move the market short term. And, one has to work in sync with the other, or the market gets nowhere fast. In fact, some of the nastiest selloffs are when one negatively diverges with the other. Believe me, it is far better when they are working together than against each other.