The Bearish Gartley On The S&P Is Complete, So Now What?

October 11, 2004
Chris Curran

The
major indexes finished lower due to a sharp sell-off in the final 2 days of the
week.Â Once again, it was Crude Oil that continued to plague
equities, as It finished at another new all-time high of more than $53.00 per
barrel.Â Also, Friday’s Employment Report was a disappointment, as the
trend of lackluster job
growth continued.Â While the equities markets finished on a sour note, the
mood was pretty optimistic earlier in the week after the S&P 500 was able to
break September’s closing high, but nonetheless, the breakout proved to be a
head fake.Â

The
December SP 500 futures closed out the week with a loss of -11.25 points, while
the Dow futures slid -153 points.Â On a weekly basis, the ES has dropped
back down into its previous down channel and has completed a bearish Gartley.Â
Looking at the daily chart, the ES broke back down through its previous
downtrend line and 20-day MA, with next hard support at its 200-day MA at 1119.Â
Nothing really changed on the YM on a weekly basis as it continues to hold its
down channel and settle at its 78.6% Fib retracement of last week’s low to
Monday’s high. On an intraday basis, steep 60-min and 30-min downtrend lines are
capping any upside breaks.Â In the small caps, the ER2 has retraced to
settle back on both its broken weekly and daily downtrend line supports.

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â

The soft
employment data sent the shorts running for cover in December bonds, leading to
a reversal up off the weekly uptrend line. The SOX posted a higher high during
the week before breaking down through the lower end of its trading range, and
needs to hold its 50-day MA at 386 to post another higher low.

Aside from the continued
rally in Crude Oil, overall conditions haven’t showed much change and the
outlook continues to appear mixed.Â Economic growth continues, albeit at a
slower pace than what was seen in the prior 4 quarters.Â The economy has
been led by industrial-type companies, which continue to benefit from
broad-based global end demand.Â Selective financial companies are also
thriving because of still historically low short-term rates. Meanwhile, the
Technology and Retail sectors continue to struggle, as we have seen warning
after warning from various bellwether names.Â Then there is the bond
market, which can’t seem to make up its mind about the economy.Â More to
the point, the subject of inflation has also stumped bond traders, as the view
on prices seems to change by the week.

Looking ahead this week,
earnings season gets into full swing with reports and guidance from Intel and
Yahoo! on Tuesday, Apple Computer and Novellus on Wednesday, and Bank of America
and Citigroup before the open on Thursday.Â The economic calendar is fairly
quiet, but all the reports are crowded into Thursday and Friday, with the
September PPI, September Retail Sales, and October Preliminary Michigan Consumer
Sentiment Index all on Friday.