weekend update

REVIEW

What a week! After the SPX dropped 3.1% last week ending at 1906, it started off quiet enough with a push to 1912 by around noon Monday. Then the bottom fell out, as the market dropped, gyrated on Tuesday, then dropped to 1821 by early afternoon Wednesday. After that it staged one heck of a come back rally, hitting SPX 1898 on Friday then ending the week at 1887. For the week the SPX/DOW were -1.0%, the NDX/NAZ were -0.9%, and the DJ World index dropped 0.8%. Economic reports for the week were biased 8:6 to the positive. On the uptick: business inventories, industrial production, housing starts, building permits, consumer sentiment, the monetary base, plus the budget surplus and weekly jobless claims improved. On the downtick: retail sales, the PPI, the NY/Philly FED, the NAHB and the WLEI. Next week is highlighted with the CPI, Existing/New home sales, and Leading indicators.

LONG TERM: bull market

The five Primary wave Cycle wave [1] bull market continues. However, the market is currently in its largest correction since 2011. Primary waves I and II completed in 2011. Primary wave III just recently completed in September 2014, and Primary wave IV is currently underway. Historically, the two most significant corrections during a five wave bull market, Primary waves II and IV in our bull market, are generally similar in the percentage of market decline. Using the DOW are a reference:

1982-1983: wave 2 -8.8%, wave 4 -8.6%. 1984-1987: wave 2 -7.9%, wave 4 -10.8%. 1987-1990: wave 2 -9.4%, wave 4 -11.3%. 1990-1998: wave 2 -10.1%, wave 4 -16.8. 1998-2000: wave 2 -7.5%, wave 4 -12.2%. 2002-2007: wave 2 -9.0%, wave 4 -10.7%. Even the lengthy 13 year bull market, 1987-2000 in OEW terms, met these parameters: wave 2 -22.4%, wave 4 -21.6%.

SPXweekly

Since Primary wave II took fives months while the market declined 22% in the SPX. We are expecting Primary IV to take about three months with a market decline between 15% and 20%. It could be higher, but not likely lower. The rising channel in the weekly chart above looks like it will provide good support.

MEDIUM TERM: Major wave A may have bottomed

Primary wave III topped in mid-September at SPX 2019 after completing the five Intermediate waves of Major wave 5. All Primary waves divide into five Major waves. As the market was correcting we set five parameters to help confirm that the top was in place. By a week ago Friday all five were met, including a downtrend confirmation which had occurred a week earlier.

The market then declined from SPX 2019 in three Intermediate waves: A 1926, B 1978, and C 1821. At the SPX 1821 low the market had lost 9.8% of its value. This was the largest correction since mid-2012. Refer to the weekly chart. On Thursday we posted a tentative green Major wave A label at the SPX 1821 low, when the characteristics of the market changed. Throughout most of the Major A decline we had observed seven wave declines, separated by quick one wave rallies. On Wednesday we observed a five wave advance from SPX 1821 to 1869. We knew when SPX 1869 was exceeded the characteristics had changed. This type of change often suggests a change is trend is underway.

SPXdaily

As noted above we are expecting Primary IV to correct for about three months. We are also expecting it to unfold in three waves: Majors A, B and C. Since Primary II took the form of an elongated flat, we are expecting a simple zigzag for Primary IV. If Major wave A ended on Wednesday at SPX 1821, we should now be in a counter rally Major wave B. Typically these counter rallies during a prolonged decline retrace anywhere from 50% to 61.8% of wave A. This suggests to rally to SPX 1920, or SPX 1943. They can also retrace back to the high of the B wave of the first ABC decline. In this case SPX 1978. Since the market has already rallied back to SPX 1898 in just two days we think the 1956 and 1973 pivots should be the upside targets for Major wave B.

Medium term support is currently at the 1869 and 1841 pivots, with resistance at the 1901 and 1929 pivots.

SHORT TERM

The downtrend decline from SPX 2019 unfolded in three Intermediate waves, with each of those three waves dividing into three Minor waves. The first Minor wave decline of Int. A was complex and the second simple. The first Minor wave decline of Int. C was simple and the second complex. Some alternation as the downtrend was unfolding. At Wednesday’s SPX 1821 low Int. wave C equaled a near perfect 1.618 relationship to Int. A.

SPXhourly

If we are indeed in Major wave B we should observe a three Intermediate wave advance, with three Minor waves within each Int. wave. The same as Major wave A only in reverse. From the SPX 1821 low we have had quite a complex rally: 1869-1835-1868-1852-1876-1857-1898-1878-1892. Notice nearly all these waves overlap each other as expected. We certainly would not consider this an impulsive advance. Thus far it appears the entire rally from SPX 1821-1898 can be counted as Minor wave a of Int. wave A. The pullback to SPX 1878 is probably part of Minor wave b. Which suggests some downside early Monday, providing the market does not exceed SPX 1898 first. After Minor b completes we should get a Minor c rally to the 1929 pivot ending Int. wave A. Keep in mind this market remains quite volatile with triple digit DOW swings nearly every day. Short term support is at the 1869 and 1841 pivots, with resistance at the 1901 and 1929 pivots. Short term momentum ended the week below neutral after getting extremely overbought.

FOREIGN MARKETS

Asian markets were mostly lower on the week for a net 1.0% loss.

European markets were sharply lower all week but rebounded Friday for a net 1.9% loss.

The Commodity equity group were all higher for net gain of 0.6%.

The DJ World index lost 0.8% on the week.

COMMODITIES

Bonds had a wild week, remain in an uptrend, and gained 0.9% on the week.

Crude continues to downtrend losing 3.0% on the week.

Gold is trying to uptrend and gained 1.2% on the week.

The USD looks like it is in a downtrend, unconfirmed, and lost 0.9% on the week.

NEXT WEEK

Tuesday: Existing home sales. Wednesday: the CPI. Thursday: weekly Jobless claims, FHFA housing prices, and Leading indicators. Friday: New home sales. Best to your weekend and week!

CHARTS: http://stockcharts.com/public/1269446/tenpp

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friday update

SHORT TERM: gap up and go, DOW +263

Overnight the Asian markets lost 0.2%. Europe opened higher and gained a huge 2.6%. US index futures were much higher overnight. At 8:30 Housing starts were reported higher: 1017k v 956k, Building permits were reported higher: 1018k v 998k, and FED chair Yellen gave a speech: http://www.federalreserve.gov/newsevents/speech/yellen20141017a.htm. The market gapped up at the open to SPX 1879 and continued to rally. The SPX had closed at 1863 yesterday. As the market continued to rally at 10am Consumer sentiment was reported at a seven year high: 86.4 v 84.6. The market continued to rally until around noon when the SPX hit 1898. Then it started to pullback. Around 2pm the SPX hit 1878 and then tried to rally. The rally carried the SPX to 1892 by 3:30, then a pullback ended the week at 1887.

For the day the SPX/DOW were +1.45%, and the NDX/NAZ were +1.15%. Bonds lost 13 ticks, Crude gained 35 cents, Gold lost $2, and the USD was higher. Medium term support rises to the 1869 and 1841 pivots, with resistance at the 1901 and 1929 pivots. Last night the FED reported a rise in the Monetary base: $4.114tn v $4.036tn. Today the WLEI was reported lower again: 51.0% v 51.6%.

The market gapped open for the fourth day this week on Options expiration Friday. Been a wild week. The gap up jumped right over the 1869 pivot range, which was resistance yesterday, and the rally carried the SPX right to the 1901 pivot range. Where it ran into some resistance. Today was actually a quieter day, wave-wise, than any day this week. This market has been making triple digit moves in the DOW, on a daily basis, for quite some time. Volatility like this often indicates an ongoing correction. While we may have ended the Major wave A downtrend at SPX 1821, volatility is likely to continue during this potential Major wave B uptrend. Will cover where we think we are in the weekend update. Best to your weekend!

MEDIUM TERM: Major A downtrend may have bottomed

LONG TERM: bull market in Primary IV

CHARTS: http://stockcharts.com/public/1269446/tenpp

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thursday’s update

SHORT TERM: gap down opening then rebound, DOW -25

Overnight the Asian markets lost 1.5%. Europe opened higher and gained 0.2%. US index futures were sharply lower overnight. At 8:30 weekly Jobless claims were lower: 264k v 287k, and at 9:15 Industrial production was reported higher: +1.0% v -0.1%. The market gapped down at the open to SPX 1841, then dipped to 1838 before rallying. At 10am the Philly FED was reported lower: 20.7 v 22.5, the NAHB was lower: 54 v 59, and the SPX hit 1853. Then after a quick pullback to SPX 1835, the low for the day, the market then rallied to 1858 by 10:30. After that we had several swings over the next hour: 1844-1862-1852-1868 by 11:30. Then the market pulled back to SPX 1852 by noon, before rallying to 1876 by 1:30. Wild swinging market again today. The market then pulled back to SPX 1857 by 3pm, rallied to 1868 just before the close, then ended the day about where it ended yesterday 1863.

For the day the SPX/DOW were mixed, and the NDX/NAZ were mixed. Bonds lost 19 ticks, Crude rose 90 cents, Gold added $2, and the USD was higher. Medium term support remains at the 1841 and 1828 pivots, with resistance at the 1869 and 1901 pivots. Tomorrow: Housing starts, Building permits, and a speech from FED chair Yellen at 8:30. Then Consumer sentiment by 10am on Options expiration Friday.

The market gapped down again at the open, third gap opening this week, hit SPX 1838, rallied to 1853, then hit 1835. Holding yesterday’s low of SPX 1821. Then the market rallied in a series of overlapping waves to SPX 1868, pulled back to 1852, then rose above yesterday’s 1869 high when hitting 1876. A higher high and low after yesterday’s nasty selloff. The price action since yesterday’s SPX 1821 low has been quite different than what we have observed during the entire 2019 to 1821 decline. A change like this sometimes equates to a change in trend. As a result we are labeling yesterday’s low with a tentative green Major wave A. And, will start tracking the current rally as if it was/is Major wave B. As long as the SPX 1821 low holds we could rally into early November. Short term support is at the 1841 and 1828 pivots, with resistance at the 1869 and 1901 pivots. Short term momentum continued to rise above neutral after yesterday’s extreme oversold reading. Best to your trading OPEX!

MEDIUM TERM: Major A downtrend may have bottomed

LONG TERM: bull market but in P4

CHARTS: http://stockcharts.com/public/1269446/tenpp

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wednesday update

SHORT TERM: gap down opening then volatility, DOW -173

Overnight the Asian markets actually gained 0.4%. Europe opened lower and lost 3.1%. US index futures were sharply lower overnight. At 8:30 Retail sales were reported lower: -0.3% v +0.6%, the NY FED reported lower: 6.2 v 27.5, and the PPI was lower: -0.1% v 0.0%. The market gapped down at the opening to SPX 1856, and continued down to 1837 in the opening minutes. After that it rallied to SPX 1867 by 10am. At 10am Business inventories were reported higher: +0.2% v +0.4%. The market then pulled back to SPX 1851 by 10:30, rallied to 1862 by 11am, and then headed lower again. At 11am the Treasury reported another surplus: +$105.8bn v +$75.1bn. Then the market dropped to the low of the day at SPX 1821 by 1:30. The market then rallied to SPX 1835 just before 2pm, dipped to 1826 at 2pm, and then rallied higher after the FED’s Beige book was released: http://www.federalreserve.gov/monetarypolicy/beigebook/beigebook201410.htm. Just before 3pm the SPX hit 1855, pulled by to 1843 by 3:30, then rallied to 1869 during the last half hour. This was followed by a pullback to SPX 1860 then a bounce to close at 1862.

For the day the SPX/DOW were -0.95%, and the NDX/NAZ were -0.45%. Bonds rallied 25 ticks after being up nearly 90 ticks, Crude lost 25 cents, Gold added $5, and the USD was lower. Medium term support drops to the 1841 and 1828 pivots, with resistance at the 1869 and 1901 pivots. Tomorrow: weekly Jobless claims at 8:30, Industrial production at 9:15 (est. +0.5%), then the Philly FED and the NAHB at 10am.

The market gapped down at the open today, breaking through the OEW 1869 pivot, forcing us to remove that tentative green Major A label. After a drop to SPX 1837, the OEW 1841 pivot, the market rallied to 1867, the OEW 1869 pivot. The next series of declines took the SPX to 1821, the OEW 1828 pivot, which was followed by a strong counter rally back to SPX 1869, the 1869 pivot. This certainly was a wild day, which became even wilder after the Beige book was released. Kind of reminds me of the market’s reaction to the FOMC minutes last Wednesday.

Technically this was the most volatile day we have seen since 2011. Also at the lows the SPX was down 9.01% for the largest correction since mid-2012. While this afternoon’s rally was encouraging, five waves up to SPX 1869, we are not convinced of a Major wave A low at SPX 1821 just yet. There was a lot of damage done today to the technicals we are tracking. However, if the market can make it to the 1901 pivot again the downtrend low may be in. Short term support is at the 1841 and 1828 pivots, with resistance at the 1869 and 1901 pivots. Short term momentum rose to just above neutral from extremely oversold. Best to your trading this volatile market!

MEDIUM TERM: Major A downtrend

LONG TERM: bull market but Primary IV underway

CHARTS: http://stockcharts.com/public/1269446/tenpp

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tuesday update

SHORT TERM: gap up opening, DOW -6

Overnight the Asian markets lost 1.0%. Europe opened lower but gained 0.2%. US index futures were higher overnight, and the market gapped up to SPX 1883 at the open. The SPX had closed at 1875 yesterday. In the opening minutes the SPX hit 1890, then dropped to 1876 by 10am. After that it went into rally mode. The SPX then made a choppy move to 1899 by noon: 1885-1878-1890-1885-1899. Then the SPX reversed and started to pullback. At 12:30 it hit SPX 1889, bounced to 1895 just past 1pm, then made a slightly lower low for the downtrend at SPX 1872 just before 3:30. Then the market rallied to SPX 1883 before pulling back to 1878 to end the day.

For the day the SPX/DOW were mixed, and the NDX/NAZ were +0.20%. Bonds gained 11 ticks, Crude dropped $3.85, Gold gained $1, and the USD was higher. Medium term support remains at the 1869 and 1841 pivots, with resistance at the 1901 and 1929 pivots. Tomorrow: Retail sales, the PPI and the NY FED at 8:30, Business inventories at 10am, then the FED’s beige book at 2pm.

The market gapped up at the open today, rallied to SPX 1890, pulled back to 1876, then rallied to 1899. then it did its recently normal afternoon selloff, making a new downtrend low at SPX 1872 by two points. During this mornings rally we posted a tentative Major A green label at the lows. We observed, and posted in the comments last night, that the market was about oversold as it had been during every downtrend of Primary III, and two of the three downtrends of Primary II. Despite the volatile action again today, which should continue throughout Primary IV, the technicals did not display any signs of a further breakdown. Should the SPX lose the 1869 pivot (1862-1876), however, then Major wave A is likely extending. For now we think the OEW 1869 pivot should hold. Short term support is at the 1869 and 1841 pivots, with resistance a the 1901 and 1929 pivots. Short term momentum displays a positive divergence at this afternoon’s low. Best to your trading the Beige book!

MEDIUM TERM: Major A downtrend may be bottoming

LONG TERM: bull market

CHARTS: http://stockcharts.com/public/1269446/tenpp

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monday update

SHORT TERM: correction continues, DOW -223

Overnight the Asian markets gained 0.2%. Europe opened lower but gained 0.2% as well. US index futures were much lower overnight, but recovered as Europe rallied. The market opened three points below Friday’s SPX 1906 close, bounced to 1912, pulled back to 1897, then hit 1905 all by 10am. Then the market dropped to a new downtrend low at SPX 1891 by 10:30. After that it started to work its way back up again. By 11am it hit SPX 1903, pulled back to 1895 by 11:30, then rallied back to 1912 by 12:30. Then it started heading back down. Just after 1pm the SPX hit 1902, bounced to 1909 by 1:30, then continued lower into the final hour. Near the close the SPX hit 1874, then bounced to close at 1875.

For the day the SPX/DOW were -1.50%, and the NDX/NAZ were -1.55%. Bonds gained 25 ticks, Crude lost 70 cents, Gold rose $11, and the USD was lower. Medium term support drops to the 1869 and 1841 pivots, with resistance now at the 1901 and 1929 pivots. Nothing on the economic agenda tomorrow.

The market opened lower today, finished a small a-b-c down to SPX 1891, then rallied to 1912. While this was unfolding the trading day started to look like Friday. Check out the one minute chart. We counted the a-b-c decline as three waves of another seven wave Minute C. The rally to SPX 1912 is the fourth wave, and the afternoon drop is the fifth wave. Should a seven wave decline be enough to end Minute C, the downtrend may end as soon as tomorrow. The SPX has already hit our initial downtrend target of the 1869 pivot. If the current decline is only another part of the larger Minor C decline, it could extend further. Either way, we expect a low soon, a rally, then another low. Then we shall see where the technical are at. Short term support is at the 1869 and 1841 pivots, with resistance at the 1901 and 1929 pivots. Short term momentum is trying to display a positive divergence. Best to your trading on potentially turnaround Tuesday!

MEDIUM TERM: downtrend

LONG TERM: bull market

CHARTS: http://stockcharts.com/public/1269446/tenpp

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weekend update

REVIEW

Another wild and volatile week. The week started off calm enough, for this market, with a continuation rally gap up on Monday as the SPX hit 1978 in the first few minutes. Then the market declined to a slightly lower low for the downtrend at SPX 1925 by Wednesday morning. Wednesday afternoon, however, the market rocketed to SPX 1970 just before the close. Then after a quiet opening on Thursday the market gave it all back and made new downtrend lows on Friday. For the week the SPX/DOW lost 2.9%, the NDX/NAZ lost 4.2%, and the DJ World index lost 2.8%. Economic reports for the week were light, but decidedly negative. On the downtick: consumer credit, export/import prices, the WLEI and investor sentiment. On the uptick: wholesale inventories. Next week we get the FED’s Beige book, retail sales, industrial production, reports on housing, and it’s options expiration Friday.

LONG TERM: bull market

The five primary wave bull market continues, but we appear to be in correction mode now. Primary waves I and II ended in 2011, and Primary III appears to have recently ended in September. This suggests a potentially nasty Primary wave IV is currently underway. We counted Primary I as five Major waves with a subdividing Major wave 1, and simple Major waves 3 and 5. We counted Primary III as five Major waves as well, but with a simple Major wave 1, and subdividing Major waves 3 and 5. During Primary III Major waves 1 and 2 ended in late 2011, and Major waves 3 and 4 ended in early 2014. Major wave 5 divided into five Intermediate waves, with the fifth wave ending on September 19th.

SPXweekly

Last weekend we pointed out several reasons why we expected Primary IV to be underway. The market had closed last Friday only about 2.5% off the all time high. We displayed charts of the NYSE, the DJ World index, and the R2K. All three had topped either in July or September and had already fully retraced their most recent uptrend. We also displayed how market breadth was declining despite the fairly significant rallies since September 19th. We also displayed how volatile Primary wave II was during its initial stages. Now the NYSE has nearly fully retraced the past two uptrends in only five weeks.

NYAdaily

Since the September 19th all time high we have been in a downtrend, which has nearly fully retraced the entire Int. v uptrend. This suggests we have entered Major wave A, of a three Major wave, Primary IV. When Primary IV does conclude we should get a rising Primary wave V to all time new highs. The size of the Primary IV correction should help determine to length and duration of the Primary wave V to follow. A shallow Primary IV should lead to a short and quick Primary V. A steep and lengthy Primary IV should lead to a long and strong Primary V.

MEDIUM TERM: downtrend

Since second and fourth waves of bull markets are typically similar. A review of Primary II will helps us in determining what to expect during Primary IV. Primary II took five months to unfold, ended in an elongated flat, (similar to the 1987 crash), as the market lost 22% of its value. Since that wave formation was a flat we would expect a zigzag to unfold for Primary IV (alternation). The first two down legs of the Primary II correction would fit this scenario. They are easily observed in the weekly chart above.

Notice how the weekly RSI dropped to quite oversold during both of those declines. And, the MACD turned negative before the correction was over. Notice where we are now. Barely oversold on the RSI and still quite high on the MACD. This suggests not only are we in Major wave A, but Major wave C should take this market much, much lower. Since Major wave 5 was stronger than Major 1, we would expect support to be found at previous fourth waves of a lesser degree. The three levels we are looking at for a potential Primary IV low are: SPX 1738, SPX 1627 and SPX 1560; Major 4, Intermediate iv, and Minor 4 of Primary wave III.

SPXdaily

The current downtrend, Major wave A, is dividing into three Intermediate waves. Intermediate wave A ended at SPX 1926, Intermediate wave B ended at 1978, and Intermediate wave C has been underway since then. We will get into more detail on this downtrend below. Medium term support is at the 1901 and 1869 pivots, with resistance at the 1929 and 1956 pivots.

SHORT TERM

Intermediate A divided into three Minor waves: 1964-1985-1926. Notice how Minor a was a bit complex, and Minor c was simple. Then we had a strong simple rally for Intermediate B to SPX 1978. Intermediate C starts off with a simple decline to Minor a at SPX 1925, a strong rally to SPX 1970 for Minor b, and now we should get a somewhat complex Minor c. Which has already begun. What is also interesting about this downtrend is that many of the moves are approximately 55 points. Minors a and c of Int. A, Int. B, Minor a of Int. C, and now, Minute a of Minor c. Also two of the counter rallies, Minor b of Int. A, and Minute b of Int. C are approximately 21 points.

SPXhourly

Since we are now, theoretically, in the last wave down of Major wave A. And we have several completed waves we can make some more precise Fibonacci calculations for its potential end. We first have a cluster of price/wave relationships between SPX 1879-1885. Next is the 1869 OEW pivot. After that we have another price/wave relationship right at the OEW 1841 pivot, and finally another at the OEW 1828 pivot. So with the exclusion of SPX 1879-1885 Major A should end at one of the three pivots under 1901. Since this downtrend has essentially moved pivot to pivot, i.e 1901, 1929, 1956, 1973 and 2019. It is likely to end at a pivot as well. We have an idea of how this last wave should unfold and will keep everyone updated in the daily updates. Short term support is at the 1901 pivot and SPX 1879/1885, with resistance at the 1929 and 1956 pivots. Short term momentum appears to be trying to set up a positive divergence again.

FOREIGN MARKETS

The Asian markets were mostly lower for a net loss of 1.0%.

The European markets were all lower losing 4.2% on the week.

The Commodity equity group were mixed for a net loss of 1.6%.

The DJ World index continues in a downtrend losing 2.8% on the week.

COMMODITIES

Bonds continue their uptrend gaining 1.2% on the week.

Crude continues its downtrend losing 4.7% on the week.

Gold remains in a downtrend but gained 2.7% on the week.

The USD may be in, or getting close to, a downtrend losing 0.9% on the week.

NEXT WEEK

Wednesday: Retail sales, the PPI, the NY FED, Business inventories and the FED’s Beige book. Thursday: Industrial production, weekly Jobless claims, the Philly FED, and the NAHB. Friday: Housing starts, Building permits, Consumer sentiment, Options expiration, and a speech by FED chair Yellen at 8:35. Busy mid to end of week. National holiday on Monday, but equity markets will be open. Best to your weekend and week!

CHARTS: http://stockcharts.com/public/1269446/tenpp

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