weekend update

REVIEW

A holiday shortened week was no help to the market this week as the SPX/DOW declined 2.3%. This was the biggest weekly decline since the 2.2% decline in November. On the economic front decliners beat advancers two to one. The negatives included declines in Case-Shiller (a new low), the Chicago PMI, Consumer confidence, ISM manufacturing, ADP, monthly Auto sales, Factory orders, the WLEI, and the Payrolls report. The Unemployment rate rose. On the plus side, Construction spending, weekly Jobless claims, Q1 Productivity, ISM services and the Monetary base all improved. As for the markets it wasn’t much better. The NDX/NAZ lost 2.1%, while the DJ World dropped 1.0%. Asian markets lost 0.3%, European markets were -0.9%, and the Commodity equity group was -0.8%. Bonds benefitted from the decline in equities +0.7%, Crude lost 0.2%, Gold gained 0.4%, and the USD was not a safe haven this week -1.0%.

LONG TERM: bull market

As we reviewed the charts this weekend we could not find one of the fifteen world indices we track in an uptrend. Nor could we find one of the nine SPX sectors in an uptrend either. All of these indices are in confirmed downtrends. But this is medium term: weeks to months. Longer term, we see most of these indices in bull market uptrends.

The weekly chart displays, after five consecutive weeks of declines – which has not occurred since 2004, the SPX is still in a long term bull market. Since Mar09 the RSI has remained mostly overbought, and has rarely been oversold as it is now. The MACD remains above neutral, as it has been the entire bull market.

Our OEW count remains bullish. The March 2009 bull market is expected to top in 2012. Since we are counting it as a Cycle wave [1], it should consist of five Primary waves. Primary waves I and II completed in Apr10 and July10 respectively. Primary wave III has been underway since that low. Currently, a drop below SPX 1011 would invalidate this count. Since Primary wave I divided into five Major waves we expected Primary III would do the same. Major waves 1 and 2 concluded in Feb11 and Mar 11 respectively. Major wave III has been underway since that low.

Recently, after a medium term uptrend to SPX 1371, the market confirmed a downtrend. Which is still underway. This suggests Major wave 3 is also dividing. Subdivisions of Major waves are five Intermediate waves. Therefore, we labeled the SPX 1371 high as Intermediate wave one, and Intermediate wave two is underway now. This subdivision does not change our long term outlook. Third waves of third waves, (i.e. Major 3 of Primary III) often subdivide. Once this correction ends Intermediate three of Major 3 of Primary III should unfold.

MEDIUM TERM: downtrend low SPX 1298

The daily chart displays most of Major wave 1; then Major wave 2, Intermediate wave one and the current Intermediate wave two. Notice the recent uptrend, Intermediate wave one, hit a print high in May and was nearly two months long. The current downtrend is currently about one month long. Intermediate waves one and two of Major wave 1 took about one month and less than a month respectively. Therefore we should expect Intermedate wave two to end in June. Corrections typically take less time to unfold than the time of the rising wave they correct.

When we examine this correction in terms of the technicals we apply we observe some interesting positives at this stage. First, a fibonacci 61.8% correction of the Mar-May uptrend is at the SPX 1296 level, i.e. 1371 – (0.618 x 122 = 75). SPX 1295 is Minor wave 4 of the prvious uptrend, and SPX 1294 was Intermediate A of the previous correction. The hourly/daily charts are currently displaying positive divergences. These often occur at significant lows. The weekly RSI is displaying an oversold condition. We have only had two others during this entire bull market: the Major wave 4 low in Feb10, and the Primary wave II low in July10. In the last bull market these types of oversold conditions also marked the end of downtrends. The wave count suggests this decline is the endng C wave of a complex double three. And, the OEW 1291 pivot contains all of the above price levels within its +/- 7 point range.

SHORT TERM

Support for the SPX is at 1291 and then 1261, with resistance at 1303 and then 1313. Short term momentum ended friday with a positive divergence. We’ve been counting this correction as an Aabc-Bx-Cabc double three. The first zigzag completed at SPX 1319: a 52 point decline (1371-1319). After an Bx wave rally to SPX 1347, then second zigzag got underway. Thus far it has declined 49 points: (1347-1298). At SPX 1295 it will equal the first zigzag. Another price/wave relationships within the OEW 1291 pivot range.

The short term OEW charts remain negative. Important support is at the 1291 OEW pivot. If this pivot breaks we’re likely headed to retesting the SPX 1249 March low. This SPX count is posted on the NAZ daily chart. Overhead resistance is now at SPX 1317, then the 1363 and 1372 pivots. Best to your trading!

FOREIGN MARKETS

Asian markets were mixed on the week for a net loss of 0.3%. All five are in downtrends.

European markets were mostly lower on the week for a net loss of 0.9%. All five here are in confirmed downtrends as well.

The Commodity equity group were all lower on the week for a net loss of 0.8%. All three of these indices are in downtrends.

The DJ World index is downtrending and lost 1.0% on the week.

COMMODITIES

During the first week of May commodities broke and then equities followed. This event also occurred in the first week of May 2010. The AGs, GKX are the first to confirm an uptrend.

Bond prices ave been uptrending and gained 0.7% on the week. 10YR yields dropped below 3.0% for the first time since early December.

Crude is downtrending and lost 0.2% on the week. We’re still expecting a decline below $93.

Gold is downtrending but gained 0.4% on the week. Despite the selloff in Silver, thus far, Gold has held up quite well.

The weakening uptrending USD lost 1.0% on the week for the second week in a row. This is usually an indication of an ongoing (unconfirmed) downtrend. The EUR gained 2.2% and the JPY gained 0.1%.

NEXT WEEK

A full five day trading week ahead but with few economic numbers. Tuesday we have Consumer credit, then wednesday the FED’s Beige book. On thursday, weekly Jobless claims, the Trade deficit and Wholesale inventories. Then on friday Import/Export prices and the Budget deficit. The FED has two speeches scheduled. On tuesday a speech by FED chairman Bernanke in Atlanta. Then on thursday a speech by FED vice chair Yellen at the Cleveland FED. Best to you and yours this weekend and week!

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987

About tony caldaro

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59 Responses to weekend update

  1. Lee X says:

    pivot at limit….

  2. waverookie says:

    Stopped out on SPY last week at 1308.51. Jumping in for more pain right here at 1290.76. Stop at 1283. Also tapping into Margin on BAC right here at 10.92. Closing my eyes and getting aggressive!!! GL everyone!

  3. Lee X says:

    Pivot Time

    Hey Josh gracias !

  4. Explanation from stockcharts.com on changes in commodity charts and USD:
    http://blogs.stockcharts.com/chipanderson/2011/06/commodity-data-at-stockcharts-past-present-and-future.html
    I personally don’t trade futures and I have found their data to be quite accurate on the commodities that I follow for close to 10 years now. To me the charts without candles are pretty much useless. If you have a problem with the new charts as I do please file a complaint. I have a feeling they are going to be getting quite a few complaints.

  5. H D says:

    pivot,fibs and +D – hit the bid

  6. ewstockscpa says:

    Lee…..what I am hoping to see today to get me long. Low put in this morning around where we are now, bump up to test the 1300 mark, pullback to lows followed by a rally. That happens and I am loading up the truck for at least 1330

  7. rfijoydeep says:

    Correction from 1371 had first set of 5 wave decline which completed at 1312,we can denote this A wave,then we got 3 wave advance,B wave which done at 1345.Then another 5 wave decline C wave going on,should go bellow 1285.After that we should get a solid X wave advance before market rolls over into second set of ABC wave which should take it bellow 1250.So this 4th wave correction looks like playing as ABC-X-ABC fashion.That X wave can go 1330 kind of level,market may bottom at 1240 level in August’11.

  8. gemxwavedotcom says:

    Elliott Wave Forecast For 6.06.11 http://Elliottwave.info

  9. jaja2121 says:

    Tony
    I remember a couple weeks back you mentioned a very small possible scenario that the bull market was over at 1371.
    Is that still a very low probable count?

      • As you said last week, Tony, “one day doesn’t make a trend.” But the deterioration in economic activity is now a months long decline. In OEW terms, the early demise of the bull may be low probability. But from my own “boots on the ground” position, this feels like a sustainable pullback in economic activity.

        That being said, a huge marketing push on our part last week has us booked out a solid two weeks and the rest of June is starting to fill in nicely. Of course, it has cost more to acquire this work than it normally would have cost us, but as I suspected, the advertising by my competitors has slacked off noticeably.

        In the end, any bearishness on my part is short term (a few months to a few years), as I am bullish on people and I am bullish on me long term!

        Thank you again, Tony, for the wonderful gift of your time, effort, and knowledge that you share with us so generously.

        Good Trading & Investing to All!

      • tony caldaro says:

        Hi Breakout, May your business prosper. Growth can come even in a recession if managed properly. Appreciate your on the ground input. cheers!

  10. Lee X says:

    Thanks Tony

    From talk of 1400 plus a few weeks ago and now possibly 1011 SPX ?
    Thank goodness I can’t see past my belly when trading :)

    • Lee X says:

      http://www.weather.com/weather/tenday/USIL0727

      I’ll be enjoying this weather with u next week Tony :)

    • tony caldaro says:

      When markets go down people get bearish, and visa versa. Certainly looks like we’ll see 1400 before we see 1200 again.

      Love oneself, or love oneself and all others. It’s a choice. Your future depends on it. Time is short. Make the choice!

      • Lee X says:

        Hey Tony

        I hear u big time and I agree .
        I think the noise is amplified by the blogs / internet
        Remember when we were in a biz that was somewhat in the shadows? Now everybody is a “Wizard” :)
        I miss those days :)

      • tony caldaro says:

        hahaha, yes 70′s 80′s and 90′s … Wizards R Us ;)

      • massoodh says:

        Hi Tony,
        It looks to me that your alternate SPX count posted on the NAZ daily chart (Expanded flat: simple Aabc-complex Babc-more complex C underway) is now a big possibility, based on the waves structure and length of time of this current downtrend. We should know about the possibility of this alternate by next week, if the rally off of the recent low turns out to be corrective. Please let me how many percent you think this alternate is a possibility.
        Thank you very much.

      • tony caldaro says:

        Hi Massoodh, will keep everyone posted.

  11. alexh110 says:

    Hi Tony,
    I was wondering how long you expect the correction in Gold to last, and what form does it need to have to alternate with Major 2. (I’m thinking maybe another 4-5 weeks.)

    Also do you expect Major 4 to end when weekly RSI just touches oversold (I notice it’s not gone below that level since the last Primary correction).

  12. rfijoydeep says:

    As per my alternate view mentioned earlier the current 4th wave should retrace 38.2% of prior 3rd wave naturaly.which means we should bottom around 1240 level.Timewise 3rd wave taken 10 months,if 4th consume atleast 1/3 of that then we should bottom around 2nd week of august’11.

  13. hooloo1957 says:

    hi tony, thanks for your work. it seems a little overly optimistic to think that the up trend would end if we hit 1010. would’nt something like 1250 be more reasonable and realistic. also and this is not to criticize you but do you have anything in your backround that would make you bullish naturally? thanks again greg

    • tony caldaro says:

      Hi Greg, Our approach is quantitative. SPX 1011 fits these parameters at the moment. SPX 1250 could just create an irregular flat. A common occurrence in the DOW as recently as the 2002-2007 bull market. Nothing that important about that level. Typically I’m an optimistic person, and prefer bull over bear. But quantitatively speaking: the market is the market and I’m just the observor.

  14. rfijoydeep says:

    Another interesting count,though already mentioned earlier here.The bear market which started in late 2007 at spx1576 may continue till end 2012.As per wave structurewise this bear market will be ABC in 5-3-5 and B should not go beyond 62% of A.But here we already crossed it,so this B wave is playing as X wave which can retrace 99%.So this bear market looks playing abc-X-abc fashion.From spx1576 3 wave decline completed at spx741 in nov’08.After that this X wave may going on in 5-3-5 abc waves.First 5 wave A completed at 1100 in oct’09 going 359 points in 12 months.Then B went sideways 4 months bottoming at spx1040 in feb’10.From then C wave of X wave playing in 5 waves,we have completed 3 waves of this 5 waves at spx1371 in may’11.Now 4th wave going on,may continue till august’11 before rolling over to 5th wave which can go to 1040+360=1400+ level sometime in oct-nov 2011 before the second ABC of this bear market resume.First ABC taken 12 months so this X wave should consume less than thrice that means less than 36 months.So this X wave may top in oct’11.

  15. northernice says:

    Hi Tony. Do you think that 38.48 could be the (b) for silver, in line with gold — although with (b) only about 0.38 of (a) ? Or is there likely to be another wave up to complete that (b) ? BTW, I noticed that the gold, silver, oil and natgas daily charts seem to be displaying line graphs instead of the usual bar charts. Thanks and best regards.

  16. Tony,
    Based on past commentary and your current count I’m assuming that you are expecting the major wave 5 in gold to extend in very similar fashion to the major wave 5 in the SPX that lasted from ~2004-2007 and end in ~2014? Of course assuming a major 4 low here in 2011.

  17. zimbabweanimike says:

    http://finviz.com/futures_performance.ashx?v=17
    Just a 1/2 year look. It appears priced in$ all the indexes are down.
    On last comment on the home mkt. The price for homes have declined more than the great depression in half the time. Kinda a fact no one cares about. (fasb lol)
    Your kindness and views everyone respects greatly.
    Thx

  18. rfijoydeep says:

    Market may correct till august’11,commodities not falling much as compared to spx in anticipation of some kind of QE as economic recovery lagging again.But this time we won’t get any QE and fed will take much more realistic approach which will end commodities bull run,dollar will bottom and start rally.so stock market also correct a bit longer period of time.As per Neely’s previous view which mention here earlier by me that market may have topped at 1371 in may and we are in big powerful 3rd wave of this bear market which started in 2007.

  19. budfox67 says:

    thank you Tony. Hope you like Illinois vs NYC.

    we both see a moster market advance in SSEC index.
    the shenzen index, is on a buy as of 6/2. but,
    should the gov relax on the banks in china. the advance
    could go vertical.

    I like your call.

    Bud, stuck in china a little while longer….

  20. liborval says:

    thanks tony, how does your anticipation of low around 1291 pivot corespondent with the end of QE2 and the lost of money from that source, couldnt be the correction deeper till QE 3 annoucement..? QE3, short covering, what will be the power for the next rally maybe dip buying?

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