wednesday update

Posted on September 28, 2011 by

SHORT TERM: market pulls back after recent gains, DOW -180

Overnight the Asian all up streak ended at one day, they were mixed. Europe opened lower and closed -1.15%. US index futures were higher overnight and at 8:30 Durable goods orders came in negative: -0.1% vs +4.1%. The market opened higher at SPX 1177, then rallied to 1185 by 10:00. The SPX had closed at 1175 yesterday. After hitting what turned out to be the high for the day the market started to pullback. Around 11:00 the SPX hit 1169 and tried to rally. The rally hit SPX 1180 by 12:00, and then another pullback followed. By 2:00 the SPX hit 1159, bounced to 1167 by 3:00, and then headed lower again. Nearing the close the SPX hit 1150 and closed at 1151.

For the day the SPX/DOW were -1.95%, and the NDX/NAZ were -1.80%. Bonds gained 7 ticks, Crude lost $3.70, Gold dropped $45.00, and the USD was higher. Support for the SPX drops to 1146 and then 1136, with resistance at 1168 and then 1176. Short term momentum hit oversold near the lows. Tonight, a speech from FED chariman Bernanke at 5 PM. Tomorrow Q2 GDP and weekly Jobless claims at 8:30, then Pending home sales at 10:00.

The market opened slightly higher today, rallied, and then took out yesterday’s SPX 1170 low. After yesterday’s SPX 1196 high, the market has been working its way lower, Bernanke speaks after the close, with only one overlap thus far. The pullback late yesterday afternoon was started by the financials, and they remained weak today. The short term OEW charts turned to a negative bias today, and would require a rally back above the OEW 1168 pivot to turn positive again.

If we count last week’s double top at SPX 1220 as a failed C wave of an inverted flat (SPX 1231-1136-1220). Then the decline to SPX 1114 could be counted as a Minor wave 1. The rally to yesterdays’ SPX 1196 high could have ended Minor wave 2. We posted two tentative green labels to that effect on the SPX hourly chart this afternoon. With FED chairman Bernanke speaking after the close we could be witnessing another sell the FED comments reaction. Short term support is at the 1136/1146 pivots with resistance at the 1168/1176 pivots. Best to your trading!

MEDIUM TERM: downtrend low at SPX 1102

LONG TERM: bear market highly probable

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

About tony caldaro

Investor
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98 Responses to wednesday update

  1. Just Lee again says:
    September 29, 2011 at 3:03 pm

    Sure is H D

    Good day. !

  2. Just Lee again says:
    September 29, 2011 at 1:38 pm

    Have a great day guys..
    I’m an addict I have issues :)

  3. Just Lee again says:
    September 29, 2011 at 12:47 pm

    ESZ just hit yes low …
    Its sassy :P

  4. vishal409 says:
    September 29, 2011 at 12:24 pm

    Tony the euro contagion feels a lot like the housing crisis in US, we all knew it existed but tried to be in denial until it finally exploded, can a simple German vote end this? only at the height of the market optimism will the final blow be delivered, till that time we are living on stroids, not trying to be pessimistic here but that’s the sense I get that profits in naked long position will be evaporated when the final blows are dealt with

  5. David Banister (@activetrading) says:
    September 29, 2011 at 12:13 pm

    Germany sends stock buy signal: Wondering why I closed my shorts on the BGZ ETF today (With profits of 5.4% to 7.5% over 48 hours).

    Well, I am not sure the US market has officially bottomed yet, but it’s within a few weeks of it worst case I think time wise. We also have bounced off 1101 twice now, which is the 38% fibonacci of the 666 to 1370 run. Yes, the 1088 figure is still sitting there about 6% or so below current levels.

    However, the reason I’m starting to peer around the corner is the German DAX index.

    If that Index holds and continues higher, I believe its a leading indicator. The index got slammed harder than most and bottomed last week. Its up 8.5% this week. That would be like the DOW rising 900 points this week.

    With that said, I like the Gold stocks down here and am beginning to pick on some of them for upside. Bought NUGT at 28.30 this morning.

    • Igor says:
      September 29, 2011 at 12:22 pm

      I can’t get rid of feeling that we are near the bottom too. Thanks.

      • vishal409 says:
        September 29, 2011 at 12:41 pm

        Short bottom yes or maybe,but structural issues will keep traders on tenterhooks, even the line bull in town gold has gotten a new name the tired bull

      • Igor says:
        September 29, 2011 at 12:56 pm

        Thank you Vishal. I am flat anyway, but patiently waiting for the opportunity to enter a long trade. I am talking about a swing trade, so my time horizon is relatively short, but huge comparing with Lee’s one :-)

      • wldcttr says:
        September 29, 2011 at 12:59 pm

        igor, read your comments over the weekend. energy & materials appear to have been the weakest this quarter – down 25%+! i believe you mentioned you were waiting for swing trade in the group. $bpener showing + divergence. anything you looking for in particular? thanks in advance.

      • Igor says:
        September 29, 2011 at 1:15 pm

        wldcttr, I am going to play the coming oversold bounce on XLE. I like the risk/reward ratio. The other way is to play individual strong stocks in the energy sector. MMP chart looks really good. I didn’t check its fundamentals though. Always do your DD.

    • Just Lee again says:
      September 29, 2011 at 12:34 pm

      Hi Igor !

  6. wldcttr says:
    September 29, 2011 at 11:58 am

    tony, just saw the 1-2 on the spx hourly. thinking the short-term bottom is in for one of the potential counts? or am i misreading? thanks!

  8. rfijoydeep says:
    September 29, 2011 at 10:03 am

    Tony,as per my ending diagonal formation market currently in D wave which must not go above 1221.This D wave also be 3 waves where we may be in 2nd wave which can go down to 1130 and after that 3rd go above 1195 to complete the D wave and wave E starts.US market may bottom around 2nd week of Oct’11.
    Indian market ,as per my lattest view, have bottomed for its 4th wave and new life time highs ahead before the bull market ends.

  10. Just Lee again says:
    September 29, 2011 at 8:06 am

    Cheap short or is it risk on?

  11. trendrecognition says:
    September 29, 2011 at 6:43 am

    Hi everyone,
    here’s my count for the consolidative action in S&P500 since the August low. I think a Diametric formation has developed. This is a pattern (in which most of the legs are equal in terms of time) described by Glenn Neely. I know Tony and most of you do not follow Neely’s method of wave analysis, but see if your work comes with the same conclusion as mine. If correct, this pattern has either ended or will end with one more rally attempt that is likely to fail below 1220. Then we should see a strong move down to new lows.
    Here’s the chart of my wave count on the hourly chart:
    http://www.trendrecognition.com/images/stories/2011/indexes2011/sp500_vst_20110929.gif
    Alexander

    • tony caldaro says:
      September 29, 2011 at 7:06 am

      Thanks Alexander,If one just takes that chart, in isolation, and reviews the waves in EW terms one views this:a: abc upb: impulse downc: abc upthis is separated by d: abc downthen the pattern starts to repeate: abc upf: impulse downg: abc up ??? to complete.

    • Igor says:
      September 29, 2011 at 9:55 am

      It’s not a Diametrik. Period. You have taken only the time relationships between legs in your conclusion that it’s a Diametric and have not paid attention to the length ratio between the legs.

  12. alexhartley1 says:
    September 29, 2011 at 5:15 am

    If Euro vote goes well and given the US futures we could be entering a III of V of B with Tony’s targets of 1240 – 1275 as the top in mid-late Oct (18 – 21). We would then have the dramatic C wave down into November to finish this correction. I would imagine the correction would finish in the 1010 – 1050 area intra-day with the arrival of QE3 which Tony has suggested will be along in due course. Holding on to the recent low of 1150 today will be the key.

  13. the moronic investor says:
    September 29, 2011 at 12:39 am

    “In effect, there is nothing inherently wrong with fiat money,
    provided we get perfect authority and god-like intelligence for kings.” — Aristotle

  14. the moronic investor says:
    September 28, 2011 at 11:26 pm

    When I was a kid, my mom liked to make breakfast food for dinner every now and then. And I remember one night in particular when she had made breakfast after a long, hard day at work. On that evening so long ago, my mom placed a plate of eggs, sausage, and extremely burned biscuits in front of my dad. I remember waiting to see if anyo…ne noticed! Yet all my dad did was reach for his Biscuit, smile at my mom and ask me how my day was at school. I don’t remember what I told him that night, but I do remember hearing my mom apologize to my dad for burning the biscuits. And I’ll never forget what he said: “Honey, I love burned biscuits.” Later that night, I went to kiss Daddy good night and I asked him if he really liked his biscuits burned. He wrapped me in his arms and said, “Your momma put in a long hard day at work today and she’s real tired. And besides… a burnt biscuit never hurt anyone!” You know, life is full of imperfect things… and imperfect people. I’m not the best at hardly anything, and I forget birthdays and anniversaries just like everyone else. What I’ve learned over the years is that learning to accept each others faults and choosing to celebrate each others differences, is one of the most important keys to creating a healthy, growing, and lasting relationship. So…please pass me a biscuit. And yes, the burned one will do just fine! And please pass this along to someone who has enriched your life… I just did! Life is too short to wake up with regrets… Love the people who treat you right and forget about the ones who don’t. ENJOY LIFE NOW – IT HAS AN EXPIRATION DATE

  15. wavespeaktalk says:
    September 28, 2011 at 10:40 pm

    On Monday we showed you why blatant wave patterns on four different time frames pointed lower.
    On Tuesday, price showed you why this remains a frustrating and indecisive marketplace. Instead of taking the opportunity to continue south, the indices again decided to rally to stay in the violent but eastbound seven week range its been in since August. This marks the ninth huge swing in the past seven weeks, and it’s making for an incredibly exhausting process as we debate the possiblity of truncations here and deep retracements there. This is a really tough pattern no matter how you slice it.
    Every single move has possessed impulsive attributes at some point in its progression, but it never
    lasts for long. All we can do is be aware of how this is going to resolve (once it finally does) by
    understanding all possible labelings. That’s the game plan again tonight. We’ll look at every single
    labeling that needs to be considered after this latest swing. We’ll again come to the conclusion that this market is headed lower because that’s the only sensible resolution. In the meantime, we have to go neutral on our near-term stance because these swings are just too much to sit through. On any larger time frame, we remain bearish because the pattern on any larger time frame remains bearish…wavespeak.com

  16. hooloo1957 says:
    September 28, 2011 at 7:06 pm

    hey tony, 1 more question about the dollar… if qe3 is announced , would the dollar immediately go down and break the may lows or would it be just a relatively minor reaction against the up trend? thanks for your insight. greg

  17. the moronic investor says:
    September 28, 2011 at 7:05 pm

    Nice trade Tony, of shorting SPX yesterday! Are you still short?

  18. Just Lee again says:
    September 28, 2011 at 6:24 pm

    Everything looks bad Tony
    I hope this comment proves to be a fade.

  19. canadianloonie says:
    September 28, 2011 at 6:04 pm

    Tony looking at your daily chart for Gold I see that Gold has sliced thru all your moving averages even going thru your weekly averages
    the 13 has crossed below your 34 which hasn’t
    happened in awhile… Something tells me this
    correction is going to be deeper and longer
    than we think. Sprinkle in this backdrop
    of deflationary macro conditions.. Tony does
    this look like a normal Gold correction to you ??

  20. Pingback: wednesday update

  21. winslow80 says:
    September 28, 2011 at 5:23 pm

    If/when SPX violates 1102, what is your expectation?
    If/when SPX exceeds 1230, what is your expectation?
    The consensus seems to be that once this range is broken, an acceleration will ensue.
    I think the big trading firms are having a field day with this whipsaw action that separates small traders from their money. We might see false breakouts in either direction or even both directions before a durable trend emerges.
    Thank you for the superb commentary.

  22. David Banister (@activetrading) says:
    September 28, 2011 at 5:15 pm

    B up ended at 1196, we were shorting it hard and got lucky. C down or 3 down here… cmon 1088, you can do it!!

  23. M1 says:
    September 28, 2011 at 4:09 pm

    Thanks Tony, this rally could very well be only wave “a” of minor 2, right ? …if this scenario is correct, I would expect 1114 (or a bit lower) to be tested. Then wave “c” and minor 2 could be completed.

  24. scottycj1 says:
    September 28, 2011 at 4:01 pm

    Tony
    Volla la la la tility,
    Didn’t think we would hit support at 1150 today. This is
    where the rubber meets the highway. I agree with you, close below
    1150 or your 1146 and it looks like the flat is complete. A failed C wave and not an a.
    Find our way above 1185 by the end of the week and 1240 still has a chance for a C
    at 1240 Oct 4th. Next 2 days will tell the story.

  25. Donna Kline (@dkpa1967) says:
    September 28, 2011 at 3:51 pm

    So on the SPX hourly, we are anticipating 3 to end at or below 1114? Thanks.

  27. Just Lee again says:
    September 28, 2011 at 3:22 pm

    Thanks Tony

    Watch the bubbles to see which way is up

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