weekend update

REVIEW

A choppy market this week in the US which ended quite mixed. For the week the SPX/DOW were +0.55%, but the NDX/NAZ were -1.15%. Asian markets gained 0.8%, European markets gained 1.0%, and the DJ World index was +0.6%. On the economic front positive reports outpaced negative ones 8 to 5. On the uptick: construction spending, productivity, factory orders, ISM services, consumer credit, the WLEI, plus weekly jobless claims and the unemployment rate improved. On the downtick: ISM manufacturing, the ADP index, nonfarm payrolls, consumer sentiment, and investor sentiment. Next week the FED meets tuesday/wednesday, plus we get reports on retail sales, the CPI/PPI, and industrial production. Best to your week!

LONG TERM: bull market nearing inflection point

Our preferred bull market count continues to unfold as generally expected. We have been anticipating this to be Cycle wave [1] of a new multi-decade Supercycle bull market. Cycle wave bull markets unfold in five Primary waves. Thus far Primary waves I and II completed in 2011, and Primary wave III has been underway since that low. Primary wave I divided into five Major waves, with a subdividing Major wave 1. Primary wave III appears to be following the same path, except Major wave 3 is also subdividing. Not unusual for a third wave. Currently Major waves 1 and 2 have completed in 2012, and Major wave 3 has been underway since the Major 2 low at SPX 1267. The technicals, RSI/MACD, continue to display generally bullish patterns. We give this bullish scenario a 70% chance of continuing into 2013.

SPXweekly

After identifying the March 2009 SPX 667 low - within a couple of days. We expected a bear market rally to retrace at least 50% of the Oct07-Mar09 decline, and reach the SPX 1100′s. After that occurred in January 2010 the market reached an inflection point. When the next downtrend looked corrective, and the market turned higher, we knew we were in a bull market.

In the spring of 2011 the market completed five waves up from the March 2009 low, and began to correct. Since the market had already doubled, in just two years, it reached another inflection point. The correction that followed, 22%, was quite abnormal for a bull market. But the market started impulsing again and eventually made new bull market highs in 2012. Now we are nearing another inflection point.

There is a 30% probability, according to our calculations, that stocks made a bull market high in Sept/Oct 2012 in the form of an elongated diagonal triangle. The chart below displays a five Primary wave, (I thru V), move up from March 2009. But it best counted as a potential ABCDE. Under this alternate scenario, only 30%, the recent downtrend into the mid-November lows was the first wave down of the new bear market. And, the current uptrend a counter-trend rally. As we have noted in the past few weeks, counter-trend rallies, after the first downtrend, retrace between 69% and 90% of the previous decline. This would give this uptrend a price objective between SPX 1434 and 1462. The SPX reached 1424 on monday.

DOWbear

If this alternate scenario is indeed the market’s next path. The current uptrend, once confirmed, should roll over after it enters this range and a new bear market should take hold. If not, the uptrend should continue to new bull market highs. Thus far, this uptrend looks impulsive suggesting the bull market will continue. However, some caution is advisable once this range is reached.

MEDIUM TERM: uptrend highly probable

After the market hit our worse case, (SPX 1345/46), correction level in mid-November, the market spiked higher suggesting the downtrend had ended. The correction, 8.9%, was quite normal for this bull market, and the low found support between waves 1 and 2 of a lesser degree. Since that SPX 1343 low the market has rallied to 1424, (6%), in just three weeks.

SPXdaily

In the middle of this rally the market generated a WROC buy signal. These signals often occur prior to uptrend confirmations. While we are waiting for the major indices to confirm an uptrend, we continue to observe many positive events. Currently three of the nine SPX sectors we track are now in confirmed uptrends. The level was zero during the downtrend. Also, 65% of the twenty international indices we track are now in confirmed uptrends. During the downtrend that reading was only 10%. The US should have an uptrend confirmation soon. Medium term support remains at the 1386 and 1372 pivots, with resistance at the 1440 and 1499 pivots.

SHORT TERM

Short term support is at SPX 1413/16 and 1402/03, with resistance at SPX 1422/27 ad the 1440 pivot. Short term momentum ended the week overbought. The short term OEW charts remain positive with the swing level now at SPX 1409.

We have been counting this uptrend as Intermediate wave iii of Major wave 3. The first rally, from SPX 1343-1424, we tentatively labeled as Minor wave 1. We counted five Minute waves up from the low: 1409-1385-1420-1409-1424. Then the market declined to SPX 1398 on wednesday. We are counting this pullback as Minor wave 2. We should be currently in the early stages of a Minor wave 3 rally.

SPXhourly

Since Minor 1 advanced 81 points, 1343-1424, Minor 3 should be equal to Minor 1 or possibily 1.618 times Minor 1. If it is equal, we should make new bull market highs around SPX 1480. If it extends to a 1.618 relationship the SPX should reach about 1530.

However, if we are dealing with the 30% probability bear market rally, we have different wave labelings, and a different wave relationship. The rally from SPX 1343-1424 would be labeled wave A, and the pullback wave B. Wave C would now be underway to complete a counter-trend bear market retracement. Under this scenario Wave C is likely to be 0.618 times wave A: SPX 1448. This falls within our SPX 1434-1462 range, and reaches just about within the upper end of the OEW 1440 pivot range.

A quick review of the hourly chart displays a lot of price congestion right around the 1440 pivot too. With the SPX ending the week at 1418, next week may be quite important to the bull/bear inflection point. It just so happens that the FED has its FOMC meeting, concluding on wednesday, Retail sales on thursday, and Industrial production is reported on friday. Stay tuned, this could be quite an important week. Best to your week!

FOREIGN MARKETS

The Asian markets were all higher on the week for a net gain of 0.8%. Only China and Singapore remain in downtrends.

The European markets were mostly higher on the week for a net gain of 1.0%. Greece and Spain remain in downtrends.

The Commodity equity group were mixed on the week for a net gain of 1.3%. Brazil and Canada remain in downtrends.

The DJ World index is uptrending and gained 0.6% on the week.

COMMODITIES

Bonds remain in a choppy uptrend, but lost 0.1% on the week.

Crude is still downtrending and lost 3.0% on the week.

Gold continues to downtrend, losing 0.7% on the week. It made may need to make a lower low.

The USD is downtrending, but gained 0.3% on the week.

NEXT WEEK

Tuesday kicks off the economic week with the Trade deficit and Wholesale inventories. Wednesday: Export/Import prices, the Budget deficit and the FED’s statement. Thursday: weekly Jobless claims, Retail sales, the PPI and Business inventories. On friday: the CPI and Industrial production. As for the FED. There will be a press conference following the FOMC statement on wednesday. Then on friday a Board Meeting on the supervision of foreign banking organizations: http://www.ustream.tv/federalreserve. Best to your weekend, and potentially important week!

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

About tony caldaro

Investor
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107 Responses to weekend update

  1. ronini3 says:

    short 6S @ 1.0737. 1.0750 stop OCO 1.0704 limit

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  3. theyenguy says:

    During the week endind December 7, 2012, the Shanghai Shares, $SSEC, traded by CAF, which had been performing very poorly ever since QE1 was introduce, rose 4.1% this week, largely on a rising Yuan, CYB.

    Commodities, DBC, and USCI, traded lower, as Precious Metals, JJP, traded lower, as Gold, GLD, fell through a consolidation triangle, and Silver, SLV, traded sharply lower. Spot gold, $GOLD, traded lower to $1,705; support is lower at $1,680 and $1665; support for GLD is 162. Oil, USO, traded lower; and Unleaded Gas, UGA, fell sharply lower. Natural Gas, UNG, fell to support, and its chart looks like it could break sharply lower. Bespoke Investment Group reports Gasoline inventories soar by most in more than 10 years. Base Metals, DBB, traded lower; Copper, JJC, a measure of the Shadow Banking System in China, traded lower. Timber, CUT, traded to a new high.

    Total Bonds, BND, traded up to a new high of 84.99, before closing lower this week at 84.81. Peak Debt is being attained.

    The Dollar, $USD, UUP, has traded lower over the years since its peak in 2002, on US Central Bank credit liquidity and easing, until it recently rose from $79.00 on September 14, 2012, and is now trading at its 50 day moving average, at $80.42, as the Euro, FXE, rose to a new rally high of 129.99, pushing the Swiss Franc, FXF, to a triple top high of 106.24, before the Euro, traded lower to 128.26. The chart of the world major currencies, DBV, shows that they jumped to a new high of 26.02, and the chart of emerging market currencies, CEW, shows they are approaching their Sept. 14, 2012, high.

    The world has passed through Peak Monetization. Generally speaking individual currencies globally are failing to rise higher on debt monetization, that is currency debauchery of the world central banks neoliberal finance. The world is passing through Peak Monetization, meaning that the world central banks are unable to stimulate further global growth and corporate profitability. Debt monetization is no longer able to leverage World Stocks, VT, higher.

    The Euro currency, FXE, has peaked out. Monetizing of debt is one of two factors that caused the Euro, FXE, to peak out and trade lower this week; and as result Italy, EWI, and Spain, EWP, traded lower from their rally high and both the European Financials, EUFN, and the European Shares, VGK, manifested bearish harami candlesticks, at the top of ascending wedges, suggesting that the rally in these shares is now complete. The other factor for that caused the Euro to peak out and trade lower, is an ongoing political leadership crisis in both Italy, and in Europe as a whole.

    Tje week’s rally and fall in the Euro, FXE, rose to a new rally high of 129.9, before trading lower to 128.2, stimulated Peak Currency and Peak Credit. Of note, Peak Stock Wealth, occurred September 14, 2012 as world stocks, VT, topped out.

    The high in the S&P of 1,465 was attained September 14, 2012, and the recent downturn to 1,412 on October 31, 2102 to 1,412, and rally to 1,418, in front on next week’s Fed meeting is a rally high on the exhaustion of the ECB’s and US Fed’s monetary authority.

    The Fiat Money System was replaced by The Diktat Money System on December 7, 2012, as the Euro, FXE, traded below 1.30. The failure of neoliberalism’s seigniorage, that is moneyness, has introducing the Age of Austerity and the Age of Debt Servitude, where people will come to trust in the Diktat Money System, where diktat serves as currency, credit, and wealth, as exemplified in Egypt, EGPT, and Argentina, ARGT.

  4. LX says:

    http://video.cnbc.com/gallery/?video=3000134334&startTime=208&endTime=849
    “You said generational buy ! Who me ? That was Joe T..Not me…” If u get the time give it a look..ole Kass gets taken to task a bit
    Guys are now insulted if u mention they said to buy aapl :)
    I’m watching Tony’s 516 for a clue to the downside. Im not trading aapl but if u trade spus u have to watch it.

    • ronini3 says:

      “Yes, “Doggie” can successfully trade AAPL, most people watching this show can not.”
      Then why CN-BS is pushing shows like “Fast Money”?

    • ronini3 says:

      What I have learned in this biz, first and foremost, is “Check the tape!”

    • CB says:

      Lee, if ur trading spus, u must be the market maker these days – Mr Topstep said last week that very few of those were traded.so .you can just single-handedly tilt the market in your direction :)

      • LX says:

        Hey C B
        Sorry I showed my age I meant minis…pssss u know those Mr Top Step guys never traded on the top step or pit ;)

      • CB says:

        LOL…go get em, Lee :)) …and no worries about ur age..in 2012 you called people born in 1963 “old” , so in 2013 we’ll just call people born in 1964 “old.” How’s that for a little logic..j/k… we’re all getting better every day :)

      • CB says:

        Lee, when you have a chance sometime, maybe U can tell us what that top step was for- some of us r so uncool that we don’t even have a clue…and they stopped those ftrading floor tours already, I guess…so it’s a historical gem by now ..you have the exclusive on that one Lee :)

        Thanks Tony.

  5. H D says:

    2012, warmest year on record for US- ever!

    • LX says:

      Brutal H D

    • CB says:

      really? I didn’t even notice
      http://screencast.com/t/KiOnVEcxR3t i am thinking 1470 …in a few …hours..once we get going :P

      • H D says:

        CB, for someone like me, who only gets his data from FOX news, the epic rise in temperatures is alarming. I was told different.

      • CB says:

        ok,HD so they didn’t tell you we’re all gonna be ‘fried &balanced” soon, BUT i specifically recall that they advised you of O’s death squads …so they just discuss matters …chronologically ;) ..anyways, dry heat is good

      • H D says:

        That’s pretty good CB! haaa yes “death squads” are here to stay. CME has some trading products for risk management of said “death squads”
        True story, got a rebate on my paycheck Friday from Obamacare. Overpayment to Cigna. Suckas are born everyday.

      • CB says:

        nice!…they paid you off, HD.lol! funny, HD and paycheck…almost sounds like an oxymoron…just reminds me of that poster everytime is see when I drive TC to his barber these days – “a steady job (paycheck, I guess ) and a wife has ruined many a good huntsman.”

  6. ronini3 says:

    .- .-. . / – …. . / .- -.. …- .- -. -.-. .. -. –. / – .-. — — .–. … / – .. .-. . -.. / ..-. .-. — — / – …. . / .-.. — -. –. / — .- .-. -.-. …. ..–..

  7. H D says:

    Good news is there is an excellent football game on tonight! Go Patriots!

  8. ronini3 says:

    Short WMT 72.16. 72.61 stop OCO 70.10 limit.

  9. LX says:

    $aapl looks like a wave 2 this morn with wave 3 up $590 ??

    • rc1269 says:

      hey Lee, just curious – why wouldn’t a 3 go higher than the 1?

      • gary61b says:

        LX if looking on daily chart could you see this as the start of 3 down on aapl? when looking over the weekly chart for aapl it would fit well with that oversize HS.

      • LX says:

        Hey RC
        Ok 590 ish ;) 3 of 1 of A
        Hey gary61b
        I see what ur talking about
        Tony mentioned if $516 gets taken out its going lower.

      • LX says:

        Did GS put a low in GC with their Top is in comments last week ?

      • LX says:

        Hey RC I see what ur saying ..Im counting 2 done at 505 with 555 as 1 and todays low as 2…I know I’m an excellent counter. My Dad lets me drive in the drive way

      • gary61b says:

        With aapl monthly from 79.28 low and up to 705 as w3 , and this just a pullback w4, .618 is at 315, and the hs has potential of 340 ish area, and with 50dma crossing over the 200dma its seems significant to consider. IMHO

    • waverookie says:

      EMA 13 crossing over EMA 34 on the Daily APPLE chart as I type. It’s been awhile since this last happened. Needs to rally hard and quick to reverse this, so it doesn’t create a longer turn trend on the daily chart. GL

    • rc1269 says:

      haha poifect. now i see your arithmetic.

      “A.. B.. C…… it’s as easy as… 1..2…3…”

  10. Hi all,
    this is a NEoWave stuff (Neely method), but it shows a Triangle from the Dec 2011 low (or from October 2011 low whichever you prefer):
    Now, the market may not follow this wave structure, but so far it has moved in line with my previous expectaions. So, I have no reason to alter my view. The recent weakness in Nasdaq 100 and Apple in particular is a strong evidence that supports the larger-degree bearish case. Plus, the 1st year of the presidential cycle is most of the time a negative year for the stock market. So, while the current view is positive, we need to be prepared.
    BR,
    Alexander

  11. ko68 says:

    Hi Tony. Is an eventual pullback to the SPX 1400-1410 levels “something we can live with” or is the bull-case weakening some with this scenario?

  12. LX says:

    Obama leaving for Hawaii for 20 days .. fuhgeddaboudit
    just buy dips

  13. Great analysis Tony.
    On the hourly volume analysis, it is obvious that we still see accumulation. Chart:
    http://tacticalstrategist.com/2012/12/09/resting-for-the-summit-tactical-view-2012-12-02/
    The strong performance of the world indices (DAX made a new bull high, China even seems to turn) further suggest we are merely held back a little by Washington. We could still see a dip, which would be a nice buying opportunity.
    SOX looks strong. I am a bit puzzled by the performance of tech though, which is contrasting the strength in financials. Maybe the banks are finally back to rule the world.

    • torehund says:

      In some stocks its hard to enter, a sure sign there is motivated waves going on and they correct more upwards than down after the motivated wave ends. And to make a rally sustainable Japan and China needs to participate. Tech is slow I agree and so is the small cap index that hasn’t gained much since the top of major 1. But little by little something could happen and thats when a rally have got legs. Some pointed out we should see substantial gains soon, I agree fully, this is inflection and many sectors will see massive bankruptcies if things dont turn upwards soon, like solar and shipping.
      If latter go massively belly up, so will banks do, just a bit later.

  14. torehund says:

    Just one of my own shares to mention if some like small cap pharmas, Dendreon (DNDN).
    Dendreon has declined from April 2010, firstly an DE wave and then it rolled over in a huge ABC, which I think is finished now in a reversed ABCDE.
    Latest development is that a motivated smaller down wave got bended upwards near its expected finish, and I therefore expect this sign of strength to give it a corrective ABC upwards to the 200mda.
    As DNDN has corrected for so long and denied 200 MDA crossings for so long, and so many times, the stock could maybe double quickly.
    As I trust Tony much more than myself it would be fun to get his opinion, or others in here as well.
    ENJOY WEEKEND !

    • tony caldaro says:

      Tore,
      DNDN has not made money in 10 years, and continued loses are expected.
      Shot up from $2.50 to $58 in one year, probably on expectations.
      Then collapsed from $58 to $3.70 the following year.
      Positive divergences across the board at the November low.
      Resistance around $6.35. Trades are always extremely risky with this microcap

  15. Greg Polites says:

    Hi Tony – great weekend update, thanks. On Friday’s post we mentioned at (http://hgpolites3.wordpress.com/) that the SP500 appears to be coming to the end of a rising wedge. Its widest span indicates a coming upside breakout this week of 20-30 points which puts the SP500 at 1440-60. This alignes with your OEW price points and overhead resistance quite well. With so many different forms of analysis pointing to the same levels it will be – as you said – and interesting week.
    Cheers,
    Greg

    • tony caldaro says:

      thanks Greg,
      With rumors suggesting the FED will increase QE 3 another $40-$45 bln/month, equalling QE 1. It will be interesting if that fails to occur, or occurs.

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  17. M1 says:

    Thanks, Tony. Great weekend update !.
    You know, I am still bearish short term and expecting a large pullback (+40 points).
    This week should give us some more clues.
    GL

  18. CB says:

    Tony, thanks!
    So AApl is behaving badly, but semis have broken out of their down trendline (albeit on low volume) & are close to confirming an uptrend on ur charts, I presume(?) Which one should we be focusing on, for some directional clues?
    Is Aapl just a commodity now, with Jobs gone, and the co. up to its eyeballs in competition & lawsuits?

  19. fionamargaret says:

    Good stuff as always Tony.

    Here are another 2 interpretations – the first being a Bradley model leading into 2013,
    and the second being Spiral dates for December.
    http://www.robertew.com/invest/bradley/br2012_2013.jpg

    http://spiraldates.com/

  20. pooch77 says:

    S&P 500 stocks above 20-day average is presently at 82%.We have about 8-15% possible upside as we usually hit 90-95% of stocks then reverse down.If we go up into FOMC meeting mid Wednsday this could be the top .Seems not much upside left at this point so it may be prudent to be vey cautious on upside.

  21. magnus1234 says:

    Tony thanks for a super weekend update. With an European economic perspective it is hard to phantom a W3 just now. However it is darkest just before dawn and I stick with that and the what the charts seems to tell us. Thanks again.

  22. rolandu11 says:

    Thanks Tony,

    my long-term volume indi gave a confirmation of an uptrend this week. Sometimes happens a fight with the 0-line. In a longer view this is positiv and normal, but the bulls have to avoid a negativ divergence in the inicator in this situation. Short term a fight with the 0-line could be tricky.

    http://s14.directupload.net/file/d/3098/jpzwxob8_jpg.htm

  23. Hi Tony, as to your 30% alternate count: I thought a wave IV couldn’t enter the price territory of wave I. Exception here? Thanks,

    • tony caldaro says:

      Mite,
      As noted this is best counted as a potential ABCDE.
      The 1-2-3-4-5 is for the novice EWer.

      • torehund says:

        The abcde is reversed with the symmetric abc on top, could be both corrective and motivated as I see it.
        If major one had been symmetric in two equal length a and c, I would have been more worried than I already am. The whole bull has elements of both a large ABCDE corrective retracement AND a motivated 5 wave structure not finished. I wish it had been more clear, however the bulls look as both fits fundamentals where the FED artificially reflates assets and no real growth has been seen standing on its own shaky feet.

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