weekend update

REVIEW

The week started off at SPX 1971. On Monday, due to overnight selling, there was a huge gap down at the open to SPX 1875. Then after hitting SPX 1867 in the opening minutes the market rallied to 1954 into the early afternoon, and then headed lower again. Tuesday was quite volatile and ended at Monday’s low. Then the market gapped up on Wednesday and Thursday, closing the week’s 100 point opening gap and hitting SPX 1990. On Friday the SPX hit 1993, then ended the week at 1989. For the week the SPX/DOW were +1.00%, the NDX/NAZ were +2.85%, and the DJ World index was +0.30%. On the economic front positive reports outnumbered negative ones 11 to 3. On the uptick: Case-Shiller, the FHFA, new/pending home sales, consumer confidence, durable goods, Q2 GDP, personal income/spending, the PCE, plus weekly jobless claims were lower. On the downtick: the WLEI, the GDPN and consumer sentiment. Next week will be highlighted by the FED’s beige book, Payrolls and the ISMs. Best to your week!

OVERVIEW

This has been quite an eventful week, with long term implications. In an attempt to remain objective we will present our findings and you can decide how to best deal with them. Monday’s flash crash at the open and retest on Tuesday was an international event. Many of the emerging markets, and commodity driven, foreign indices, which had been rising in corrective patterns for the past number of years, appear to have completed those patterns and are now back in bear markets. Our list includes: Australia, Canada, Hong Kong, Indonesia, Singapore and S. Korea. These indices join Brazil, Greece and Russia, which had already been in bear markets. These nine indices represent half of the foreign indices we track. Obviously the rest of the indices, plus the US, are now facing some headwinds.

After the SPX hit an all time high in May at 2135, it had a modest correction into early July to 2044. We had anticipated that low, and then expected the bull market to resume. The SPX then started to uptrend, but the advance looked corrective, as the NDX/NAZ were making new highs. We then suggested defensive positions were warranted. Over the following weeks, while the market went sideways, we determined there were three possible counts. Lengthy bull markets, like this six year rise, make it difficult to track due to the abundance of waves. The three counts suggested a range from a minimum decline of SPX 2040 to the largest correction since 2011. A week ago Thursday the market closed below SPX 2040, which had provided six months of support, then a three day selling wave took the market down to 1867. Creating the largest corrections since 2011: SPX -12.6%, DOW -16.2%, NAZ -18.0% and the NDX -19.3%. The worse case scenario had unfolded.

Our worse case scenario, for the bull market, was that the SPX 2135 high ended Primary wave III and a three wave Primary wave IV was underway. This count was carried on the daily SPX and some other major index charts. The selloff, after breaking SPX 2040 support, was so rapid that it nearly triggered a long term downtrend. Long term downtrends are confirmed only during bear markets. They never, ever occur during bull markets. This was quite unexpected, and suggests additional caution should be maintained until this bull market reasserts itself. Should the market break Monday’s/Tuesday’s SPX 1867 low, any time in the future, a long term downtrend is likely to be triggered, and we too will be in a bear market. Naturally we will post this information in the daily update when/if it occurs. Using this information as an objective foundation we move ahead to the regular report.

LONG TERM: bull market

Our preferred count remains that this is a Cycle wave [1] bull market following the Super cycle bear market low in 2009. Cycle wave bull markets unfold in five primary waves. Primary waves I and II completed in 2011. Primary III completed in May, and Primary IV may have completed at this week’s SPX 1867 low. Over the past three months the SPX has had three corrective trends: 2044-2133-1867. This would satisfy three Major waves down into a Primary IV low.

SPXweekly

With Primary III topping in 2015 much of the historical references we have used this entire year no longer apply. We had thought, since this was the third longest bull market in history, that its three rising waves would unfold in Fibonacci years, like the other five. It has not. We also thought that the bull market would last for a Fibonacci number of years. We can no longer count on this relationship either. We are in unchartered historical territory.

At the beginning of 2015 we projected an upside target of SPX 2500+ by 2016. We had used the Fibonacci years relationship and the ECB’s EQE to determine this target. Unfortunately EQE did nothing for the SPX, as we have noted for the past several months. And with the Fibonacci years relationship now discounted, this target now becomes the optimal target rather than the expected one. When considering everything noted thus far, we are forced to shift from an aggressive posture to a more conservative one.

Fifth waves, during this bull market, have been notoriously weak. A simple glance at the Major wave 5’s during Primary waves I and III illustrate this quite well. Nothing more than marginal new highs before those primary waves ended. If Primary wave IV ended at SPX 1867, as expected, we can make some projections for Primary wave V. Since we use Fibonacci price clusters to determine these types of targets, we will offer them now as guidance going forward. There is a cluster between SPX 2214 and SPX 2219. Then single hits at SPX 2302, SPX 2397, and then a cluster between SPX 2522 and SPX 2571. The two clusters suggests the minimum and the maximum upside targets for the rest of the bull market.

MEDIUM TERM: downtrend may have bottomed

After the Primary III high at SPX 2135, the market did a Major A down to 2044, a Major B up to 2133, and now a Major C down to 1867 thus far. This would appear sufficient, barring a retest of the lows, to complete a Primary IV correction. At the low we had the most dramatic negative readings in the MACD in quite a while. The hourly MACD hit a negative 43.4, far below the -31.0 of Primary II, but above the -50.8 during 2008. The daily MACD hit negative 42.0, in line with the -42.4 of Primary II, and the -41.8 at the 2009 low, but well above the -77.2 during 2008. This weeks activity was a very significant event.

The Major wave C downtrend, while swift, can be counted as three Intermediate waves: 2052-2103-1867. With each of the Intermediate waves dividing into three Minor waves. Intermediate wave C, which is most important right now, displays these three Minor waves: 1867-1956-1867. At the low there were positive divergences on the hourly RSI/MACD, and the above noted extreme oversold levels on the daily chart. Normally these are more than sufficient to indicate a downtrend low.

SPXdaily

Last weekend we had noted an expected downtrend low this week. Only we were not quite sure at what level it would occur. On Monday we posted that the downtrend should bottom during a retest of Monday’s lows between the 1828, 1841 and 1869 pivots. We had no idea it would occur as soon as Tuesday. After hitting the extreme oversold levels we posted a tentative green Primary IV label on the hourly/daily charts Wednesday morning. Thus far that low has held. Medium term support is at the 1973 and 1956 pivots, with resistance at the 2019 and 2070 pivots.

SHORT TERM

Due to the volatility we have expanded our short term algorithm range a bit and can see five waves up from the SPX 1867 low: 1915-1880-1990-1948-1993. The third wave divided into five waves as well. Quantitatively, however due to the volatility, we only see three waves up at this time. The algorithm count would suggest support around the 1956 pivot. We will track both for the time being until the market provides additional data.

SPXhourly

If we take the minimum Primary V target of SPX 2214-2219 it is possible this bull market could complete during one uptrend and this year. If so, the five wave advance of such an uptrend would be labeled with five Major waves. Since this is a possibility, and the simplest count, we will start off labeling it this way once the uptrend is confirmed and/or looks impulsive.

Short term support is at the 1973 and 1956 pivots, with resistance at the 2019 pivot and SPX 2040. Short term momentum is displaying a negative divergence at Friday’s highs. Best to your trading this volatile market!

FOREIGN MARKETS

The Asian markets were mixed for a net loss of 1.1% on the week.

The European markets were mostly higher gaining 0.8%.

The Commodity equity group rose 5.0% on the week.

The DJ World index gained 0.3%.

COMMODITIES

Bonds are in an uptrend but lost 0.7% on the week.

Crude had it largest weekly rise since just after the 2009 low: +12.2%.

Gold is still trying to uptrend but lost 2.2% on the week.

The USD is still in a downtrend but gained 1.2% on the week.

NEXT WEEK

Monday: the Chicago PMI at 9:45. Tuesday: ISM services, Construction spending and Auto sales. Wednesday: the ADP, Factory orders and the FED’s beige book. Thursday: weekly Jobless claims, the Trade deficit, and ISM manufacturing. Friday: Payrolls and the Unemployment rate. Best to your weekend and week!

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

 

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Friday update

SHORT TERM: gap down opening, DOW -12

Overnight the Asian markets gained 0.9%. Europe opened lower but gained 0.4%. US index futures were lower overnight. At 8:30 Personal income (+0.4% v +0.4%)/spending (+0.3% v +0.2%) were reported higher, and the PCE was reported higher: +0.1% v +0.1%. The market gapped down at the open to SPX 1981, it had closed at 1988 yesterday. In the opening minutes it ticked down to 1979, and then rallied to 1993 by 11:30. At 10am Consumer sentiment was reported lower: 91.9 v 92.9. The market then pulled back to SPX 1975 by 1:30. After that it worked its way higher for the rest of the day closing at SPX 1989.

For the day the SPX/DOW were mixed, and the NDX/NAZ were +0.20%. Bonds lost 5 ticks, Crude rallied $2.85, Gold rose $9, and the USD was higher. Medium term support remains at the 1973 and 1956 pivots, with resistance at the 2019 and 2070 pivots. Today the WLEI was reported lower: 49.1%  v 49.6%, and GDPN was reported lower: +1.2% v +1.3%. Tomorrow FED vice chair Fischer gives a speech at Jackson Hole at 12:25 et.

The market gap down at the open today for the eighth consecutive gap opening. After a pullback to SPX 1979, the market rallied to a new high at 1993 from Tuesday’s 1867 low. As noted yesterday, this now looks like a potential fives waves up from that low: 1915-1880-1990-1948-1993. But we can still only quantify three waves. Signals mixed for the potential uptrend. While support appears to be around the 1956 pivot, the key resistance level moving forward is to recapture SPX 2040. Unfortunately there are now lots of cross-currents both medium and long term. This will be discussed at length in the weekend update. Short term support is at the 1973 and 1956 pivots, with resistance at the 2019 pivot and SPX 2040. Short term momentum displayed a negative divergence at today’s high and ended the week above neutral. Best to your weekend!

MEDIUM TERM: downtrend may have bottomed

LONG TERM: bull market

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

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Thursday update

SHORT TERM: another gap up opening, DOW +369

Overnight the Asian markets gained 2.2%. Europe opened higher and gained 3.4%. US index futures were higher overnight. At 8:30 Q2 GDP was reported higher: +3.7% v +2.3%, and weekly Jobless claims were lower: 271k v 277k. The market gapped up at the open to SPX 1963 and rose to 1972 in the opening minutes. After a pullback to SPX 1960 by 10am the market moved higher again. At 10am Pending home sales were reported higher: +0.5% v -1.8%. The rally continued until 1pm when the SPX hit 1990, then the market started to pullback. The pullback ended at SPX 1948 by 3pm, then the market rallied into at 1988 close.

For the day the SPX/DOW were +2.35%, and the NDX/NAZ were +2.45%. Bonds lost 4 ticks, Crude rallied $4.15, Gold was flat, and the USD was higher. Medium term support rises to the 1973 and 1956 pivots, with resistance at the 2019 and 2070 pivots. Tomorrow: Personal income/spending and PCE prices at 8:30, then Consumer sentiment at 10am.

The market gapped up at the open for the third day in a row today. Opened 20 points above yesterday’s close, rallied another 30 points closing Monday’s gap down opening, dropped 40 points in the afternoon, and then got most of that back before the close. So far this week the market has dropped 100 points, rallied 90 points, gave back that 90, and then rallied 120 points. This market is still quite volatile and potentially vulnerable. So far it looks like the market has done nearly five waves up from Tuesday’s SPX 1867 low: 1915-1880-1990-1948-1988, but we can only quantify three waves. Nothing convincing either way yet. Count remains unchanged. Short term support is at the 1973 and 1956 pivots, with resistance at the 2019 and 2070 pivots. Short term momentum was quite overbought today, dipped to neutral, then closed overbought. Best to your trading!

MEDIUM TERM: downtrend may have bottomed

LONG TERM: bull market

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

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Wednesday update

SHORT TERM: another gap up opening, DOW +619

Overnight the Asian markets gained 0.2%. Europe opened lower and lost 1.5%. US index futures were higher overnight, and at 8:30 Durable goods were reported higher: +2.0% v +3.4%. The market gapped up at the open to SPX 1905. The market had closed at SPX 1868 yesterday. In the opening minutes the market rallied to SPX 1915. It then pullback to SPX 1889 just past 10am, bounced to 1908 at 10:30, then dropped to 1880 by 12:30. After that the market started to rally again. By 2pm the SPX was back to 1908, dropped to 1897 by 2:30, then rallied to 1943 just before a 1941 close.

For the day the SPX/DOW were +3.90%, and the NDX/NAZ were +4.65%. Bonds lost 9 ticks, Crude slipped 35 cents, Gold dropped $15, and the USD was higher. Medium term support jumps to the 1929 and 1901 pivots, with resistance at the 1956 and 1973 pivots. Tomorrow: Q2 GDP (est. +3.1%) and weekly Jobless claims at 8:30, then Pending home sales at 10am.

The market gapped up at the open today for the second day in a row. This time, however, the market did not selloff into the close, losing 3% in the last hour of trading. It rallied into the close gaining 1+%. Market is still quite volatile as today’s range was 3%. We noticed several things this morning before the open and posted a tentative green Primary IV at yesterday’s SPX 1867 low. First a short term positive divergence and a double bottom (many of them lately) at SPX 1867. An extremely oversold daily RSI, and the most oversold weekly/monthly RSI since Primary II. The SPX had corrected 12.6%, the DOW 16.2%, and the NAZ 18.0% – the largest corrections since P2 as well. Plus the low occurred within the 1828, 1841, 1869 pivot range, and it occurred this week. Both expected. The potential for a downtrend low is there. Let’s see what the market can do with it. Short term support is at 1901 and 1929 pivots, with resistance at the 1956 and 1973 pivots. Short term momentum touched overbought after yesterday’s positive divergence. Best to your GDP trading!

MEDIUM TERM: downtrend may have bottomed

LONG TERM: bull market

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

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Tuesday update

SHORT TERM: gap up opening fails, DOW -205

Overnight the Asian market were still lower -0.8%. Europe opened higher and rebounded +3.9%. US index futures were much higher overnight. At 9am Case-Shiller was reported higher: +5.0% v +4.9%, and FHFA housing prices were higher: +0.2% v +0.4%. The market gapped up at the opening to SPX 1928, then continued higher to 1941 just past 10am. The market had closed at SPX 1893 yesterday. At 10am New home sales were reported higher: 507k v 482k, and Consumer confidence was reported higher: 101.5 v 90.9. After a pullback to SPX 1926 by 10:30 the market rallied to 1948 by 11:30, then started to pullback. The market declined to SPX 1915 by 1:30. Then after a rally to 1930 just before 3pm, the market dropped 3% in the last hour of trading to SPX 1867, yesterday’s low, and closed at 1868.

For the day the SPX/DOW were -1.30%, and the NDX/NAZ were -0.50%. Bonds lost 25 ticks, Crude gained 65 cents, Gold dropped $13, and the USD was higher. Medium term support is now at the 1841 and 1828 pivots, with resistance at the 1869 and 1901 pivots. Tomorrow: Durable goods at 8:30.

The market gapped up at the open for the first time since August 10th. In between those two gap up openings, were seven gap down openings in ten trading days. Quite an onslaught of overnight selling. Today’s market activity continued the feeding frenzy in the index futures. While the market did rally quite a bit from yesterday’s opening minutes low at SPX 1867. It was still quite a bit below Friday’s close at SPX 1971. And at the end of the day the market was back to that low.

The updated count, as noted yesterday, suggests the SPX is in Major C of Primary IV. Major A having occurred in July at SPX 2044, and Major B also in July at SPX 2133. Support for Major C should occur between the OEW 1828-1841-1869 pivots. Thus far it appears Intermediate A declined to SPX 2052, Int. B rallied to SPX 2103, and Int. C is still underway. Within Int. C we are counting Monday’s SPX 1867 low as Minor A, and the rally to SPX 1954 as Minor B, with Minor C already retesting the lows. Once Minor C concludes it should end Primary wave IV. Short term support is at the 1841 and 1828 pivots, with resistance at the 1869 and 1901 pivots. Short term momentum only managed to get back to neutral then ended the day quite oversold. Best to your trading!

MEDIUM TERM: downtrend

LONG TERM: bullish

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

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Monday update

SHORT TERM: flash crash Monday, DOW -588

Overnight the ES futures opened 10 points below Friday’s close. After an hour or so they were 20 points lower. Overnight they dropped to 60 points lower. Then about 1/2 hour before the open they hit limit down 100 points lower: (-5.0%). Then just as the market opened they dropped to 140 points down. The cash market opened down 96 points at SPX 1875, dipped to 1867, and then started to rally without the futures. Instead of the tail (ES) wagging the dog, the dog (SPX) was wagging the tail. The market then rallied to SPX 1911, dipped to 1875 just before 10am, then rallied to 1932 before 10:30. A wild first hour of trading. By 10:30 the SPX was down to 1909, rallied to 1928 just before 11am, then dropped to 1909 by 11:30. Then by 1pm the SPX was at 1954. After that it headed back down again. Around 3:30 the SPX hit 1880, rallied to 1925, then closed at 1893.

For the day the SPX/DOW were -3.75%, and the NDX/NAZ were -3.80%. Bonds gained 10 ticks, Crude lost $2.30, Gold slipped $6, and the USD was lower. Medium term support drops to the 1869 and 1841 pivots, with resistance at the 1901 and 1929 pivots.

The gap down opening today made no doubt that the market is in Primary IV. Kudos to those that called it a month ago. The four major indices have already had their largest corrections since 2011. Today’s activity, which was quite volatile, looks similar in some ways to the flash crash of 2010. Only that occurred during trading hours. As a result of today’s activity we have updated all the SPX charts to display a Primary III high at SPX 2135, a Major A at SPX 2044, a Major B at SPX 2133, and Major C underway. Support for Primary IV should arrive between the 1828, 1841 and 1869 pivots. The market dropped to the 1869 pivot this morning, rallied to the 1956 pivot, and then started to decline again. Volatile day! Short term support at the 1869 and 1841 pivots, with resistance at the 1901 and 1929 pivots. Short term momentum only managed to get out of oversold territory during today’s midday rally, then closed at oversold again. Careful out there, this is a very volatile market.

Late last week Stock charts deleted the Java mode I was using to update the charts, and now it requires some new mode. It will take me some time to figure it out. This the reason the charts have not been completed updated.

MEDIUM TERM: downtrend

LONG TERM: bull market

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

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weekend update

REVIEW

The market started the week at SPX 2092. After a gap down opening on Monday the market quickly recovered to hit SPX 2103. It traded at that level again on Tuesday, and then ran into three straight gap down openings for the rest of the week. On Friday the SPX hit 1971 and closed there. For the week the SPX/DOW were -5.8%, the NDX/NAZ were -7.1%, and the DJ World index was -5.3%. On the economic front reports came in slightly to the positive. On the uptick: the NAHB, the CPI, housing starts, existing home sales, the Philly FED and the GDPN. On the downtick: the NY FED, building permits, leading indicators, the WLEI, plus weekly jobless claims rose. Next week’s reports will be highlighted by the next report on Q2 GDP, Durable goods, and PCE prices.

LONG TERM: bull market

Last weekend we introduced a third corrective count: Major wave 4. This new count, along with the Intermediate wave ii and Primary IV counts, all suggested defensive positions as the market would likely be heading lower soon. We gave four levels of support with varying wave degree implications: the low SPX 2040’s, the 2019 pivot, the 1973 pivot, and SPX 1820. Three of these levels were hit as the market moved to the downside this week.

Breaking the first two levels suggested the Intermediate wave ii, subdividing Major wave 5 labeling, could be eliminated. We held this count for most of the year as we had expected the ECB’s EQE to stimulate the US stock market, as well as Europe. After months and months of choppy action it was quite obvious this was not occurring. A little over a month ago we introduced the Primary IV count as four of our long term indicators had turned negative. Soon after one of those indicators reversed higher. Now, this week, a different set of long term indicators turned negative. So this count is still viable and remains posted on the SPX daily chart. A Primary IV correction would suggest a decline back to the October 2014 lows around SPX 1821.

SPXweekly

A Major wave 4 correction still fits the wave patterns in all four major indices. It does not display a compressed Major wave 4 and short diagonal Major wave 5, as labeled with the Primary III May top count. It suggests all the price activity from the October Intermediate wave iv low was a diagonal triangle Intermediate wave v, in both the DOW and SPX. While the leading NDX/NAZ impulse from that low in five waves. Either way the market is clearly downtrending again after months and months of choppy activity.

We continue to label this six year bull market as a five primary wave Cycle [1]. Primary waves I and II completed in 2011, and Primary wave III has been underway, or recently completed, since that October 2011 low. If Primary IV is underway it should end with the largest percentage correction since 2011. All corrections in the SPX, since Primary II, have been limited to 10.4% or less. If Major wave 4 is underway it should end with less than a 10.4% correction.

MEDIUM TERM: downtrend

For months on end the market remained in a choppy pattern, even through Wednesday of this week. After the FOMC minutes were released on Wednesday the market rallied to SPX 2096. Then with Thursday’s gap down opening, and losing the six month support level at SPX 2040 at the close, the market tumbled during Friday’s options expiration.

SPXdaily

While our long term sector indicators are not aligned with a Primary IV scenario, the technical indicators are getting there. The SPX weekly MACD has now joined the DOW and turned negative for the first time since 2011. The SPX monthly MACD remains on a sell signal with the DOW, and the RSI is also heading toward an oversold level not seen since 2011. The market will need a sharp reversal next week to keep these indicators from collapsing further.

With the drop below the SPX 2040 level at Thursday’s close the subdividing Major wave 5 scenario was eliminated. Especially with the DOW completely retracing its uptrend by Thursday’s close. Since the market has turned weak late-Thursday through Friday we are favoring the Primary IV scenario, and updated the hourly chart with that count. The weekly chart continues to display the Major wave 4 scenario. To keep that count alive the market needs to rally strongly next week, without breaking down too much further. Similar to what it did at the Major wave 2 low. Medium term support is at the 1956 and 1929 pivots, with resistance at the 1973 and 2019 pivots.

SHORT TERM

With Thursday’s/Friday’s market activity, we not only updated the hourly chart to match the daily chart. But also shifted the first significant wave of the downtrend over to the SPX 2052 level. This would put it more in proportion with the recent selloff. At Friday’s SPX 1971 low Minor C is within one point of a 1.618 relationship (1972) to Minor A. Should the 1973 pivot range hold the market could experience a good rally next week. If not, the 1956, 1929 and even 1901 pivots would be next.

SPXhourly

After four years of a rising market, and the loss of the six month support at SPX 2040, it appears many are hedging or simply taking profits. Short term support is at the 1956 and 1929 pivots, with resistance at the 1973 and 2019 pivots. Short term momentum ended the week extremely oversold. Best to your weekend and week!

FOREIGN MARKETS

The Asian markets were all lower for a loss of 5.6%.

The European markets were all lower as well for a loss of 6.3%.

The Commodity equity group also all lower losing 6.0%.

The DJ World index lost 5.3%.

COMMODITIES

Bonds remain in an uptrend and gained 1.1%.

Crude remains in a downtrend and lost 4.1%.

Gold has nearly confirmed an uptrend and gained 4.2%.

The USD confirmed a downtrend and lost 1.6%.

NEXT WEEK

Tuesday: Case-Shiller, FHFA housing, New home sales and Consumer confidence. Wednesday: Durable goods orders. Thursday: Q2 GDP (est. +3.1%), weekly Jobless claims and Pending home sales. Friday: Personal income/spending, PCE prices, and Consumer sentiment. Saturday: a Jackson Hole speech by FED vice chair Fischer.

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

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