Wednesday update

SHORT TERM: higher open new rally highs, DOW +142

For the first three days of the week the Asian markets gained 0.7%, and the European markets gained 0.1%. The SPX has rallied from Friday’s close at 2596 to 2626 today, before closing at 2616. The US market has hit an inflection point. One that determines whether or not this rally is a B wave, or the Christmas low was the end of the bear market.

We’re using five criteria to hopefully determine which is the most probable outcome: size of rally, NDX/NAZ and SPX/DOW wave patterns, rebound percentage from the low, and breadth rise from the low. First, this rally is the largest rally since the bear market began, a positive. Second, the NDX/NAZ look like they have done five waves up from the Christmas low, another positive. Third, the SPX/DOW look like they have done three waves up from the low, a negative so far. Fourth, the largest rebound for B waves, under similar conditions, in the past three decades has been 13%. The rally has already reached 12%, close to turning positive. Fifth, the maximum percentage rise in breath for a B wave has been 25%. Thus far breadth has risen 19%, a negative.

Since we already have two positives, a third would raise the probabilities in favor a new bull market. A fourth would increase those probabilities, and a fifth would almost assure them. Short term support is at the 2594 and 2575 pivots, with resistance at the 2632 and 2656 pivots. Short term momentum ended the day with a negative divergence. Best to your Opex trading!

MEDIUM TERM: downtrend

LONG TERM: downtrend probable

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

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Weekend Update

REVIEW

The week started at SPX 2532. After a small pullback to the SPX 2525 pivot early Monday it rallied to SPX 2580 early Tuesday. Then after a Tuesday pullback to SPX 2548 it rallied to SPX 2598 by Thursday. Friday was the second straight gap down opening, and just like Thursday it had minimal impact on the close. For the week the SPX/DOW gained 2.5%, and the NDX/NAZ gained 2.5%. Economic reports for the week were sparse due to the government shutdown. On the downtick: the CPI, ISM services and consumer credit. On the uptick: weekly jobless claims improved. Next week’s reports will be highlighted by industrial production, retail sales, and the NY/Philly FED. The ECRI has now declined to 2011 levels.

LONG TERM: downtrend probable

The foreign markets, as we noted on December 29th, have been displaying signs of improvement after entering what appears to be their last bear market downtrend. While Germany and Spain have rallied a little off their late December lows. The Asian markets are doing a lot better. Hong Kong and the Kospi both appear to be in an uptrend, and Singapore has already confirmed its uptrend. China has had a small rally off its January low. Elsewhere, Brazil continues to make new bull market highs.

On the home front. Nothing has changed in the long term count for the US major indices. A Primary I bull market ran from 2009-2015. Primary II lasted 9 months but did little damage ending in February 2016. Major 1 of Primary III rose from that low to September – October 2018. A Major 2 bear market, having dropped 20% already, has been underway since then. When it concludes, if it hasn’t already, an Intermediate I bull market will be underway. Intermediate I, of Major 3, of Primary III.

MEDIUM TERM: downtrend

After the bull market high in October 2018 at SPX 2941 the market headed into a bear market. The decline appeared ordinary until December. Then the market went into avalanche mode. Was it the POTUS I’m the Tariff Man tweet? The market dropped from SPX 2800 to SPX 2347 by Christmas, a 16.2% decline, for the worse December since the year 1931. After that the market reversed and changed characteristics. While nearly every rally was sold in December, nearly every decline is currently being bought. The SPX in 12 trading days has rallied from 2347 to 2598, a 10.7% gain. Was it the POTUS Stocks are Cheap tweet?

While all this was going on we were doing some research into historical market activity that is similar to this. We found five events, not much, since, and including the 1987 crash. In every one of the five instances the market rallied between 7.5% to 13% after the significant low. In four of the five instances, when the rally concluded, the market retested the lows. The one exception still had a 61.8% pullback, before moving higher. The pivots highlighted in green 2632 and 2656 are the 12% and 13% levels.

We also looked into momentum measures. This data is only available since the turn of this century. And there are only three instances. In each of the three instances momentum rose 20% to 25% before the market reversed and went back to retest the lows. It is currently up 17%. The chart for this is located on page 17 of the charts. Probabilities suggest a decline soon that mostly likely retests the lows.

SHORT TERM

During the bull market it was fairly easy to track the five wave movements as volatility was low and the rise was generally slow. With volatility still high it has been somewhat difficult to track the smaller waves with our normal approach. With this in mind we all have been working to quantify short term waves just on price alone.

There are a few potential counts floating around in our group. Nearly all are corrective. The approach I am using displays 5 impulsive waves up (SPX 2347-2520), a choppy pullback to SPX 2444, then 5 overlapping waves (possibly an expanding diagonal) to SPX 2598. Waiting to see how this unfolds in the days ahead. Short term support is at the 2594 and 2575 pivots, with resistance at the 2632 and 2656 pivots. Short term momentum ended the week above neutral. Best to your trading Opex week!

FOREIGN MARKETS

Asian markets were all higher on the week and gained 3.0%.

European markets were all higher and gained 1.9%.

The DJ World index gained 3.0%, and the NYSE gained 2.7%.

COMMODITIES

Bonds continue to uptrend but lost 0.3% on the week.

Crude continues to look like it is in an uptrend and gained 7.6% on the week.

Gold is in an uptrend and gained 0.3%.

The USD is in a downtrend and lost 0.5%

Bitcoin is in a downtrend and lost 2.8%.

NEXT WEEK

Tuesday: the PPI and NY FED. Wednesday: retail sales, export/import prices, business inventories and the NAHB. Thursday: jobless claims, housing starts, building permits, and the Philly FED. Options expiration Friday: industrial production, capacity utilization, and consumer sentiment. Best to your week!

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

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Wednesday update

SHORT TERM: rally continues, DOW +92

For the first three days of the week the Asian markets have gained 2.9%, and the European markets have gained 1.2%. The SPX started the week at 2532 and hit 2595 today for a 2.5% gain so far this week. When reviewing the charts of the SPX, DOW, NAZ and NDX we do not see them as choppy as we would have expected for a B wave rally. The SPX, DOW, and NDX look like three waves up, and the NAZ is one wave up thus far. Could be corrective, could be impulsive, too early to tell. With that in mind we did a bit of research.

Whenever the Presidents Working Group (PWG) gets involved in the markets through their Primary Dealers. The market generally rallies 10% to 13% before turning over and heading back down again. One time, 1990, it never did fully return to the recent lows. Was that the outlier? Or is that a possibility this time around too? The three levels to watch going forward actually fit with three OEW pivots. These are highlighted in green on the daily chart. SPX 2575, 2632 and 2656. The first is a 10% rally, which has already been achieved. The second a 12% rally, and the third a 13% rally. We would not expect a PWG B wave to exceed that third level. We are also watching market breadth, and have some parameters there too. Interesting juncture.

Short term support is at the 2575 and 2525 pivots, with resistance at the 2594 and 2632 pivots. Short term momentum displays a negative divergence at today’s high. Best to your trading!

After observing TESLA  for a few years we have determined it trades more like a commodity stock (abc’s) than a growth stock, and have dropped it from our charts. In its place we have added a few things. Fed-Ex (pg. 13), Intelsat (pg. 14), and GBTC (pg. 13) the pink sheet Bitcoin ETF. Under commodities on page 8 we have added to Gold and Crude, the CME Bitcoin index and Soybeans. Biotech remains on that page. The Housing index has been moved to page 15 with the housing stats. New Year improvement? Possible.

MEDIUM TERM: downtrend

LONG TERM: downtrend probable

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

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Weekend update

REVIEW

This volatile week started at SPX 2486. After a gap up opening Monday and rally to SPX 2509, the market went into chop mode ahead of the NY Day holiday. A gap down open started the action on Wednesday. After hitting SPX 2467 early the market rallied to SPX 2519. Thursday had another gap down opening. The market quickly dropped to SPX 2448, rallied to 2488, then dropped to 2444 just before the close. Friday a totally different story. After a gap up opening to SPX 2482 the market just kept on rising, hitting SPX 2538 before closing at SPX 2532. For the week the SPX/DOW gained 1.75%, and the NDX/NAZ gained 2.25%. Economic reports for the week were light and mixed. On the downtick: ISM manufacturing, plus both jobless claims and the unemployment rate rose. On the uptick: the ADP, monthly payrolls, and auto sales. Next week’s reports will be highlighted by the FOMC minutes, the CPI, and ISM services. Best to your week!

LONG TERM: downtrend probable

After the worse December since the year 1931 many of the market pundits capitulated and turned bearish. The SPX lost 9.2% on the month. It is probably best to describe 2018 as a bull sandwich: two three month corrections, with a six month uptrend in the middle. Net loss YoY 6.2%. Economically, the ECRI was making lower lows this week.

Last weekend we noted that just when many were turning bearish several foreign markets looked like they were in the last bear market downtrends: China, Germany, Hong Kong, Singapore, S. Korea, and Spain. This week China made a new bear market low, Hong Kong confirmed its last downtrend, S. Korea confirmed its last downtrend and made a new bear market low. S. Korea looks like it could be bottoming now.

An emerging market that is enjoying the fruits of its economic and political recovery is going mostly unnoticed. It just made new bull market highs in the first three days of this new year. The market: Brazil. After a market crash, along with nearly every other market, in 2008, the BVSP rose in a P1 bull market until 2010. Then economic/political trouble set in and a six year P2 bear market followed until the worldwide low in 2016. It has been rising in a P3 every since. Short term charts are on page 5 of the stock charts link below.

Nothing has changed on the long term count or the weekly chart. You can read last weekends update for more detail.

MEDIUM TERM: downtrend

Made some notes on the daily chart to prove a point. For those that think the POTUS and FED cannot move markets, think again. Note the four instances in December when the POTUS or FED did something market noteworthy. December 4th, Trumps tariff man morning tweet. The market was at SPX 2786. By December 26th the market had dropped to SPX 2347: -15.8%. Along the way Powell stated that rates and QT were on auto pilot during the rate hike pressor on December 19th. If you recall the SPX dropped 100 points between the time the FED raised rates and he finished his pressor one hour later. On December 24th the Presidents Working Group convened. Then on Christmas day, December 25th, Trump tweeted stocks are cheap. The SPX had closed at 2351 on the 24th, and has since rallied 8.0% at Friday’s high. Clearly Powell and Trump can move markets.

With the best surge in market breadth since the downtrend began it is possible Int. A ended at SPX 2347 and Int. B is currently underway. A 38.2% to 61.8% retracement would be normal for a B wave of this degree: SPX 2574 to 2714. It’s a large range but nothing this volatile market couldn’t handle in a couple of days.

We also see the possibility, as noted in the DOW charts, that Int. C is still underway. This was detailed in last weekends update. Either way we should be seeing a retest of the December lows before this bear market ends.

SHORT TERM

The pattern for this downtrend remains the same. An abc down to late October, a November B wave, then another abc down to late December. While the pattern has been unchanged, the wave degree has been a bit difficult to determine. Ideally, as noted last week, a drop to SPX 2310 would ideally fit the SPX and DOW.

Short term support is at the 2525 and 2479 pivots, with resistance at the 2575 and 2594 pivots. Short term momentum ended the week overbought. Best to your trading in the NY.

FOREIGN MARKETS

Asian markets were mostly lower and lost 0.8%.

European markets were all higher and gained 2.1%.

The DJ World index gained 1.5%, and the NYSE gained 2.2%.

COMMODITIES

Bonds continue to uptrend and gained 0.6%.

Crude appears to be trying to get an uptrend going and gained 5.8%.

Gold remains in an uptrend and gained 0.2%.

The USD is in a downtrend and lost 0.2%.

NEXT WEEK

Monday: ISM services and factory orders at 10am. Tuesday: consumer credit. Wednesday: the FOMC minutes. Thursday: weekly jobless claims and wholesale inventories. Friday: the CPI and the Budget deficit. Best to your week!

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

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Wednesday update

SHORT TERM: gap down opening then rebound, DOW +19

For the first three days of this holiday shortened week the Asian markets lost 0.9%, and the European markets gained 0.5%. The US market after doing two zigzags up from the SPX 2347 downtrend low, may have started the third zigzag at today’s SPX 2467 low. The previous zigzags were: [2367] 2414-2394-2468 and [2398] 2508-2473-2520. This third one could be: [2467] 2519-2495-xxxx. Had the first leg up of this potential zigzag exceeded SPX 2520 we would feel better that another one is underway.

A market maker in the making. Bernanke, Powell and Yellen get together on Friday morning for a round table discussion. Will Powell announce a QT freeze? Short term support remains at the 2479 and 2456 pivots, with resistance at the 2525 and 2575 pivots. Short term momentum ended the day around neutral. Best to your trading and Happy New Year!

MEDIUM TERM: downtrend

LONG TERM: downtrend probable

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

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Weekend update

REVIEW

The week started at SPX 2417. After a gap down opening on Monday’s half-session the SPX closed at a new downtrend low of 2351. Trading resumed with a gap up opening on Wednesday to SPX 2386, which was quickly sold off, and a new downtrend low was hit for the 7th day in a row: SPX 2347. After that the market abruptly reversed, and by the end of the day the DOW had gained a record 1000+ points. The SPX closed at 2468. A gap down opening started Thursday. The SPX hit 2398 in the afternoon, but ramped up into a SPX 2489 close. Two days of spectacular up moves. Friday had a gap up opening, hit SPX 2508 early, dropped to 2473, then hit 2520, before dropping to 2477, and closing at 2486. For the week the SPX/DOW gained 2.85%, and the NDX/NAZ gained 4.0%. Economic reports for the week were sparse and to the downside. On the downtick: consumer confidence, the Chicago PMI, and pending homes sales. On the uptick: weekly jobless claims improved. Next week’s holiday shortened week will be highlighted by monthly payrolls and ISM. Happy New Year!

LONG TERM: downtrend probable

Sometimes the advantage of applying OEW to the indices can keep one a step ahead of the crowd. During 2017 we noticed Germany and Spain could be completing bull markets. They are still going down. Then in Q1 2018 China, Hong Kong, Singapore and S. Korea were completing bull markets. They are still going down too. Now that most of the world is in a bear market pundits are trying to justify it with many things, but especially a slow down in global activity.

 

In Q1 2018 the US had the biggest correction of its bull market, about 12%. But we knew it had one more wave up to new all-time highs before its bull market was over. It was a struggle with most of the world’s indices already in bear markets. But it got it done in September/October, and then rolled over into its own bear market.

 

We mention this now because those six previously noted foreign markets all look like, if our counts are correct, they are in their last downtrend of their bear markets. Four have been declining since Q1 2018, and two have been declining since mid-late 2017. Look at Hong Kong’s abcA-B-abcC. This kind of pattern is normal for completing a bear market. Just when nearly everyone is onboard with a bear market scenario it could be ending.

MEDIUM TERM: downtrend

As for the US, the four major indices, SPX/DOW and NDX/NAZ, have had only one downtrend. It has been quite complex with many, many 60-100 SPX point waves. In fact, several times we labeled a tentative green Intermediate wave A low expecting an uptrend. All we got was a rally, and then lower lows. All along we felt the structure we had labeled was correct, but we were not quite sure about the wave degrees. This week’s activity, we think, gave us a hint.

If we look at some of the minor US indices from their bull market highs, we observe that they had a downtrend, an uptrend, and a downtrend. All while the four major indices have been in one downtrend. These indices are: R2K, SOX, TRAN, XLB, XLF, XLI, XLP, and XLV. Seems odd that the financials, industrials, transports, semi’s, and small caps all display the three trends, while the major four do not. Even the NYSE had three trends.

As a result of this weeks market activity, and the above noted observations, we are seriously considering that Intermediate waves A and B have already occurred. And Intermediate wave C has been underway since November. This count is posted on the DOW hourly and daily charts.

SHORT TERM

When considering everything previously noted. It is possible that the next selloff could not only end the bear markets internationally, but also in the US. At the beginning of the bear market we expected a short one of about 15%-20%. So far it has held within those parameters. We had thought that SPX 2400 would be the maximum downside. We got that wrong as the SPX has already hit 2347.

We see two potential support levels for the next, and maybe last, selloff. SPX 2310 C = 1.5 A, and SPX 2270 C = 1.62 A. The DOW C wave would have a 1.62 relationship to A around the SPX 2310. While is no pivot at SPX 2310, there is one at SPX 2321, 2286 and 2270. Also if the potentially last selloff is not too severe many positive divergences would be set up in the daily and weekly charts, with oversold monthly charts. These typically work to end downtrends and bear markets. We added some charts to the very end of stock charts to display how oversold the major indices really are. Here’s one.

The rally from the downtrend low at SPX 2347 looks corrective. We have observed three waves up (2414-2394-2468), three waves down (2414-2444-2398), then three waves up (2508-2473-2520). Notice the two rallies are nearly equal at 121/122 points. Symmetry. After the high the market setup a double negative divergence on the hourly chart and the SPX dropped to 2477. So the second set of three waves is complete. Will we get a third set next week? Or does the market head down from there? Short term support ended at the 2479 and 2456 pivots, with resistance at the 2525 and 2575 pivots. Short term momentum dropped to neutral after the double negative divergence. Best to your trading in the NY.

FOREIGN MARKETS

Asian markets were mixed on the week and lost 0.3%.

European markets were mostly lower and lost 0.6%.

The DJ World index gained 2.0%, and the NYSE gained 2.3%.

COMMODITIES

Bonds continue to uptrend and gained 0.3%.

Crude continues to downtrend and lost 0.6%.

Gold is still in an uptrend and gained 2.0%.

The USD is still in a downtrend and lost 0.5%.

NEXT WEEK

Tuesday: holiday. Thursday: jobless claims, ISM, construction spending, and auto sales. Friday: monthly Payrolls, and unemployment rate. Happy New Year!

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

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Wednesday update

SHORT TERM: gap up opening, pullback, then DOW +1086

For the first three days of the week not much happened in the foreign markets, as most were closed, or open a limited time. The US market, however, was a bit different. Even though there was a half session on Monday, the market tanked to SPX 2351 at the close. Down 65 SPX points on the day. Today was a totally different a story. The SPX closed at 2468: +4.96%.

On March 4th 2009 POTUS Obama stated to buy stocks because they were cheap. The 2007-2009 bear market bottomed only 4% lower and two days later at the infamous SPX 667. On Monday Treasury secretary Mnuchin convened a meeting of the Presidents Working Group (FED, SEC, CFTC and Treasury). On Tuesday, Christmas day, POTUS Trump stated to buy stocks because they are cheap. Did the market respond to the POTUS or the PWG? Keep in mind POTUS Trump tweeted on December 4th that he is the Tariff Man. The market promptly dropped 15.9% over the next three weeks.

If today’s activity was because of the PWG, better known as the Plunge Protection Team, there is certainly more upside ahead in the coming days and possibly weeks. Managed
Markets for a Managed Economy (MM4ME). The rally from today’s SPX 2347 low, the 7th consecutive day of new downtrend lows, looks like three waves thus far: 2414-2394-2468. Short term support is at the 2456 and 2444 pivots, with resistance at the 2479 and 2525 pivots. Short term momentum reached quite overbought during the rally. The daily RSI just came off its lowest level since the 1987 crash. Best to your trading!

MEDIUM TERM: downtrend

LONG TERM: downtrend probable

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

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