tuesday update

SHORT TERM: stocks hold short term support early and rally into the close.
Stocks gapped down slightly at the open on a much weaker than expected Durable goods order report. Within the first 15 minutes the stock indices found support, the previous 2nd wave in the SPX/DOW, and rallied for a half hour. After some consolidation until about 2:00, they turned higher again into the close. It was a fair recovery considering yesterdays selloff. At the close the SPX/NDX/NAZ were up about 0.30%, and the DOW was 0.10% higher. When one reviews the DOW 60min chart, it becomes obvious why the market held in the early minutes this morning, see below. Thus far, I am labeling this decline as wave ‘a’, as it does not appear impulsive enough to label it a 1. Therefore, this rally, should it hold into tomorrow, will be labeled a ‘b’ wave. After spending the past four months anticipating waves unfolding to the upside, now it’s time to reverse gears, and starting looking lower. On the economic front, the revised Q2 and Q3 GDP’s will be announced at 8:30 tomorrow, then at 10:00 OCT New homes sales. Bonds added slightly to their 1/4 point gain this morning, Crude was up about 50 cents, and Gold completed a small wave ii which should lead to another rally shortly. Best to your trading!
MEDIUM TERM: neutral … major indices should have completed their uptrends
LONG TERM: bullish.
 

About tony caldaro

Investor
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4 Responses to tuesday update

  1. tony says:

    Hi Rob,
     
    Yes a 5 wave down "a" would imply a zigzag in the making. But this decline didn\’t look like a 5, more like an abc. As such I would be expecting a \’b\’ wave rally, which appears underway this morning, then another decline. Typically, the second waves in this market have been slow to get going to the downside, and usually accelerate when nearing the end of the move. We\’ll have to see how this works out. Appreciate your kind words!
     
    tony  
     

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  2. Rob says:

    hi guys…
     
    I think I recall that if we get 5 waves down as wave a, in classic EWT, then we are in a zigzag correction. Don\’t know if you go along with that Tony, but I\’m thinking with the reduced chances for a zigzag, and the  strong 4 month rally, and all the support at 1375 you show on your 1hr chart, a nice abc flat correction would make a lot of sense here.
    Too early to tell, but if so that b wave could take 3-4 weeks to slowly meander it\’s way back near or above the recent highs. Bouncing up and down giving us some kind of sloppy triangle as it goes, and constantly beckoning me to jump back in, heh, and finally right back down into wave c. The a wave was about 30 points… there are plenty of places even in this past rally where 30 points up took several weeks to draw.I think the multi-week scenario is still alive and well. Hopefully i\’ll stick to gold stocks, and silver too by the way! 
     
    I agree with BMZ about your calls  Tony… you\’ve been dead on!
     
    rob

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  3. tony says:

    Hi BMZ,
     
    Thank you!
    If a wave 1, then I would be looking for a 2-3-4-5 before any sizeable rally.
    If just wave \’a\’, then I would be looking for only b-c  before a sizeable rally.
    Doesn\’t change the trend which should be down until the correction ends.
    tony 

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  4. BMZ says:

    Tony-
     
    Kudos again for, not only calling the rally up from 1219, but then alerting longs to take cover before this decline.
     
    I have a question about today\’s comments, what is the significance of an initial labeling of this decline as "a" vs."1"?  Is it just that it appears to be taking the form of a 3 wave correction instead of a 5 wave one?  If it is only a 3 wave a-b-c, are you suggesting that after a "b" move top in the next day or so, we will experience a "c" wave that should complete the correction and lead to the next wave up?  Just wondering how that scenario (SPX top last Wednesday that may finish up an a-b-c correction in a few more days) reconciles with an earlier scenario that this correction may last several weeks.  Also, would the a-b-c scenario diminish the probability of a drop to a level as deep as say the 1327 you mentioned as a possiblility in an earlier post?
     
    Thanks
     
    BMZ
     

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