wednesday update

SHORT TERM: market stages a very nice rebound after mondays selloff.
At 8:30 this morning, the government released the GDP revisions for Q2 and Q3. The news was much better than even the FED expected. Q2 was revised upward, as was Q3, and the GDP growth for the past 12 months is at 3%. Of course, there will be revisions to the revision, but for now the economy looks stronger than it appeared. Stocks opened strongly rallying until 11:00, when the Tech sector started to pullback. The pullback in techs continued until 1:30, when the NDX actually went negative for the day. But the Cyclicals continued to maintain their opening strength, and the entire market rallied into the close. In the end, a strong day, as the major indices gained between 0.70% and 0.90%.
Bonds, strangely enough, rallied on the GDP news. Bonds have been rallying for the past few months, in anticipation of a lowering of short term rates, by the FED, early next year. That seems even more unlikely at this point in time. Near the end of the day Bonds did close slightly lower. Another market, that is definitely effected by the news, is the Crude market. A stronger economy means a potential return to strong demand for energy: Crude rallied nearly $1.50 on the GDP data, and a decrease in inventories. Gold had a quiet day, trading within a narrow $3 range. Technically, with todays rally, the SPX has retraced most of its recent 30 point decline, (21 points). Yet Technical indices, the NDX/NAZ, which have been leading the market for the past month, have only retraced a 50% of the recent decline. Obviously, this is creating mixed signals as to the worthiness of this rally. For now, I will maintain that this is a "b" wave rally within the context of an overall correction. The SPX/DOW are displaying negative RSI divergences at the late afternoons highs, in the 15min/60min charts. The NDX/NAZ both failed to make a new intraday high in the afternoon. Tough market, be careful!
MEDIUM TERM: neutral … major indices appear to have completed their uptrends
LONG TERM: bullish.       

About tony caldaro

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6 Responses to wednesday update

  1. tony says:

    Hi Guys!
    Rob, a fun market indeed. Strong uptrend tops are always tough to pinpoint.
    Greg, you are correct. OEW is not much different than EW when it comes to wave structures.
    B waves should always be 3\’s, and I\’ve seen many apparent 5\’s turn into threes.
    In other words, either the A or the C subdivided.
    This is the reason I follow so many indices: SPX/DOW/NDX/NAZ/SOX/TRAN/R2K.
    I want to see confirmation of one move in one index by the others.
    Specifically, in modern times, the SPX and NDX confirming each other.
    This is not a 1980\’s market, when most of the textbooks were written on the EWT.
    This is a derivative driven market. The SPX and NDX move this market!


  2. Greg says:

    Quick answer to BMZ\’s question:
    In my understanding of EW (I\’m not sure about OEW) is that wave "B\’s" are countertrend events, therefore they should always take a 3 wave form with one exception:  Because they are also the "last" event before the final (wave c) push to end a countertrend move, they could form a triangle, which would be 5 waves (all 5 taking a "3 wave" shape)
    Tony, feel free to amend/correct this if I\’m wrong.


  3. Rob says:

    Hi Tony,
    I was wondering what the chances are that the spx has been drawing a “running” wave 4 correction since the top of wave iii. After today it seems possible, that maybe we are just now finished with iv and starting v. It also seems like wishful thinking of course… a running wave 4 should lead to an extended wave v. Has your indicator given a signal confirming that wave v has completed as shown on your daily chart?… or is there still a chance we just started v? Just curious… it IS a fun market!


  4. tony says:

    Hi Greg and BMZ …
    In the spring we couldn\’t get a rally, not we can\’t stop one. It\’s a fun market!
    Yes, I noticed the 5 waves in the SPX/DOW.
    But the NDX/NAZ are not confirming, yet. And, they have been the leaders for more than a month.
    The NDX, even tried to break the rally today. Seems there are many with the intent of taking this market lower.  
    Thus far, the SPX broke through 1389 on the downside, and has again rallied above that level pushing to 1401.
    We\’re back in the 1389 – 1410, downtrend – uptrend range.
    Something has to give sooner or later.


  5. BMZ says:

    I\’m wondering the same thing.  You couldn\’t ask for a prettier 5 wave move up from yesterday\’s bottom on the SPX.  Can a B wave be a 5 wave pattern if the A wave is a straight-down shot?
    It looks like today completed, or came near completing, the 5-wave move on the SPX; we also closed a tiny gap left on the 5 minute chart from Friday\’s close.  I would think at some point tomorrow we get a decent pullback.  What a juncture! I was feeling great about closing out half of the longs I\’ve been holding for a couple of years in the 1380 SPX area, and the other half all with the SPX over 1400.  After today, I\’m wondering if I need to jump back in before the train leaves the station for this long-term bull.
    Best to you,


  6. Greg says:

    Hi Tony,
    Do you have any concerns about your current count regarding the look of this b wave?  It sure looks like a 5 wave event to me.  What are your thoughts about this and possible implications if it is a "5"?


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