tuesday update

SHORT TERM: stocks selloff following China and Europe’s lead.
Overnight China declined nearly 9% on profit taking and fears of government intervention to slow down their booming economy. While the rest of Asia was relatively subdued, Europe dropped 2% before our market even opened. Europe ended their trading day about 3% lower. When our markets opened on a gap down in price, both the SPX/NDX touched support and held in the first few minutes. At about 11:30 the cyclicals started to break short term support at SPX 1432 and headed lower. The tech sector held until about noon, when it too broke support at NDX 1792. I noted both of these levels in this mornings update. At 1:00 the market resumed selling off, and by 2:00 a selling panic hit, pushing the DOW down more than 500 points for the day. The panic selling subsided by 3:00, and the market bounced wildly into the close. At the close all the indices we follow were down between 3% and 4% across the board. Intermediate wave three (iii) announced its conclusion, with this nasty reminder of how fragile the markets can get at times. Bonds surged 1 1/4 points as a safe haven. Crude and Gold were also sold during the mini-panic: Crude was down $1.00 and Gold was $26.00 lower, but the Euro rallied.
We are still in a bull market! But the medium term trend is now down, and this is only a correction.
For the past few weeks many of the negatives holding this market back were getting resolved, except one. The rising wedge formation, commonly called a diagonal triangle, or ending diagonal, remained in place. When the techs started to rally a week ago, it appeared that this potential diagonal, like so many others, would be resolved to the upside. I was too bullish medium term. When the market broke through the lower leg of the diagonal today, it clearly acted as it should upon completing a diagonal, with a sharp selloff. The sloppy uptrending market in recent weeks was apparently a series of threes that completed exactly at the EW pivot SPX 1462. Intermediate wave three (iii) completed at SPX 1462, and we are now in Intermediate wave four (iv).
Now that the market is in a correction there are two obvious short term pivot points that should provide support: the first being SPX 1378 and the next SPX 1361. We’ll monitor these two levels over the next few days and weeks. For today I will work on getting the charts in order, and determine what other information can be derived from them. Best to your evening!
MEDIUM TERM: neutral
LONG TERM: bullish.       

About tony caldaro

Investor
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7 Responses to tuesday update

  1. peter says:

    Hi Tony,
    1)Without giving away any secrets can u give some general info on how you derive your pivot points? That last one was a doozy.
    2) Are 5th wave triangles with overlapping waves part of original Elliot Wave theory, or Prechters Elliot work? (I gave away all my Elliot books, lol)
    2a) I am actually open to change in Elliot Wave.. According to my favorite philosopher, George Santayana, all things are probably mechanical, but with human phenomena new forces come into play which makes the patterns evolve(From \’The Life of Reason\’).
    best regards, Peter F.
    Ps. This link is a good read with chart from Seeking Alpha: Oil Inventory at nearly 46 days is near 16 year low
    http://biz.yahoo.com/seekingalpha/070301/28377_id.html?.v=1

    This compares CURRENT demand to current inventory rather than inventory to the "5 year average inventory" or PAST demand.

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  2. tony says:

    Hi Gary,
     
    Looked into Value Line.
    It has a bit of a different count than the other indices, as it should.
    But I still do not see 5 waves up from the 2002 lows.

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  3. tony says:

    Hi Gary,
     
    Will try to take a look at the Value Line soon.
    Appreciate your input.
     
    tony

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  4. Unknown says:

    Tony,
    Appreciate your reply.The Markets are skewed as to the look of the charts and EWT counts as indeed 1974 was the start of wave 5.
    Your clearest picture is the Value line now showing a completed 5 waves of cycle degree with a Throwover @2366 .This target is something special drawing a trendline you can see the TO come into play perfectly.This top in this index years from now will be talked about as in the Broadening top in Edwards and Magee.
    My opinion.
     
    Thank You

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  5. tony says:

    Hi Gary,
     
    Long term I stand by the OEW wave count.
    Cycle wave low for the DOW in 1982, and the SPX in 1974.
    I can count a clear 5 waves up to the 2000 top from both of these lows.
    From the recent Oct02 low, we still have some waves to go to complete a 5 wave sequence.
    Worse case scenario, the next major top will only complete the third wave from the 1982 lows.
    But that is unlikely considering the thrashing the Nasdaq took between 2000-2002.
    Thanks for your post.
     
    tony   

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  6. Unknown says:

    Hello Tony,
    Could it be that the 5th wave is in.If the 1974 low was the starting point for wave 5 then you can count a completed 5 waves of cycle
    degree at the recent dow highs.My thoughts are when in fact all are caught off guard then the probobility for a top is secure.1987,1990,1997,2000 all are good points that show a turn in liquidity as is 2/2007.Liquidity in financial markets is what determines an equity turn.EWT ended in 1987 as a clear tool for financial markets since then there has been overlapping of 3\’s and 5\’s
    .This has since been relagated as long term tool only.The $VLE as an index shows a completion in the pattern and is the clearist.
     
    Thank you for your work on EWT I find it very helpful.
     
    Regards,
    Gary

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  7. henrietta says:

    Thanks Tony

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