weekend update

Stocks slumped for the second week in a row, SPX/DOW -3.6% vs. -3.5% last week. The DOW was the first major index to make new bear market lows, now -19% from the October 2007 high. Yet, under the radar, the KBE banking index has now fully retraced its entire 2002-2007 bull market. The NDX/NAZ dropped 3.8% as some started to realize that techs are cyclical too. Bonds gained 1.2%, Crude rallied 3.6%, Gold confirmed a new uptrend +3.1%, and the Euro gained 1.2%. Crude, the CRB (2.0%)  and CCI all made new all time highs. Economic reports continued flat to negative, and housing was reported down 15.3% year over year. The FED remained on hold.
LONG TERM: bear market
For a comprehensive review of the entire stock market from 1932 to present, please refer to last weeks weekend update. After the five year bull market topped in October 2007 at SPX 1576, the market declined in a series of waves into the March low at 1257. These waves all took one month each (Nov-Dec-Jan-Feb-Mar). A two month rally followed into a May high at 1440. After spending just two hours at that level the next wave (downtrend) began. We have labeled the Jan low as the orthodox OEW low Major wave A, and the May high as the end of Major wave B. An alternate count on the DOW charts, uses the actual March price low as a 5 wave Major wave A decline, then the May high again as Major wave B. Should the market follow the same pattern during Major wave C. We should expect another series of waves down (Jun-July-Aug-Sept-Oct). Upon completion this would terminate Primary wave A, of a potential five year Primary ABC, or Cycle wave [2], bear market. Our eventual target for the end of Primary wave A is just below SPX 1100. Upon conclusion of Primary wave A, an explosive counter-trend bullish like rally should occur, retracing as much as 61.8% of Primary wave A. Certainly a buying opportunity! For now, we will just continue to track Major wave C, which was confirmed by the DOW making new bear market lows this week. And when the waves and the technicals set up, a few months from now, we’ll turn bullish for that rally.
MEDIUM TERM: downtrend continues
From the SPX 1440 Major wave B high the first downtrend has been underway for about six weeks now. Many negative technical signals were displayed at the high. This downtrend appears to be unfolding in five waves, similar to the first two downtrends in the bear market, which bottomed in Nov (170 pts) and Jan (250 pts). The current downtrend reached 168 points at friday’s lows. So you can see that it is similar in length to the Nov wave, thus far. Counting from the high Minor wave 1 was 67 pts at 1373 in late May, and Minor wave 3 was 75 points at 1331 mid-June. Therefore Minor wave 5, to complete this downtrend, can be any length. Since Minor wave 4 ended at 1367, it has already reached 95 pts in length, longer than either waves 1 or 3. If we now take the total move of waves 1 thru 3, we find the length was 109 pts (1440 – 1331). Subtracting 109 points from 1367 provides the next fibonacci target of 1258. The SPX closed at 1278 on friday. When the SPX hit 1440 in May it topped right at our OEW 1438 long term pivot. Now if the downtrend bottoms near 1258, it will have also stopped at an OEW pivot 1261. The daily RSI/MACD indicators are close to downtrend low readings, as is the weekly RSI. If 1261 fails to hold next week, 1240 is the next support pivot.
Support for the SPX is at 1261 and then 1240, with resistance at 1287 and then 1316. Short term momentum is oversold, and the near term indicators are the most oversold they have been during this entire downtrend. From the Minor wave 4 high at 1367 we count two minute waves: Minute i at 1304 and Minute ii at 1334. Minute wave iii has already reached 1272 (64 pts), as compared to Minute wave i (63 pts). Minute wave iii came within 2 pts of the Jan 1270 low, a psychological support level. When Minute iii ends we should experience a quick 30+ point rally. The rallies during this downtrend have been 33, 38 and 32 respectively. Then minute wave v should complete Minor wave 5 and end the downtrend. Should the SPX set up holding above the Mar 1257 low, this would place a positve divergence between the SPX and the DOW. A similar positive divergence in March kicked off an uptrend. We would then expect an uptrend retracement back to SPX 1344 – 1364 before the next downtrend took out all the lows and closed in on 1100. Best to your trading!
The Asian markets are all in downtrends, as India’s BSE and China’s SSEC have made new lows.
The European markets are still in downtrends, following the western markets, and a nearing new bear market lows.
The Commodity markets are still mixed with Canada’s TSX in an uptrend, and Brazil’s BVSP in a downtrend. Expecting both to make new highs when the worldwide downtrends reverse.
Bonds, the 10YR rate has declined from 4.32% to 3.99% as stocks have dropped. When stocks bottom rates should resume their climb.
Crude made another new high this week trading over $140 as its bull market uptrend continues.
Gold certainly came alive after the FED failed to take any action at their FOMC meeting. It is now uptrending again in its bull market.
The Euro gained 1.2% this week and is close to starting another uptrend, not good for the USD medium term, nor long term.
End of month and the end of Q2 occur on monday. The Chicago PMI is released on monday just after the open. On tuesday June ISM manufacturing and Construction spending, then ADP employment and Factory orders on wednesday, followed by June non-farm payrolls and ISM services on thursday. Friday is a national holiday in the US. The only FED speech on the calendar is FED governor Mishkin on wednesday in Israel. Best to your week! 

About tony caldaro

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64 Responses to weekend update

  1. egoldspot says:

    Tuesday have been bounce back days….after big sell of thurday look past history

  2. S2 says:

    Good question. I\’m not real sure, but I wouldn\’t bet on oil and gold for that time period, although the last few days of the bounce could see some re-accumulation back into commodities with positive divergence. And, I think an 8-10 day bounce or even 11-12 days is more probable than 5-7 days although it should be an abc with a decent retrace around the 4-6 day time frame. You could buy an index or sector that has been down more than others (like Dow is down more than Nasdaq) since mid-to-late May. I\’ll probably do that with a partial position while preparing for my gold & oil trades and index shorts for the next down leg. I want to study Nasdaq and RUT and Transports to see if they might play catch-up on the next down leg to give me more bang for the buck. Good luck.

  3. egoldspot says:

    Thursday/Triche, any idea?

  4. Forkoholic says:

    who do you think will lead this upcoming 5-7 days bounce?
    which sector?

  5. S2 says:

    Looks like a perfect ED v of c of 4 just shy of 1290 as proffered. The retrace of "c" even went back to the end of wave ii of c which is common when wave v is short. The retrace also has 5 waves on a 1-minute chart with an apparent 3-wave .6 bounce to 1286.
    2 strong possibilities now.
    1. If SPX stays below 1286, it could be ready to launch wave iii of v of 5 down from 1440. Likely targets would be 1-2.6x wave i, which was 10 points. So, 1285ish minus 10 to 26 is 1250-1275 before a iv/v completes things. SPX could also be extending an abc to as high as 1288-1290 into end of day, but the results would be similar tomorrow.
    2.  If SPX moves above 1291 as stated before, it may have formed an abc-x-abc going to at least 1296-1299 probably by Tuesday morning before topping. This would make iv of 5 more equal in size to similar degree corrections as Tony has suggested 30 pts.
    I\’m not sure which to favor, but maybe a 1/2 short position in the 1280s and another 1/2 in the 1290s would work with a stop above 1304 tomorrow…if you want to play this last projected drop down. Good luck.

  6. Unknown says:


    The Dow 50mMA is 11573.59.  Sure doesn\’t look like it\’s going to close at or above that level by end of day.  Means the Dow will have technically broken the 50 month MA.

  7. Forkoholic says:

    We think Amos was digging graves whole night

  8. Amos says:

    We went long Crude Oil this morning at 7:30 am sold the position today for  very nice profit.
    Might go long again on the next pull back.
    Equities are in Wave 4 bounce……when crude starts its next wave up…equities will fall in wave 5
    Low volume on crude indexs and RSI (5) suggests it will make one more low before going hgher..
    God bless Amos

  9. S2 says:

    From Friday\’s 1272 low, I can see an abc bounce so far.
    1272-1284 (a)
    1284-1275 (b)
    1275-???? (c)
    1287-1288 would have marked a perfect 1×1, but that has now been surpassed so I would look for c to equal 1.5x-2x wave a. That would be 1293-1299. Also, looking at the 1-minute charts, I think we are in either wave v or iii of "c". Since the potential wave i (1275-1284=9) is longer than the potential wave iii (1281-1287=6), the wave v would need to be <6 meaning it cannot surpass 1291 (1285+6). If 1291 is reached suggesting SPX is in iii of "c", the odds favor SPX should reach 1296+, which is the level at which waves i, iii and v of "c" would be equal. So, in summary, a 5th wave SPX pullback could happen at any moment since it has satisfied an abc bounce, but if c of 4 surpasses 1291, it will likely reach 1296-1299 which would also be close to Tony\’s 30-pt bounce estimate. SPX 1304 is needed by end of day to keep an ED pattern alive from 1367, but I\’m not leaning that way. The wave overlaps on the 1-minute chart in the last hour suggest to me we\’re either setting up for a mini wave iii explosion to the 1296-1299 area OR we\’re going to get an ED v of "c" just under 1291 as explained above…the next few hours should tell. Good luck.

  10. egoldspot says:

    if so many different analyis result from pros (OIL & GLD), I better find a easy trade then diffcult one, any idea?

  11. Prakash says:

    Stu, where do you see support for gold (GLD)? <90 seems to be the best we can get and I have limit orders in for DGP (dbl long gold) at <22. It does seem that oil and oil stocks are running in to some sort of small negative divergences, while gold is not even overbought and could fit the scheme of flat/marginally down oil and gold going up resulting in oil to gold ratio coming down…Thanks,Joe

  12. Prakash says:

    Stu, where do you see support for gold (GLD)? <90 seems to be the best we can get and I have limit orders in for DGP (dbl long gold) at <22. It does seem that oil and oil stocks are running in to some sort of small negative divergences, while gold is not even overbought and could fit the scheme of flat/marginally down oil and gold going up resulting in oil to gold ratio coming down…Thanks,Joe

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