thursday update

SHORT TERM: downtrend makes lower low, DOW -41

Overnight the Asian markets were all lower. Also FED vice chair Yellen gave a speech in Japan: Europe opened lower and closed -1.70%. US index futures were higher overnight. At 8:30 weekly Jobless claims were reported about unchanged: 422K vs 424K, and Q1 Productivity was reported higher +1.8% vs +1.6%. The market opened slightly higher at SPX 1315. The SPX had closed at 1314 yesterday. Within the first half hour the SPX rallied to 1318 and then pulled back to 1310. Also at 10:00 Factory orders were reported negative: -1.2% vs +3.4%. After another rally to SPX 1318 the market rolled over and hit 1306 by around noon. That was the low for the day and a new downtrend low. After that the market rallied to SPX 1317 and eased back to close right at the OEW 1313 pivot.

For the day the SPX/DOW were -0.25%, and the NDX/NAZ were +0.15%. Bonds lost 12 ticks, Crude added 50 cents, Gold slid $5.00 and the USD was lower. Support for the SPX remains at 1313 and then 1303, with resistance at 1363 and then 1372. Short term momentum hit extremely oversold around noon and then bounced. Tomorrow, the monthly Payrolls report at 8:30 then at 10:00 ISM services. Also at 12:30 a speech from FED governor Tarullo in Wash, DC.

Today’s early selling pushed the SPX to a new downtrend low at 1306. This low is still within the 1313 pivot range, and also within the 1303 pivot range. The three OEW support pivots (1291, 1303 and 1313) are so closely bunched together they offer significant support. In fact, the SPX first entered the OEW 1313 pivot range over two weeks ago on May 17th. It has held support ever since despite the slightly lower lows.

Technically we are observing some interesting relationships at this juncture. The first decline, which we labeled Minor A on the SPX hourly chart, was 52 points (1371-1319). After a Minor B wave rally to SPX 1347 the market has done another ABC decline. This second decline would equal the first at SPX 1295 (1347-1295 = 52).

Another observation would suggest equality between the A and C waves of the two ABC’s. In the first ABC the A wave (42 pts.) was about equal to the C wave (40 pts.). In this second ABC, at SPX 1306 the C wave is 39 pts. while the A wave was 35 pts. Again near equality. Both relationships suggest support between SPX 1295 and today’s low.

Applying Fibonacci relationships suggests support at SPX 1310: a 50% retracement of the recent uptrend. Then support at SPX 1296: a 61.8% retracment of the uptrend. The last observation notes the positive divergences on the SPX/DOW daily charts, while the NDX/NAZ have failed to make new downtrend lows. Some positives and good support between the OEW 1291 and 1313 pivots. Best to your trading!

MEDIUM TERM: downtrend new low at SPX 1306

LONG TERM: bull market


About tony caldaro

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28 Responses to thursday update

  1. H D says:

    From 1370 just looks like a massive corrective bull flag to me 😯

  2. Lee X says:

    ABC up in ESM from globex low here ?

  3. mckennedy says:

    Just my 2 cents…. the govt is playing the Enron game with debt. The sales of mortgages are being done with off-balance sheet entities with the govt keeping their ownership of these entities valued at levels that assume they will recover $1 for $1. Just like Enron, at some point, these over-valued assets will have to be substantially written off. It’s just a shell game so far with the govt sucking up the bad debt off the balance sheets of the financial institutions. At some point, the music stops and SOMEBODY has to take the writeoff.

  4. Lee X says:

    Everybody get long at the open ?
    morn 🙂
    its trading..hope it lasts 🙂

  5. zimbabweanimike says:
    No wealth transfer to bankrupt wall st institution for years now is not fixing Greenspans and Benrons bs. Here’s your dip, dipsters. Have a great weekend:)

  6. rfijoydeep says:

    C wave started at 1345,we are now in (i)st wave of this C wave.tomorrow we may complete it after gap down openning in disappointing pay roll report.Then (ii) wave bounce will only go to 1318 kind of level next week before the big (iii)rd down.

  7. MGD says:

    Not sure abt the count, but I think the market may overreact at any worse than expected number tomorrow…..

  8. CB says:

    Tony, definitely! It seems like some guys -shall we call them bank-law-liticians- have all the fun at everyone else’s expense since their professional creativity tends to interfere with markets, and ultimately drives up our cost of living and doing business.
    Tony, whenever you have a minute, what do you think about those comments that Jellens’ recent speech means that the Fed is starting to get concerned about (stock) market valuations and high leverage?

    • tony caldaro says:

      Conclusion The Federal Reserve is fully engaged in monitoring financial markets for potential imbalances and developing the tools necessary to carry out that task. These ongoing efforts include attempting to recognize early signs of misaligned valuations in asset markets and increases in leverage. At present, we see few indications of significant imbalances, and the use of leverage appears to remain well below pre-crisis levels. That said, I’ve noted some recent developments that warrant close attention, including indications of potentially stretched valuations in certain U.S. financial markets and emerging signs that investors are reaching for yield. Should broader concerns emerge, I believe that supervisory and regulatory tools, including new macroprudential approaches, rather than monetary policy, should serve as the first line of defense.

      • zimbabweanimike says:

        Yellens the most dangerous of the “were insane cause were gona do it anyway” bunch..

      • CB says:

        Thanks Tony. That’s quite a departure from their mandate & Greenspan’s official philosophy (of not trying to control asset prices)

        • tony caldaro says:

          CB, in 1989 FED vice Wayne Angell disclosed, at a dinner, that the FED can target any market it chooses.

          Love oneself, or love oneself and all others. It’s a choice. Your future depends on it. Time is short. Make the choice!

    • CB says:

      Thanks Tony. I guess, to them ,markets are a failure….

      • tony caldaro says:

        CB, actually no. A FED regulated economy is a failure. It always requires monetary inflation at some level to create growth.

      • CB says:

        Yes, Tony, certainly. I meant their attitude that they know better than the markets… 🙂 so, like you’ve said, they keep trying to correct the consequences of their previous actions with more intervention as if it’s a market’s failure. Very few people talk today about a severe recession of 1918 when the Fed was still in its infancy and the markets were allowed to correct freely without too much “help.” But they are too afraid to do that now…Plus they have enormous power to supersede markets…so yes, markets don’t fail…but they are not allowed to fix themselves on their own terms anymore.

  9. CB says:

    Thanks Tony!

    Mike, it was just explained to me how complex that whole real estate process is (or how little I know about it) 😉 , so I guess that’s why lawyers are in charge of the entire thing right now & that’s why the market is not functioning as it should. What a mess …& it seems that a lot of those properties will just become uninhabitable because nobody is taking care of them properly …

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