thursday update

SHORT TERM: solid gap up rally after ECU debt deal, DOW +340

Overnight, the Eurozone reached agreement on dealing with their credit crisis. Asian markets were all higher on the news. Europe opened higher and closed +4.2%. US index futures were higher overnight as well. At 8:30 Q3 GDP was reported higher than expected: +2.5% vs +1.3%, and weekly Jobless claims came in slightly lower: 402K vs 403K. The market gapped up at the open to SPX 1266 and continued to rally. The SPX had closed at 1242 yesterday. Within the opening minutes the SPX hit 1275 and then began to pullback. At 10:00 Pending home sales were reported lower: -4.6% vs -1.2%. The market pulled back to SPX 1265 by about 10:30, and then started to rally again. With several small pullbacks along the way the SPX rallied to 1293 by 3:30. Then a quick decline to SPX 1279 was followed by a bounce into a 1285 close.

For the day the SPX/DOW were +3.15%, and the NDX/NAZ were +3.05%. Bonds lost 36 ticks, Crude jumped $3.60, Gold rallied $18.00, and the USD was sharply lower. Support for the SPX jumps to 1261 and then 1240, with resistance at 1291 and then 1303. Short term momentum hit extremely overbought. Tomorrow, Personal income/spending at 8:30 along with PCE prices. Then at 10:00 Consumer sentiment.

Strong overnight buying in the SPX futures helped create a large gap up opening of about 2%, which jumped right over resistance between SPX 1257 and the OEW 1261 pivot. This type of activity has been a common occurrence over the past few months, both up and down. In the first few minutes the 1261 pivot was cleared, and then retested around 10:30. After that the market headed straight up to test the next resistance level at SPX 1284 and then the OEW 1291 pivot. Quite a rally! This market has now risen 20.3% since the Oct 4th SPX 1075 low. Hope many of you have caught some of this uptrend, even though we still consider it a bear market rally.

While we have been expecting another rally off of yesterday’s SPX 1221 low. One has to be impressed with today’s gap up and 3+% surge. We checked the pattern and found each of three previous zigzag rallies have been 96, 75 and 66 points respectively. This rally, which should be wave A of the last ABC zigzag, is currently 72 points. So it still fits within the range of the previous ones. With the SPX 1258 and 1284, 61.8% and 70.7% fibonacci retracement, levels being exceeded today, the next levels are at 1308 (78.6%) and 1337 (88.6%). Also, if the Int. wave C = 0.618 Int. wave A relationship at SPX 1284 does not hold. Then the next internal wave relationship is at Int. C = Int. A or SPX 1341. Quite a range of targets.

For now we expect a 20+ point pullback soon, and then another high. Short term support is at the 1261 and 1240 pivots, with overhead resistance at the 1291 and 1303 pivots. Short term momentum is extremely overbought. Best to your trading!

MEDIUM TERM: uptrend hits new high SPX 1293

LONG TERM: bear market highly probable


About tony caldaro

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74 Responses to thursday update

  1. gselsidi says:

    For everyone interested in the Euro deal. The Euro deal was just leaders saying we are going to do these things. With no actual steps or action. Just more Euro talk with no action.

    It’s hard to come to any conclusion from Media who paint it as actions actually happening. Everything said at the meeting has not happened. The 50% “voluntary” haircut has not happened no laws and packages have been created or signed.

    Basically the Euro summit was something like this: “We need QE3” Instead of “We need QE3, and we are going to start it next month with a balance sheet of XYZ.”

    Knowing Europe, which promised a second Greek Bailout in July and now it’s almost November and still nothing finalized. Whatever was discussed at the Summit is either never going to happen, or by the time they get around to it, it will be to late and then they will need a bigger package then before.

    Sorry for the rant lol. Here is a great article discussing the Summit from PIMCO’s CEO:


  2. Igor says:

    So we are slowly working the overbought conditions off, not giving up much on the gain. And all that is just under the pivot. Do you feel what I am feeling?


  3. vishal409 says:

    Tony today’s upmove in BSE sensed as per plan or any change if view we are dot at the blue line drawn by you


  4. H D says:

    Corn-Prolly have to gap the 655 pivot. It just ain’t happening. I’ve been waiting 3 weeks and am getting tired of it – Let’s do it already! . DX could be showing bear flag. Could help?. GL


  5. mckennedy says:

    SPX is up against the monthly SMA at 1289. Dow’s monthly SMA is 12110. I doubt either of these are break these levels. Would think we would be more likely to see the trend turn down from here.


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