weekend update


The market staged a surprise this week, continuing its rally from the August 29th low at SPX 1628, by gapping up the first two days and hitting SPX 1690 by Thursday. We had expected the market to run into resistance at the SPX 1658-1667 range and even the OEW 1680 pivot range. But it managed to exceed both. For the week the SPX/DOW were +2.5%, the NDX/NAZ were +1.55%, and the DJ World index was +2.3%. Economic reports came in with a positive bias. On the uptick: wholesale/business inventories, retail sales, the PPI, the M1 multiplier, the WLEI, plus weekly jobless claims and the budget deficit improved. On the downtick: consumer credit/sentiment, and export/import prices. Next week we have industrial production, the FOMC meeting, housing reports and options expiration.

LONG TERM: bull market

From time to time, during bull and bear markets, the market takes an unexpected path. This past week was one of those times. Occasionally an unexpected turn suggests a complete review of the long term trend. That is not required at this time, as the path was up and we are still in a bull market. The recent confirmed downtrend did not resume, as expected, and the market ended the week closer to its highs then its recent lows. This sudden reversal has many questioning their wave counts, both medium and longer term. While we do recognize there are several possibilities. We choose to remain with the counts posted  on the SPX and DOW charts.


This Cycle wave [1] bull market continues to unfold in five Primary waves. Primary waves I and II completed in 2011, and Primary wave III has been underway since then. Primary I divided into five Major waves with a subdividing Major wave 1. Primary III has also divided into five Major waves, but both Major wave 1 and 3 have subdivided. Major waves 1 and 2 ended by mid-2012. Major wave 3 recently ended in August, and possibly Major wave 4 as well. Should the DOW continue it rally to new highs, we would consider this uptrend Major wave 5. Should the DOW fail to make new highs and make lower lows, we would consider this a continuation of Major wave 4. In either case, the bull market is still not expected to end until late-winter to early-spring 2014.

MEDIUM TERM: inflection point

After the early August high at SPX 1710, we anticipated the market had ended a Major wave 3 uptrend and was down trending in Major wave 4. We expected the downtrend to take about one month to unfold, and generally decline in a three wave sequence SPX: 1630-1670-1540. The decline was a bit slow to get going. It dropped to SPX 1639, rallied to 1670, and then declined to 1627. We accepted this second low as the end of the first major decline. This week, however, the market rallied past SPX 1670 to 1690. This was quite a bit more than we expected. During this bull market, however, B waves have sometimes pushed beyond the limits of expectations. Only to turn down to complete the downtrend. With this in mind we maintain a Major wave 4 count on the SPX charts: Int. A 1627, Int. B underway, and Int. C to follow.


Remaining objective, we also offer an alternate count on the DOW charts. This count suggests Major wave 4 ended at the recent low, and a Major wave 5 uptrend is currently underway. This is the reason we suggest that the market is at a point of decision or an inflection point. As noted above. If the DOW makes lower lows Major 4 continues, higher highs Major wave 5 underway. Medium term support is at the 1680 and 1628 pivots, with resistance at the 1699 and 1762 pivots.



The recent rally started off quite choppy, but has recently turned impulsive. Another reason for the indecision inflection point. If it had remained choppy throughout, we would be more convinced of the Int. wave B scenario. Under this scenario the rally can be counted as a Minor a-b with Minor c underway.


Under the Major wave 5 DOW scenario it can be counted as an Minor wave 1-2 with 3 underway.


Short term support is at the 1680 pivot and SPX 1658-1667, with resistance at the 1699 pivot and SPX 1710. Short term momentum is displaying a potential negative divergence. The short term OEW charts remain positive with the reversal level SPX 1674.


The Asian markets rallied 3.5% on the week. Indonesia, Japan and N. Korea have yet to confirm uptrends.

The European markets gained 2.6% on the week. All indices in uptrends.

The Commodity equity group gained 1% on the week. All uptrend here too.

The DJ World index is still in an uptrend gaining 2.3% on the week.


Bonds remain in a downtrend, but ended the week flat.

Crude is still in an uptrend, but lost 1.6% on the week.

Gold appears to be correcting losing 4.6% on the week.

The USD is still in an uptrend, but lost 0.9% on the week.


Monday: NY FED at 8:30, then Industrial production at 9:15. Tuesday: the CPI and the NAHB housing index. Wednesday: Housing starts, Building permits, and the FOMC statement. Thursday: weekly Jobless claims, Existing home sales, the Philly FED and Leading indicators. Friday: Options expiration. Best to your weekend and week!

CHARTS: http://stockcharts.com/public/1269446/tenpp

About tony caldaro

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398 Responses to weekend update

  1. Lot’s of charts like FB all of a sudden looking bearish today.

  2. H D says:

    only thing to trade is the FED and FED news. Total BS. This will end badly

  3. Tony,
    Even if we break new highs, is there a possibility we can have a 5 wave down wave C of a true flat, where b is at 90% of a?
    I’m not short, but I can’t find many stocks I would want to be long.

  4. daking66 says:

    i am sure tony will note SPX still has not taken out August intra day high. we also have naz in the red plus both naz and russell have glaring neg divergence on weekly chart..

    shorts hanging by a hair.

  5. phil1247 says:

    NDX bearish engulfing reversal in the works

    taking profits on 50% of NDX shorts off from this am

    need to see how it closes to reshort more tomorrow or run for cover

  6. pio27 says:

    almost like an invisible hand refusing to let this market go down.

    • tommyboys says:

      That’s how it feels when you’re fighting the trend. Same thing conversely when trying to long a bear.

    • radrian6 says:

      Depends on perspective, Pio. NDX is down, RUT futures were up dramatically over night but are now barely positive. NDX is forming a “bearish engulfing” candle while RUT is printing a “hanging man” candle — both of these formations are bearish but require downside followthrough to confirm. It seems the “invisible hand” is allowing a few things to slip through its fingers.

  7. rc1269 says:

    hmm last time spx was here in early August the vix was at 12. at 14.3 now and green on the day.

  8. daking66 says:

    we dont have to worry about Int C UNLESS when we pull back …we have distribution and fall below 50dma…then that will be the first signal to put on protective cups

    HOWEVER, (this is a warning to the shorts). if we pull back and breakout out of this ascending right triangle, every computer, technician, short , bull, drunken fool, scientist, transgender etc will recognize the big base breakout and will trade accordingly. we can move up 3-5% SPX swiftly ..then all we have to worry about is not holding 171 SPY

  9. rc1269 says:

    all the shorts out now? okay good. now let’s go

  10. uncle10 says:

    CN, nice call again on Big up. Indeed the ” Paul Revere of the blog”. Looking forward to “Big Down”. 🙂
    What are your thoughts on oil here?
    Thank you.

    • Big Up! says:

      I’m still short but growing weary and leary … shall we say, “wary.” Oil could actually get me flat, and possibly even long, as early as tomorrow. I would say, to borrow Tony’s terminology, that oil, with respect to the BigUP/BigDown “feel it in me bones” system, is at an inflection point.

  11. rc1269 says:

    nasdaq options trading halted again. they running that system on an old 386 or what

  12. Tony,
    I know that C wave is not probable, but is it still possible and if so, what are the odds? Thank you, I know it is a tough question.

  13. blackjak100 says:

    I’m confident $SPX is going to pullback to keep everyone guessing on Major 4. NAZ went Red as I type this. If 1665 holds in the coming days, irregular flat still well in play. It would not shock me to see a multi day pullback starting immediately

Comments are closed.