weekend update


In a bull market full of surprises this one has definitely had its share. The week started off innocent enough with a small decline to SPX 1708 at the open. Then after a retest of SPX 1708 on Tuesday the market headed lower, in a very choppy fashion, for the rest of the week ending with a gap down opening on Friday. For the week the SPX/DOW were -1.2%, the NDX/NAZ were +0.2%, and the DJ World index lost 0.6%. On the economic front it was a good week. On the uptick: Case-Shiller, FHFA housing prices, durable goods, new home sales, Q2 GDP, personal income/spending, PCE prices, consumer sentiment, the WLEI and weekly jobless claims declined. On the downtick: consumer confidence, pending home sales, the M1 multiplier and median new home prices declined. Next week we get reports on the monthly Payrolls, ISM and the Chicago PMI. Best to your week!

LONG TERM: bull market

The market closed just under SPX 1700 this week. A long way from the bear market low of SPX 667 in March 2009. While many did not believe it was a bull market, even three years into the rise. Most are apparently on board now, and feel the FED will monetize debt indefinitely. Forcing asset prices and the stock market to continue to rise. The Elliott Waves suggest a different outcome.


We have been counting this market as a Cycle wave [1] bull market unfolding in five Primary waves. Primary waves I and II completed in 2011. Primary III has been underway since then. Primary I divided into five Major waves with a subdividing Major 1. Primary III has also divided into five Major waves, but both Major waves 1 and 3 have subdivided. Major waves 1 and 2 completed by mid-2012, Major waves 3 and 4 completed by mid-2013, and Major wave 5 (completing Primary III) may have just ended. Should this be correct a Primary wave IV correction would be next. After the conclusion of Primary IV a one uptrend Primary V should end the bull market. We continue to target a top between late-winter and early-spring 2014 around the SPX 1780 area.

MEDIUM TERM: uptrend erratic and weakening

If one takes a look at the weekly RSI, in the above chart, you will observe a triple negative divergence at the recent high. Normally a single negative divergence is good enough to end an uptrend. Also of note is the negative divergence in the weekly MACD. This usually occurs at significant tops. On the daily chart below, the MACD appears to be headed for a negative crossover after the RSI hit an extremely overbought condition. Another sign of an impending top.


The uptrend from SPX 1627 to 1730 was quite short in time, but good enough in price to push the market to new all time highs. Since it was so quick, at first we had a difficult time counting five waves up. But there is a five wave pattern there. So it is not likely to be a B wave of an irregular Major wave 4. It does, however, look like a completed uptrend or an uptrend that is pulling back and preparing to extend.

Since most fifth waves, during this bull market, have been relatively short. Probabilities suggest a completed Major wave 5 high at SPX 1730. We posted that count originally on the DOW charts, and have moved it to the SPX charts for clarity. The DOW charts now display the alternate count. Which is the uptrend is preparing to extend. Medium term support is at the 1680 and 1628 pivots, with resistance at the 1699 and 1779 pivots.


We have counted the uptrend as a five wave series of Intermediate waves completing Major wave 5 and Primary III. The recent activity, since the SPX 1730 high, looks quite similar to the beginning of the last downtrend:  a quick drop followed by choppy activity with a downward slope. Right after the initial decline the market setup a positive divergence. But has spent the entire week drifting lower despite maintaining this divergence. This sometimes occurs during corrections, and rarely during uptrends.


Short term support is at the 1680 pivot and SPX 1654-1665, with resistance at the 1699 pivot and SPX 1730. Should the market fall through the lower end of the 1680 pivot range: SPX 1673, a correction is most probably underway. As long as this pivot holds an uptrend extension has a possibility to follow. Should the market be in a Primary IV correction, it may some time to unfold as the Tech sector has remained relatively strong. This also occurred during the early stages of the Primary II correction back in 2011. Best to your trading!


The Asian markets were mostly lower on the week for a net loss of 1.2%.

The European markets were also mostly lower but lost only 0.1%. The FTSE is close to confirming a downtrend.

The Commodity equity group were mixed on the week for a net loss of 0.9%.

The DJ World index is still uptrending but lost 0.6% on the week.


Bonds appear to be in an uptrend gaining 0.6% for the week.

Crude is down trending and lost 1.9% on the week.

Gold has nearly confirmed a downtrend but gained 0.8% on the week.

The USD remains in a downtrend losing 0.3% on the week.


Monday: Chicago PMI at 9:45. Tuesday: ISM manufacturing, Construction spending and monthly Auto sales. Wednesday: the ADP index. Thursday: weekly Jobless claims, Factory orders, and ISM services. Friday: the monthly Payrolls report. The FED returns to activity this week. On wednesday: FED chairman Bernanke gives an speech at 3:30. Thursday: FED governor Powell speaks at 1:30. Friday: FED governor Stein speaks at 9:30. Best to your weekend and week!

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

About tony caldaro

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190 Responses to weekend update

  1. h&S break targeting 1676.5

  2. Hi Tony,
    I am wondering what your confidence level is on the $TNX breaking above this years highs in the next 6 months.

  3. FYI: SSTOs indicator on the weekly SPX, INDU, NYSE-charts gave a sell-signal with today’s price action. Trade above 1705ish this week will negate that signal. Link to chart later today.


  4. anybody knows why a shutdown would ’cause investors to sell??? I can’t see the link… Why would I want to sell, say NFLX or DAL or SBUX or SWY, etc etc because the government is closing for 1-2 days??? I don’t see the connection at all. If anybody does know, please explain. I think this is all simply news trying to play -as usual- catch up with the already present underlying -in this case negative- current/sentiments.

    • Because while the government is shutdown it stops spending a lot of the money it would have otherwise spent and that’s about all that’s keeping the economy going these days. Could lower GDP significantly if it drags on for awhile, plus nobody known what to expect when a deal is finally reached. That’s my take.

    • 16golfer says:

      Tony says it’s just noise. Politicians doing what they do best….grand standing for attention. However, I think the chickens are about to come home to roost for all the years of mismanagement.

      • That’s my take too: news=noise. Politicians only want your vote. Nothing else matters.

        As for a few days of no spending; drop in a bucket, POMO continuous as usual etc, etc.

      • 16golfer says:

        If politicians were really smart, they would be working in the private sector making millions, not feeding from the public trough. However, they are in a position of power which feeds their ego and can influence the direction of our country through the laws they pass. Nowadays, they have to lie to get elected. Say they will do one thing and once elected, do something else. Most if not all fall into the power trap and “will go along to get along”. I think the electorate is finally waking up and becoming informed voters once again.

    • pio27 says:

      surfer their is no reason no matter what that would cause a investor to sell. The investor has a million reasons to sell but nobody cares. We can go over the debt ceiling and still have an up day.

    • fbender7 says:

      It costs money to shutdown the gov’t. and could shave a tiny bit off of GDP if it lasts more than a few days. I think that’s the biggest fear, not knowing how long it would last.

      From USA Today: “The Standard & Poor’s 500 fell 3.7% during the 1995-96 government shutdown, according to S&P Capital IQ. Stocks quickly rebounded after the government got back to work, rising 10.5% the month after the shutdown ended.”

  5. Intraday 5 minute SPX chart reminds me a lot of the daily SPX in October 2012. I’m expecting a similar result in the next few days.

  6. jackkendo1987 says:

    Is it possible Primary 4 completed at 1674.99 (1680 pivot) with a small c?
    c of major 4 on Aug 28 is much smaller than a of major 4.
    major 4 on Aug 28 is smaller and higher than int iv on Jun 24.
    Primary 4 is much smaller and higher than major 4, and much much smaller and higher than int iv?
    The correction is getting smaller and smaller as FED still buys 85 billion each month?

    60 Min RSI positive divergence at 1675.
    Bounced 10 handles from 1675. HD:)

  7. jackkendo1987 says:

    You labeled SPX major a and major b.
    major c of Primary 4 completed at 1675 (1680 pivot)?
    Or you have a lower price target for Primary 4?

    DOW retraced 61.8%. If this is int ii, got to be here with bullish int iii of major 5 coming.

    What’s the probability for the SPX Primary 4 and DOW major 5? 50-50?

  8. I don’t think any short position can work properly here as long as NDX is running as it has recently. If there is no sensible bearish count on NDX, a divergence, a blow off, reversal, anything – just drop it. Wait in cash.

    Fractured market is not a very bullish thing, I agree, but if you don’t have Nasdaq on your side, you are just bound to suffer.

    • Market is waiting for 2:30 Senate answer, if Senate rejects, market will drag everything down… This is just the tip.

      • It makes me sad that things have come to this, where any reasonable compromise seems impossible. We’re trading today based on how much the government will screw things up. Heck even if they delay the confrontation we’ll just be going through it again in a few days or so. This is no way to run a country. I agree a finish at intraday lows is probable.

      • I do not follow that. If you are hoping for Senate to pull the plug on this market, good luck, no offense intended.

        This pull back looks like an a-b-c for now. There is absolutely no evidence that this market has topped. It might be topping, but that is another story all together.

      • We have already made two wrong moves, recently, based on what we thought waves should do….. there are some Moving averages that are under other MAs that suggest a top is in, but lets wait and see. GL

      • mcmasoniam says:

        I’m no charting genius like Tony and others, but I swear, I keep coming up w/present waves in Major 5, ED, very similar to chart FM posted. Don’t know why everyone thinks this is so off-base. There are others than have Major 3. All sorts of readings everywhere you look. Also, just because everyone sees ED, therefore, it can’t be correct is a highly questionable theory. Well, as has been said, we should know shortly… Maybe.

  9. C=A and .618 support near SPX 1667 for a Zigzag off 1729..

    Today’s opening could be the gap downward 3 of C


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