weekend update


Another wild week as the trifurcation of the major indices continues. The market gapped down from SPX 1691 on Monday, continued lower until Wednesday hitting 1646, then reversed like a rocket into Friday’s 1703 close. In the meantime, the government shut down moved into its second week and the debt limit looms large this Thursday.
For the week the SPX/DOW were +0.95%, the NDX/NAZ were -0.35%, and the DJ World gained 0.8%. On the economic front reports were sparse, only four, and negatives outnumbered positives 3 to 1. Consumer credit increased, but consumer sentiment and the WLEI declined, while weekly jobless claims rose. Next week we may/or may not get reports on Housing, the NY/Philly FED, Industrial production and the FED’s Beige book.

LONG TERM: bull market

We noted last weekend that the DOW, SPX and NDX/NAZ all appeared to be moving in different directions. The DOW has been weak, the NDX/NAZ strong, and the SPX caught somewhere in the middle. This ongoing activity, that actually first appeared in August, has resulted in a plethora of potential waves counts from many market pundits. And, has made trading quite difficult for many, including us, since we lean on the bellwether DOW. Kudos to those that have caught these recent swings.

When the stock market becomes difficult to track one has to rely on their years, if not decades, of experience. In OEW, patterns often repeat. But not always exactly the same exact way. Our objective has always been to offer the most probable count, and then project, monitor and adjust when necessary. Since we do not have a crystal ball, the market sometimes deviates from the most probable count. When this does occur, patience is required until the market’s most probable count reappears. The one thing we have known during these volatile few months is that we are still in a bull market. In bull markets, one should always have a core long position and trade/hedge when a correction is likely. In bear markets, one’s core position should be cash or a core short position and trade accordingly. Trying to build a nest egg from just trading, requires excellent money management and trading skills. Keep in mind 90% of traders fail.

After a thorough review of the four major indices, and their relationships to each other, we have arrived at three potential counts. Remaining objective, and with the bellwether DOW as the foundational index we offer these counts, one by one, below in their order of preference, using the DOW charts to avoid as much confusion as possible.


The first chart is our current count posted on the public DOW charts. We pick up the bull market count from 2011 for analysis purposes. As you will note, Major waves 3 and 4 completed in early 2011 and the next rally ended Primary wave I. Now in mid-2013 we observe a similar pattern which ends Primary III. During the first decline of Primary II the DOW dropped about 1,000 points. Then it spiked up about 900 points before rolling over and dropping 2,000 points into its Primary II low. This was a choppy and difficult pattern to track at the time. Recently the DOW dropped about 1,000 points again. Then starting this Wednesday it spiked up over 500 points. This Primary wave II to IV comparison suggests we could have some more upside left, before this rally peaks short of a new high, and then heads lower. Since Primary II was what we term an elongated flat. Primary IV now appears will be a zigzag, alternating with that flat. Should the DOW make new highs during this advance we need to consider the next count.


This count suggests Primary III is still underway. And, a Major wave 4 irregular-flat has made an alternating pattern with the Major wave 2 zigzag. Major wave 5 of Primary wave III would currently be underway. Should the DOW’s new highs exceed 16,200 we need to consider the next count.


The last count is even more bullish than the two preceding counts. Using OEW we have examined all the trends of the four major indices, and this count eliminates the trifurcation. This count suggests that Intermediate wave v of Major wave 3 is subdividing into Minor waves. Something this market has not done during its entire bull run. This is the potential asset bubble count, one could say. This count would extend the bull market well into 2014 and possibly 2015. While it would be fun participating in a blow off top. The bear market to follow would be steep and swift. That’s the three counts with their parameters. The market will determine which of the three it will chose. All three charts are posted at the very end of the stock charts link below.

MEDIUM TERM: DOW downtrend, SPX/NDX/NAZ uptrend

We have to go back to near the end of June to find when all four major indices last bottomed in confirmed downtrends. After that they all advanced in confirmed uptrends into early August, and it is at that point that they started to diverge. The DOW confirmed a downtrend into late August, an uptrend into mid-September, then another downtrend into early October. The NDX/NAZ never confirmed any of these downtrends, and has remained in an uptrend since late-Jun. The SPX has been quite choppy, but has remained in an uptrend since late-June as well. Normally, when the four majors get out of sync like this, we have just relied on the DOW until they re-sync again. The futures market has a tendency to occasionally create noise in the heavily traded ES/SPX and NQ/NDX. The past few months has certainly been one of those times.


Currently we have the SPX/NDX/NAZ all in uptrends, and the DOW trying to re-establish a new uptrend. The key, at this juncture, is what the DOW does in the coming weeks to confirm one of the three patterns noted above. Keep in mind, we have been in a bull market since March 2009. And, regardless of the recent gyrations in the major indices that has not changed. What is being sorted out by the market, is the wave pattern that will produce the eventual top in this four plus year bull run. Until something changes we continue to project a bull market top in late-winter to early-spring 2014. Medium term support is at the 1699 and 1680 pivots, with resistance at the 1779 pivot.


After reaching an all time high of SPX 1730 in mid-September the market declined in a corrective fashion until Wednesday’s low at 1646. Thursday’s opening pushed the market to its best rally since the decline began, and we labeled that low Intermediate wave a. Under the preferred scenario, Intermediate wave b should be underway now. This rally, however, has gone straight up from SPX 1646 to 1703 without any notable subdivisions. Thus far, it looks more like a kick off to something higher rather than just a B wave. How it unfolds over the next week or so should be quite important medium term.


Short term support is at the 1699 and 1680 pivots, with resistance at SPX 1730 and the 1779 pivot. Short term momentum ended the week extremely overbought. The short term OEW charts are positive from around SPX 1670, with the reversal level now 1684. Best to your trading!


The Asian markets were all higher on the week for a net gain of 1.9%.

The European markets were mostly higher for a gain of 1.6%. Both England and Switzerland are in confirmed downtrends.

The Commodity equity group were all higher for a gain of 1.4%.

The DJ World index is still uptrending and gained  0.8%.


Bonds continue to look like they are in an uptrend but lost 0.2% on the week.

Crude remains in a downtrend and lost 1.9% on the week.

Gold aborted its uptrend attempt and lost 2.9% on the week.

The USD may have recently bottomed and gained 0.3% on the week.


With the government still partially shut down we may/may not get the following reports. Tuesday: the NY FED. Wednesday: the CPI, NAHB housing index and the FED’s Beige book. Thursday: weekly Jobless claims, Housing starts, Building permits, Industrial production and the Philly FED. Friday: Leading indicators. As for the FED. Monday: FED chairman Bernanke gives a speech at 9AM. Friday: FED governors Tarullo and Stein both give speeches. The weeks ahead should be quite interesting. Best to your weekend and week!

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

About tony caldaro

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212 Responses to weekend update

  1. pio27 says:

    Market votes and its higher prices again. Bears are completely extinct

    • lunker1 says:

      Pio you are chatting a lot. This is not a market view.

      • pio27 says:

        sorry lunker. I have given up on trying to learn OEW. I thinki i am just going to buy every dip like i did in the past because when i seem to short on downtrends I get roasted

      • lunker1 says:

        pio it’s still a bull so maybe don’t short downtrends but just sell into rallies and then use the cash to buy the dips.

    • Tokyo Jo says:

      Pio, do you have a position right now?

    • torehund says:

      Small cap A-b- X- C finished at about 1130(currently 1089) on the futures Reading. At that moment there will be a major shift. As the mess seems to be accelerating one would expect a downturn. Also retest of macd Level from previous small-cap bull is about to be tested, a neg div here IF developing is not good.

  2. rc1269 says:

    76.4% retrace of 1729.91 – 1646.47 = 1710.22

  3. lunker1 says:

    Guys reminder this isn’t a chat board. Share your stock market view….up/down, when, why. That’s our role here. Not to clog the board with chat.

    • pbnj123 says:

      And an RSI -DIV to boot 😉
      Well played lunker1 – well played

    • 777daimon says:

      You have my appreciation!
      look what marketwatch.com published minutes ago: “2:43p

      Obama meeting with Congress leaders postponed”
      You simply caught it!

      • tony caldaro says:

        postponed due to lack of interest 😉

      • 777daimon says:

        Yeah, Tony, for sure!
        I don’t know why i have a slight intuition , I have the feeling that this market might get at level slightly higher (like Piker said) but on very thin volume and when a deal is announced …ka-boom! …a blow-off top with good volumes strongly reversed 1-2-3 days after.

        My opinion is that the dippers should take a break. Under no circumstances those are not levels to get long now and if you do it , don’t risk more than 1-5% of your capital. We are quite close of the 2009 resistance channel.

      • Yup. Buy the rumor, sell the news IMHO. Let’s not forget to step back and look at the big time frame on our charts … and remember how to make money, “Buy low, sell high.” Look at this MONTHLY chart and ask yourself, “Time to start raising cash?” Good luck all.


      • Was wondering, “What is the next catalyst to take this market down — even if/when we get deal?” “Could S&P decide to downgrade U.S. again because of all the theatrics?” They did it in 2011 and said they would do it again.

    • uncle10 says:

      Lunker, do you make money trading those charts? Thanks.

      • lunker1 says:

        hey uncle,
        first I’m not a trader per se. I’m a day job guy that like to actively manage his retirement dough and I enjoy talking shop and drawing charts. the fork charts are another tool in the basket. sometimes they are unclear and other times they are so spot on it is uncanny.

  4. pio27 says:

    the main reason I see the market going a lot higher like RC said i have pointed out so many times is the fed is all that matters. debt ceiling , syria, sequester, earnings , economy , charts all mean nothing . does the market look like it cares about doing anything but going higher? i know alot of people are pointing out 2000 or 2007 but we were not buying 85 billion a month then to goose the market .

    • My two cents…its too late..there will be no deal by Oct 17th …the market is shooting itself in the foot by rallying….House Republicans have gone all in ..the cavalier attitude of FOX news to the shutdown and prospect of default does not smell like a compromise to me ..and after all Fox news is the “real” Republican party..if there is no deal by Nov 15th when treasury really runs out of options ….then ….

      • RDC says:

        Deal will done/announced on Wednesday so Markets around the world will shoot much higher and celebrate like there is no tomorrow.

      • Rancho says:

        And we want the deal to be done. Why not ? We don’t want a market crash and people hurting …

  5. torehund says:

    Looking at the weekly Small cap 2000 it should start rolling over or squeeze soon, still a macd neg div from previous top.

    • torehund says:

      Feels like we are at the Junction where one have to ( irreversably so) choose between hyperinflation or deflation. If Tonys hyper bullish segmenting Count strikes, it may be no turning back.. Whats best long term is a deflation as the opposite always ends badly, and in a much larger magnitude than the previous bear. Well I tink nature has its plan, and as we in the end are part of it and inseparable from it; could be the republican pebble in the road that changed world history towards the most pronounced deflationary episode ever ?.

      • torehund says:

        sometimes the unruly ones like Boehner is what the world needs to get back on track, lots of folks agreeing all the time is Dangerous…

  6. H D says:

    how can we trade 3 counts and all this political drama? 1692* -1702,,,, oh nevermind :mrgreen:

    I don’t think this is a good week to be in the markets for most. JMHO

  7. pio27 says:

    Mr C
    17 trillion in debt , goverment shut down, earning not good, the market still goes higher no matter what. BULL market for sure. But everybody has caught on to buy the dip

    • rc1269 says:

      i remember when stocks were at all time highs and shrugging off every bit of bad news. it was called 2000 and 2007. the ‘wall of worry’ rationale only applies at lows, not highs. for avoidance of doubt.

      • pio27 says:

        how much money were we printing in 2000 and 2007? not 85 billion a month

      • radrian6 says:

        You inspired me to take a look at my monthly charts and find technical scenarios similar to today’s overbought monster. On this chart, I have two somewhat unconventional indicators (Detrended Price Oscillator, and Choppiness Index) and one self-programmed indicator that combines and weighs the status of several conventional indicators. In recent times, I could only find two circumstances similar to today: April 2011 and April 2010 — prior to these dates, I had to go back to the first quarter of 2004 to find a parallel. All of these extreme markets corrected with 2011 being the most violent.

        It always amazes me the way traders can simply ignore reality and keep buying but, considering the conditioning that’s taken place since 2009, it’s understandable.

      • radrian6 says:

        You have a point but I think RC is talking about market bubbles rather than monetary policy.

      • 5 month consolidation is hardly overbought. The SP 500 is only up 6-7% from the 2007 highs 6 years later…. its all relative people

      • rc1269 says:

        D Banister-
        >>”The SP 500 is only up 6-7% from the 2007 highs 6 years later….”

        from a behavioral finance perspective that isn’t very consequential. the average investor thinks in terms of gains and losses. it is no coincidence that the SPX topped in 2007 at a level barely above the 2000 high.
        those who missed their selling opportunity in 2000 finally saw they’re chance to sell flat or at a gain 7 years later. they held and held for 7 years, which provided the lack of selling required to produce a strong bull run.
        those who missed their chance to sell flat or at a gain in 2007, will be licking their chops here at fresh new highs. once again we spent 4 years rising on a lack of selling, as people do not cut losses but rather sell gains. they now have gains.
        i would be surprised to see substantial market progress without revisiting those highs in short order. ie, 1550-1576. then we may be able to make meaningful upside progress.
        the next time we see those levels, however, will be when all these folks who are finally in the green frantically start to sell at breakeven. just my 2 cents

      • radrian6 says:

        I should have mentioned that I trade the RUT. The indicators that I am referring to are imposed on a monthly chart and are showing overbought levels so extreme that they only occur a few times per decade. The RUT PE ratio as of the end of September was about 86 which is extraordinary considering that about 20% of RUT stocks don’t have earnings.

        You mentioned a five-month consolidation … when I look at my RUT weekly chart, I see six straight weeks of higher closes and a linear 11-month advance. During the advance, there have been four moderate corrections of 5.9%, 6.5%, 5.1%, and 4.6%. From November 2012, the RUT has gained about 323 points or about 42%.

      • lunker1 says:

        Yes it’s all relative. In August you thought SPX was so overbought that a major correction period (Major 4) was starting and was then “confirmed” by closing below 1685. But since you blew that call what’s “relative” seems to have changed and then your “possible” count is now a “forecast” that’s “on target”. Dude you’re a shape shifter. I don’t need any snake oil thanks.


      • jparkins10 says:

        Radian, you probably know this, but on IWM, 12 of the last 15 days, during RTH, have only seen upside, the other 3 only saw downside.
        In my 13 years of tracking IWM daily data, the only other month like this was February of this year, October & February are significant outliers (in terms of having very little RTH downside)

      • radrian6 says:

        That is interesting data that I was not aware of. RUT has made an extraordinary run considering the political mess and the lack of indicator support. Traders don’t seem to be fearful right now so this rally may last a while longer.

  8. torehund says:

    Isnt Yellen some kind of an anti-bubbleist- looks a little like personality wise skewed to the undertaker branch of Obamanomics, hint of Prechterism in her ambience…

  9. JK says:

    “”I feel more hopeful now”.

  10. pio27 says:

    I am going to keep this simple. Market players are refusing to panic and seem to think everything will work out. Which I am sure we all know there is a deal that will get done. It seems people are looking to just buy the dip as opposed to scale out of positions. I dont know how this figures into Mr C count but I am leaning bullish as it seems to be we always end up higher. the chance of a 2011 sell off are very small

    • pbnj123 says:

      1 in a million is still a chance 😉
      Sideways consolidation near the lows with breadth on the negative (sell side) leads me to believe smart money is distributing – all be it in small scale – but it is being done orderly as there is time – 4 days from now who knows you could be completely correct or exactly wrong – no one knows for sure.

      • pio27 says:

        pbnj123 do you not think there is a deal already done? how do you explain the massive 2 day move ? I am sure your better at reading oew than me so I dont know what the charts are indicating but my guess looking at the market we will break highs by week end. we cannot even get a correction and I mean a meaningful or real correction not an overbought profit taking.

      • If you think the politicians are done with their games, then you are in for a big surprise.

      • tommyboys says:

        Market isn’t moving on ‘deal or no deal’ outside of momentary blips – that’s just noise. Market moving on GDP growth/contraction and valuations based on this and perceptions of economic activity 6-9 months down the road.

      • rc1269 says:

        i would say mkt is moving on Fed or no Fed. as Pio has so aptly suggested many times, the Fed is factors #1-10 these days. the mkt does not yet seem to care much about GDP, valuation and economic activity. it may never, during this bull mkt. IMO

    • uncle10 says:

      Hey Pio, you are right, everyone knows we will get a deal that kicks everything down the road awhile. But, as long as the market trends pretty straight up and down 80 to 100 SPX points like it has done for months, then traders can make good money buying and shorting.

      • uncle10 says:

        Markets not moving on deal or no deal or GDP or valuations….. its all math/bots/algos. They have been on buy for 5 years and continue today. The math/bots/algos will turn and when it does GDP/earnings/valuations won’t matter then either. Been watching and studing the markets for 20 years and never seen a time where the market moved on GDP/earnings/valuations.

      • tommyboys says:


      • uncle10 says:

        Hey RC or anyone, when has the market “cared much” about GDP, valuation , and economic activity??

  11. pbnj123 says:

    Good morning all and Tony especially 🙂
    Market is acting well so far which I just cannot believe in light of all that is only days away.
    I am happy to miss a potential couple percent up vs. who knows how much down.
    Be careful out there because this just feels like thin ice

  12. 777daimon says:

    no, that’s not bullish.
    something’s cooking here… for the next days/weeks.

  13. opader says:

    Thx Tony. This is a difficult market to navigate. My thought:

  14. manunidhi21 says:

    Namaste Tony !
    will it be fair to give 5 points to Int b(max 1698) , if so at 1703.
    what close will confirm a Int b. 1680 ?

  15. Updates to my Oct 3rd wave 4 forecast chart, with new Oct 14th chart… still on target! This should be last pullback in wave 4… http://stocktwits.com/message/16463607

  16. VXX up significantly premarket. Early morning spike in VIX looks likely and strong. Good time to sell some puts today I suspect in various things, maybe Novembers 30ish days out. Premiums so juicy! Debt deal will be done by then or we’re all up a creek anyway.

  17. $SPX $SPY $$UVXY $AAPL $NUGT the “KARMA” roadmap for monday: http://standardpoor.wordpress.com

  18. Hi all, been reading the weekend update posts but couldn’t reply ’til now. All I can say is, we all need to use some common sense. OEW, and EW in general gives us some idea when to buy the dips for improved gains in a bull or sell the rips in a bear to meaningfully increase our returns (and when to take some money off the table), but it can not and will not ever be some sort of a perfect system. That perfect system doesn’t exist and never will exist in the real world. It’s not possible. I’ve been following Tony and other posters closely for the last 6 months and I’ve come to the conclusion that’s where the value in OEW is, just those things I mentioned.Those are important things! They are not however everything there is to know about how the market behaves. They need to be combined with other knowledge or ideas to be practical beyond those uses. So let’s use some common sense, ok? Tony is human and will be wrong sometimes. Everyone is sometimes and that will always be true. His information and ideas are helpful.

    So far I see a lot of value in OEW for deciding when to buy the dips (in a bull market), as in when is the right time to deploy cash that is currently idle to maximum effect. From what I have seen that time is more often than not the end of the A wave of a particular pattern because we never really know where the C wave will take us (or if there will be any sort of a meaningful one at all). I’m sure that is not always the case but it is what I have seen so far. I may change my mind on that later, but it’s what I’ve seen so far. Anyone who has useful trading ideas on how to use OEW in the real world is always a welcome read for me. After all, it’s how we apply it that really matters in the end. Cheers to all.

  19. Wow Tony,
    I was suspect of your count after Friday. But, now that S&P futures are down 20 pts and Dow down 140 pts. I am back on your count.

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