monday update

SHORT TERM: new highs then pullback, DOW +8

Overnight the Asian markets gained 1.1%. Europe opened higher and gained 0.6%. US index futures were at record highs overnight, and the market opened at a new high: SPX 1808. After the opening bell the market pulled back to SPX 1804 by 10am as Pending home sales were reported lower: -0.6% v -5.6%. The market then drifted up until 2:30 when the SPX hit 1807. After that it started to pullback again. Around 3:30 the SPX hit 1801, then closed at 1802.

For the day the SPX/DOW were mixed, and the NDX/NAZ were +0.10%. Bonds gained 5 ticks, Crude slid 65 cents, Gold rose $6, and the USD was higher. Medium term support remains at the 1779 and 1699 pivots, with resistance at the 1828 and 1841 pivots. Tomorrow: Housing starts and Building permits at 8:30, Case-Shiller and the FHFA index at 9am, then Consumer confidence at 10am.

The market opened at a new all time high today, but failing to break through the SPX 1804-1810 Fibonacci range the market pulled back. This resistance range looks like it could be an important one. Negative divergences remain from the hourly MACD to the daily, weekly and monthly RSI charts. Bullishness is quite high and this is likely to be a light volume week. Lots of economic reports being squeezed into the next two days, should be interesting. If it is not boring.

Short term support remains at the 1779 pivot and SPX 1746, with resistance at SPX 1804-1810, SPX 1818 and the 1828 pivot. Short term momentum backed off to below neutral after being quite overbought this morning. The short term OEW charts remain positive with the reversal level now SPX 1797. Best to your holiday trading!

MEDIUM TERM: uptrend

LONG TERM: bull market


About tony caldaro

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96 Responses to monday update

  1. pbnj123 says:

    Well that was interesting
    Cheers all

  2. jobjas says:

    ES topped @1807

  3. tuamotu says:

    Ending diagonal ?

  4. Sunday, Monday, and now Tuesday. And with the current forecast, it looks as though we can add Wednesday and Thursday as well. So the real question is when oh when will I get in even just a mere nine holes? Woe is me … woes IS me.

  5. pooch77 says:

    Last post…looking for top on Monday,eom buying ,1st day of new month buying and daily charts should all be topping by then qqq,spy,iwm,close now but no cigar yet

  6. mcmasoniam says:

    Okay, can’t resist posting this. If Tony doesn’t like it, he can erase. It would definitely scare me! M

  7. Goldman Sachs must be following Tony’s blog 😉
    Goldman Sees S&P 500 Falling 10% Next Year Before Rally to 1,900
    Just slightly different timing, but otherwise exactly as the P-IV and P-V we’re all looking for…

    • tony caldaro says:

      With the analyst talking about SPX 2100 and then 2200 the public is just going to ignore the 10% part.

      • 10%?? oh my .. the market does not go down… lucky to see 10 S&P points. But it sounds good to me

      • I agree. Seeing many comments over the www in that sense; “why bother about a draw down to 1600+ if we’re going to 2000+?” Well… since it may never get to 2000+…. And while their longs loose 10-20% value, my shorts will do the opposite (cash is always a very smart and good position too) 😉

  8. radrian6 says:

    Hello Tony and all,
    The day is far from over but RUT has punched through the daily upper Bollinger Band so we may be near the momentum high for this cycle. This year’s early rallies were 12 to 13%, the corrections were 5 to 6.5%, and the duration was over two months (45 to 47 trading days). The cycles have shortened in time and in amplitude as the public jumped in. The more recent rallies have been 8%, the corrections have been 4%, and the duration has been reduced to 21 trading days.

    The current rally from 1079 is only 5% but with ongoing cycle reduction, there may not be much more. If the cycle plays out as usual, expect several days of sideways consolidation — there may be a slight upward bias. After the consolidation, expect a drop to the daily lower Bollinger Band which is currently near 1083. If the correction gets serious, RUT will break below the recent low of 1079 and end this uptrend.

    • Hi radrian. I agree with you. The amplitude is narrowing more and more. Really an extension of the narrowing of the ending diagonal of the last six months. Talking SPX here. I see this as a long pattern of reduced volatility reaching its apex. The pattern just cant continue and must change. Should be easy to spot when the move comes. All this excitement today is overwhelming! 😄

      • radrian6 says:

        Hello 2-side,
        I’m not an EW person, but the ramp from 1123 looks like wave 5 price action. I would expect the balance of the week to be sideways and maybe next week price will start moving toward the lower Bollinger Band.

      • jparkins10 says:

        I’m expecting a last little push up to 1137/8 to complete this pattern.

      • jparkins10 says:

        I believe ED’s usually see a fairly “violent” reaction the opposite way when they complete. Hard to see that with the holiday/month end support/new month inflows, but most of this year has been “surprising”, maybe we get one the other way for a change?

    • mcmasoniam says:

      from radrian6’s post: “…and the duration has been reduced to 21 trading days.”
      PERFECT. Puuuuurfect. 21 trading days. From Dec. 2 to Christmas week, 21 trading days. How interesting.

      Over my blog limit and working on something too. Bye All! M

    • gokalg says:

      Hi Radrian,

      Nased on your projection, when and where do u see IWM topping?

      • radrian6 says:

        I can’t predict when and where the IWM uptrend will end — I’m just making an observation on the RUT and relating it to recent price history. The IWM looks about the same as the RUT — it made momentum highs on October 18 and on September 18 and it might be there again. I don’t have any reason to believe the uptrend is ending with this cycle but I do have reason to believe this cycle may be near its highs. The test will come when RUT and IWM challenge support.

    • pooch77 says:

      Thanks Radrian,keep us posted if you can

  9. Ryan Parker says:

    Not sure if anyone saw this yet. Just saw it today.

    This would seemingly hurt the economy if the Fed were to quit paying banks on their excess reserves. I understand what they are trying to do but this seems a bit misguided. I don’t think lending standards are too high right now. The problem is lack of demand. Lack of demand comes from large number of unemployed/under-employed and lack of conviction in the future of the economy among consumers. These problems are reflected quite clearly in the velocity of money which has been falling for about 20 years now and it at the lowest levels in at least 60 years (the last chart I saw cut off at 1950 and we are seemingly now near levels that were likely seen during the Depression).

    Would also seem as though if banks pass on the costs to consumers that more consumers would try to just cut banks out of the picture all-together and hoard cash/precious metals in a safe/safety deposit box. On the other hand it seems to me that the Fed/Treasury is increasingly trying to move us to a cashless society in order to collect the most amount of taxes possible. This was just brought up in something I saw this morning.

    I remember Prechter discussing something similar to this at one point when talking about the diminishing effects of QE over time. You give a person one Ferrari on the cheap, they are really happy. But, even if you reduce the price down to a very low level the demand is eventually going to dry up because nobody needs 10 of them. They have no need for 10 of them and nowhere to put them. The Fed/govt. needs to work on the stimulation of end demand as this is where the problem is. You can’t force banks to make loans and you sure can’t force customers to take on loans.

    • torehund says:

      Some women have 100 pairs of shoes, and men me included have all to many fishing rods lol. However, there is a limit to where incremental (of just about everything ) cease to give any delta effect, then its rolling over and the Salvation army gets lots of donations. In the end stuff ends where its needed, and thats good.

    • radrian6 says:

      Good observations, Ryan, and I agree on the diminishing return of QE — I like the Ferrari analogy.

    • tony caldaro says:

      Hi Ryan,
      It does not cost the banks much to hold savings.
      After all they are not holding anything but a computer credit on an account.
      Since Debit cards fees are limited, the only thing they could do is charge more money for checking accounts.
      If a bank charged savers to hold their money, that money would move to a bank that didn’t.
      If all banks charged savers, the Treasury would be printing 24/7 to keep up with the cash demands of the banks.
      Manufacturers of safes would boom, and the banks would need those excess reserves to keep them from collapsing.
      Savers are already not earning any interest. They certainly would not tolerate being charged to hold their money.
      They can hold their own money.

    • mcmasoniam says:

      Not only can’t you force banks to make loans, The Fed can’t force Employers to hire people. I’ve never understood The Dual Mandate, and think Jobs should be taken out of The Fed’s hands. M

  10. Hello Tony,
    I have been MIA for a bit due to some ongoing health issues so please forgive me for a repeated question. Are you expecting primary IV to be at least a 10% correction? Thank you.

  11. I think S&P 500 index could attempt a final extension to 1811-1815 before heading south.

    • mcmasoniam says:

      If you mean for wave 3, I agree. The perfect setup for it to catch everyone off guard (doesn’t mean it will happen), is to start fast, continue to be sharp, making it very hard to jump in, then, ending abruptly. What a hoot that would be! M

  12. gary61b says:

    Rut possible overhead at 1132-33 level

  13. pooch77 says:

    At worst we gain 1% yet this week a rut 2k,daily still has room to run.

  14. Caldaro question for you sir. How much does the FED factor into your count? for example there is no reason for the end of this uptrend as long as they keep pumping. So we would not expect the correction of PRI IV if they continue to drive up the market. I am sure this has to change OEW in many ways.

    • tony caldaro says:

      During all three QE programs we have had uptrends and downtrends.
      During QE 1 the downtrends were about 9% while the FED was buying over $90bln per month.
      The two largest corrections 17% and 22% were when QE 1 and QE 2 were ending.

    • ewtoriginal says:

      I must agree with capitulation stance of bearish leaning folks. No selloff for quite some time has done any damage in either price and certainly not in time as well. Prudent management says if you have any downside protection in place, do not add at any higher price levels because it is meaningless and a waste of good money. Will the markets explode higher? Not a likely outcome unless Genius is a genius and correct.But more unlikely is a correction of even 3% between now and year end for numerous reasons..structure, personality, Fed,ECB, seasonality,capitulation,the Fed,statistical strength following unusually strong market periods, and probably the Fed.

  15. bobhopium says:

    Thanks Tony and greetings to all.
    For my own trading/investment purposes, here is my view, hope it is useful to others.
    Still no change of opinion, and as long as the mkt continues to build bullish structures, I continue to be long. I remain vigilant of the mkt throwing me a curve ball, but my target remains 1883/85
    I also still believe we will enter (if not already) the mania phase early next year when Mom and Pop go “mad for it”…………….GL to us all.
    S&P fut hourly

    S&P fut Day

  16. pooch77 says:

    Market consolidating for next leg up??

  17. bdoalex says:

    Regarding sentiment of retail investors….I am a CPA based in NYC. We are getting lots of calls from clients regarding year-end planning and the main topic(about 10 calls since last week) has been “should I take losses to offset the gains?”. The recommendation we have been giving is yes. Realize as much losses as you can. The reason being, the market is at all time high and if you really like the stock, buy it back in 31 days.

    Thanks Tony for all your work. Happy Holidays!

  18. torehund says:

    About dry bulk, seems like a consolidation here, and even Egle after a nice 2 day rally still isn’t throwing off a lot. Is a rally just around the corner ?

  19. Bears had their chance to turn market red and were unable to do it. VIX is low for a reason and good reason. Bears have no teeth right now.

    • Great article. Why would he be bearish the market goes up everyday , there is no volatility and the fed wants higher prices. I seem alone in the bearish camp waiting for that one day that will never come.

  20. thanks for the update Tony!!! I finally had time this evening to look at the charts after a very busy weekend with computer malfunctions… 😦 and hiking in the santa cruz mountains 🙂

    IMHO, Price is now likely in minute v of minor 5 of intermediate v of Major 5 of Primary III.

    The white, green, red, yellow and blue fib extensions, respectively, show a 2.00x extension of minute i for minute v at 1821; a 2.236x extension of minor 1 for minor 5 at 1822; a 0.764x extension of intermediate i for int. med. v at 1823 and a 1.618x extension of major 1 for major 5 at 1822. Hence, a massive cluster of fib extensions in the 1820 +/5 area. This will also satisfy the 80/20 rule, where trade through 1780 suggests 1820s. But, will price get there????.

  21. gary61b says:

    STJ on 60 min chart, possible cup and handle in the making.

  22. pooch77 says:

    Looks like new highs again tomorrow.

  23. torehund says:

    Small caps in pharma popping all around. Scoop up the underdogs a retrace of some of them can yield the baggers. Last one out is my ECTE, that I scooped up whilst pessimism ran rampant a couple of days ago.
    Nearing christmas is also prime time for some of them to run.
    I now run the pattern of 2050 of so on SPX, so far so good.

  24. gtoptions says:

    Thanks Tony ~ Enjoy the Hollidays

  25. tuamotu says:

    Well I am suspicious of a top … or an interim high …even if it’s the holidays season …

    What if it’s like this ?
    To just for you ! 🙂

    • perversionofthemean says:

      To me, our market is quite different than the one you’re suggesting is the analog. In 1969, the Dow 30 broke an 8.5% trend dating back to ’32, and from ’66-’81 was range bound with -50% and +100% swings. Then, it emerged from the 15-year range, and was off to the races, with a decline in ’83 to test its prior highs as a new floor. I contend our analog is ’83, and not ’69. This doesn’t match OEW, however. If OEW calls for a 40% decline after P5, then P5 has to go substantially higher first, or the decline will invalidate the breakout last New Year’s. If that happens, this isn’t ’83 all over again.

      • ewtoriginal says:

        It borders on absurd to compare anything about the 1983 economic environment to today. The only thing that may be comparable is your degree of enthusiasm.
        1983 30 year mortgage rates 13 % vs today 4.5% with alternatives to lessen it
        1983 CAPE (per Schiller via Hussman) approximated levels of major market bottoms whereas today is it situated at levels of the most major tops minus the exceptional 2000 with a q factor superimposed
        Another significant difference is changing world hegemony which may or may not impact market prices.No one can forecast the outcome of that and the obscene experimental practices of central banks gone mad.
        That said, the shape of the rise is not unlike those that go parabolic so I can see that too.Strangles could not be cheaper vs possible outcomes.Further, if it is not a vertical rise or sudden drop, volatility tends to swell around major highs and lows so plenty of opportunity there.

  26. Jennifer says:

    Thanks Tony!

    U.S. stocks mixed to higher following Iran agreement:

  27. BEWARE: If you utter the words downside, gap down, pullback, correction, retrace, complacency, euphoria, bubble, or crash you will be labeled as calling a top and targeted as Public Enemy #1 by many BULLS here. LOL

    • pcskier says:

      Like!!! I got a buy sign on EWV today, short Japan!!! I havn’t made a trade since OCT 9. I’m going to pull the trigger in morning.

      • pcskier says:

        or wait for more confirmation, it’s tough to be bearish these days. I have $SPX 1790 as buy the dip line if it breaks below that I would become bearish. I am looking at ORLY, CMG, BA, to make short trade if the tape breaks down.

      • pcskier,
        It would be nice if you could share what triggered your short Japan signal. For me it looks like a short term correction ended on a 30 minute chart and it should move higher this week. I would rather short $EEM (Emerging markets) than US and Japan. Emerging markets are really weak. I am waiting to go long Japan.
        What an impressive strength in Financials. $BAC, $C and $KRE. My guess is institutional funds are buying financials. Theory behind this could be…rising interest rates are bad for emerging markets and good for financials bottom line. Of course obviously bad for gold. So far the theme is playing out as per textbook.

    • I was actually praying you would be right.

  28. radrian6 says:

    Hello Tony and all,
    RUT continues to expand its range above the former high of 1123.26 which is now acting as support and was successfully tested today. RUT contacted the daily upper Bollinger Band at the intraday peak and backed off a bit — however, the upper band is starting to curl up to make way for higher prices. The weekly upper BB is also curling higher and is now near 1143 — plenty of room for RUT to continue its expansion. Technical indicators, and breadth are not too pretty right now so the advance may be slow. However, with with light volume and continued cash injections from the Fed, RUT should continue towards its target of 1162-70.

    As I’ve stated before, I would welcome a correction but I can’t find a reason for such an event — they either start selling or they don’t. On the outside chance that a correction starts, support levels to watch are 1123, 1109, 1097, and 1079.

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