tuesday update

SHORT TERM: pullback continues, DOW -94

Overnight the Asian markets were mixed. Europe opened lower and lost 1.7%. US index futures were lower overnight as well. The market gapped down at the open to SPX 1795, traded in a narrow range for a few minutes, then bounced to 1800 by 10:30. After that it started to pullback again. Around 2:30 the SPX hit 1788, was extremely oversold, and started to rally. Heading into the close the SPX hit 1795 and ended the day there.

For the day the SPX/DOW were -0.45%, and the NDX/NAZ were -0.15%. Bonds gained 6 ticks, Crude rallied $2.30, Gold added $4, and the USD was lower. Medium term support remains at the 1779 and 1699 pivots, with resistance at the 1828 and 1841 pivots. Last night the FED reported a slight increase in the Monetary base: $3.689tn v $3.682tn. Tomorrow: ADP at 8:15, the Trade deficit at 8:30, New home sales and ISM services at 10am, then the FED’s beige book at 2pm.

The market gapped down at the open today for the first time since November 13th. That gap down was immediately bought. This one was not. The recent decline appears to have two facets: weaker post-Thanksgiving US sales and a potential recession in France (-2.65% today). With the latter probably more important medium term. Should Europe head into another downturn, France is its second largest economy, it would echo throughout the world. Definitely something to keep an eye on in the upcoming weeks. The ECB meets on Thursday.

Short term support remains at the 1779 pivot and SPX 1746, with resistance at SPX 1810, SPX 1818 and the 1828 pivot. Short term momentum hit extremely oversold this afternoon then bounced towards neutral. The short term OEW charts remain negative with the reversal level now SPX 1801. Best to your holiday trading!

MEDIUM TERM: uptrend weakening

LONG TERM: bull market

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

About tony caldaro

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124 Responses to tuesday update

  1. bobhopium says:

    Greetings all.
    For my own trading purposes here is what I am working with…Maybe of use to others.
    No change of opinion and I am still seeing short and medium term Bullish structures on DOW,S&P and FTSE and am happy to participate….one more slight new low flush is possible…GL to us all.
    S&P fut hourly

    S&P fut Day

  2. gary61b says:

    spx to 1789 for b of C then down to 1755 for the 1.618 to finish C. just texting outloud, no trade ideas intended.

  3. cmparis says:

    B retrace 50% to 1795 and then C to 1760 for A=C?

  4. blackjak100 says:

    Point of recognition is here. Trade below 1775.22 is an early indication P3 or major top took place. It’s still possible minor 4 completed at 1779 as a double ZZ. We will know shortly. If we break 1775.22, it may indicate dec taper is likely.

    • jmoptions says:

      No buy every dip crowd around.

      • tommyboys says:

        I’ve been buying all week prepping for big EOY rally beginning next week. One Fed Gov indicated yesterday no taper even at 6.5% unemployment until economy shows strong signs of growth. Rates to remain very low regardless after taper commences. Ultimately taper will be bullish for markets as it will indicate solid economic growth. Likely just have to get over the initial hump of “taper fear”. Ironically stocks I’m trying to add today are all green and not allowing much – go figure…

        • tony caldaro says:

          If no-taper is bullish, and taper is bullish … then it does not matter what the FED does?
          If long term rates rise while the FED is buying bonds, and continue to rise after they stop buying because the economy is improving … then it does not matter what long term rates do?

      • tommyboys says:

        Within limits. If the 10 year hangs at 3.5% with or without taper it provides the same level of impetus. My opinion is that rates can rise to somewhere in the 5.5-6.5% range prior to having a detrimental effect on the economy. We’re still at “emergency” low rates. Once above maybe 5.5-6% I wouldn’t want to hold equities. Historically rates increase measuredly in bulls. Its only once the economy weakens does the Fed feel the need to take action and reduce rates. No need to reduce rates in a booming economy. In fact the need to increase them to ward off inflation becomes the mandate. Time will tell.

        • tony caldaro says:

          If one is a pension/hedge/mutual fund manager and they know:
          1. the market has risen over 170% during the past nearly five years.
          2. the average gain over the past 100 years is 5.8% per year.
          3. yields on stocks are now under 2%
          4. bonds offer much much less risk with yields at 3.5%
          What do you think they would start doing?

      • mcmasoniam says:

        Absolutely! 10-Yr. at 2.84 right now. Geez. GN All. M

      • tommyboys says:

        Sell stocks depending on their risk appetite…

      • tommyboys says:

        Also lots of ways to look at that Tony. While 170% over five years looks like a lot we’re only up 10% over 6 years…net net we’ve been up less than 2%/year over the past 6 years…considerably lower than that average.

        • tony caldaro says:

          Top to top does not count.
          Neither does bottom to top for that matter.
          What’s the 10 year return on stocks?
          Where is the market in relation to the country’s GDP?

      • tommyboys says:

        Was just looking at that. The return from 2000 is also less than 2% per annum over the 13 year period to date- considerably below the 5.6% average. After a decade of considerable underperformance maybe we’re due for a decade of over performance..

    • mcmasoniam says:

      You mean indicate that traders THINK dec taper is likely?

  5. jmoptions says:

    minor c of 1.618 of minor a is about 1755

  6. 777daimon says:

    exited in cash humiliated and 100% shorting now.
    sometimes it happens! 🙂

  7. ewtoriginal says:

    I feel comfortable that the 37.5 million e minis with a stop of 1777 will get off within a penny of the last…or higher. Its a big door and tons of money on the sidelines including the big dude in the red suit.He’ll buy anything in December.Hope he doesnt go on vacation.

  8. H D says:

    that’s 1 spicy meatball,,,, 10AM and 1800.

  9. gtoptions says:

    Tony, sorry if this was asked and answered. Does a drop below 1746 eliminate the Int. i count?
    Thanks for your work.
    Happy Holiday all.

  10. mjtplayer says:

    Lots of POMO this week, yesterday and today are heavy; Friday and Monday are heavy too. After Monday, next week is much lighter and no hevy POMO days until Thursday Dec 19th – the day after the fed meeting, can’t make this stuff up.


  11. mjtplayer says:


    Int V/P3 tentatively in? Now in minor b of int A down?

  12. I think SP500 would finish wave a between 1785 and 1779 and start a wave-b towards 1803.

  13. jmoptions says:

    Minor b underway now. 38.2% retrace is 1797.

  14. rc1269 says:

    ADP goooood. QE off
    ISM services baaaad. QE on

    zzzzz wake me up when it’s time to care

  15. Lee says:

    Merry Christmas and Happy New Year

  16. 777daimon says:

    remember my little doggie style shorting session yesterday (with the levels of accumulation and the targets) ?
    I just closed my shorts in a great way (just like SoulsurferUSA did).
    just wanted to share this with you, as a friendly sign.

  17. elmer510 says:

    One reason for positve futures?

    The Federal Reserve should only taper when it is “completely confident” the economy is on the right track, said John Williams, the president of the San Francisco Federal Reserve Bank, on Tuesday.

    Williams also said he would continue QE even with unemployment rate falling below 6,5%. And interest rates would be still be low after QE.

    • The Fed will not taper until they convince the people economy is strong. Posted an article below a very good read. The truth will come out one day. But the Fed has figured out to to control the market. Look let’s all be honest here 85 billion a month changed the game. Caldaro is an old timer knows the game and he is smart enough to know 85billion has changed the count and waves . He will stay the course and make count fit with the fed. I think caldaro is brilliant in playing this market. I say this because I do not know one person who has or carried similar count in Elliot that has done what Caldaro has done. I keep my count on all markets but the US. For the US I follow Caldaro he knows the game.

      • ewtoriginal says:

        Truth, many contributors here have 30 years market experience and indeed, most respect the diligence and integrity of Tony’s efforts as well. And while I fully agree with you that the effects of the Fed purchases are massively distorting in price action, the wave counts may no longer be counting price in the purest regard but actually the sentiment in the market as to if and when the lone ,largest,risk free buyer loses control. Being an oldtimer, you certainly know the expression “Nobody is bigger than the market”. Jaded watchers could state that does NOT pertain to the Fed, but in classic form, they will be wrong as the adage has merit and will ultimately prove true again. The hard part of what we all are trying to do is determine the where and when.
        It is currently the most dovish Fed in decades and too many rational thinkers believe they have entered dangerous territory with this experiment. Will hubris get the better of them and they continue a clearly unsuccessful program? Will empirical studies prove a disconnect between QE and UE? To date it has and one day, maybe soon, they will attempt a reversal from this lofty Bal sheet level to see what really happens before the Bal Sheet balloons even more and they lose control of everything including inflation.

        • tony caldaro says:

          The FED more than doubled the Monetary base between 1937 and 1942.
          Worldwide events did not stop the market from being in a five year bear market.
          QE is not the end all.
          It is only one effective tool that is currently losing its effectiveness at these lofty market levels.
          Also, historically, the FED has never taken measures to unwind an expanding monetary base.
          Their balance sheet will be over $3tn for many years/decades to come.

      • Do you read the same blog as I do? The amount of twists and turns Tony has done in recent times to fit his wave counts is no more funny.

        Another brick in the wall of worry by Tony – “The market gapped down at the open today for the first time since November 13th. That gap down was immediately bought. This one was not. The recent decline appears to have two facets: weaker post-Thanksgiving US sales and a potential recession in France (-2.65% today). With the latter probably more important medium term. Should Europe head into another downturn, France is its second largest economy, it would echo throughout the world. ”

        A technician only looks at the chart and doesn’t pay attention to Thanksgiving sales or recession. Chart should reflect it first if one believes in Technicals. Who the heck are we to decide that market is at lofty levels?

      • berniebaruch says:

        Given that we err toward manipulation versus letting natural market forces heal the system, it is hard to see how they get out of this box. If the economy heats up, long rates with front run the fed and they will look bad when they pull support for the market out of the system.

      • Lee says:


        Whether u are a kid from New York working on an internship to be a pharmacist or an old timer with 30 years in the financial business, its the same game its been for decades just a different day so adapt or retire/quit IMHO.

      • Lee says:

        Hey Tony

        If you’re talking to this hombre , yes I have sir
        CL/GC ain’t a bad day trading gig lately either

      • ewtoriginal says:

        The Fed hasnt ever reduced the monetary base? I hadnt noticed.
        But actually,Tony, it is the magnitude this time(and throughout the 90s onward) that has created the greatest disrtortion. I’ll tell you one more observation: a generation of money managers have come to expect that no bear markets can have long term deleterious effects…the Fed has backstopped every one so that reconstruction happens quickly–2 to 4 years back to new ALL time highs.And then all the brilliant technicians see onward and upward in perpetuity–as if that is a good thing.Hint:Its not as business cycles must run the course and reallocate capital to advance societies.Unfortunately, that creates dislocations which hurt economies over some period of time.
        Tradesmart321,I would bet my last dollar you talk a much better game than you have lived and havent done this for more than 15 years tops.

        • tony caldaro says:

          The FED is in the bubble business. They always stay whatever course for too long.
          Tech stocks, Housing, Bonds and possibly the general stock market next.
          With the monetary base this high, the next inflationary cycle is going to be worse than the 1970’s.
          But it is about two decades until that begins.

      • mcmasoniam says:

        Thank you ewt! I do thank you for that. I’m not quite old enough yet to be in diddies again! HA! M

  18. $SPX $UVXY $NUGT $TNA $FAS SPXL $AAPL, market update for tuesday. and wed. trades: http://standardpoor.wordpress.com

  19. pcskier says:

    On the Dow 30 or $INDU today’s low of 15859 was lower than Nov 20 low of 15865( bearish). I would not be surprised if tomorrow or the next we hit 15753 followed by a rally back to 16025 only to get rejected creating a 1200 to a 1400 point fall in $indu before we get a real dead cat bounce. I don’t even think that an ugly GDP # or payroll # will give the market new highs. I am sure people will use margin and leverage ETF to buy and buy, but the smart big money will gladly sell, sell, sell. The 20 weekly average on the $vix is flatting and turning up. Lately, When the $vix gets above or pierces it’s 50 Weekly moving average the Dow has corrected by a ~1000 pts and the $vix is there now.

  20. jmoptions says:

    Is your green a label on SPX considered a tentative minor a?

  21. My old friend Dougie Kass retweeted this article from zerohedge. Not a fan of zerohedge but very good read anyway even just for entertainment.

  22. Thanks Tony. This week is going to be interesting as it decides if we are still in PRI III or PRI IV has started.

  23. ewtoriginal says:

    Thank you Tony for the stable, rational thought process you provide. The statement concerning the ramifications of the large French economy in turmoil echoing throughout the globe is not factored into markets. Two things strike me as interesting.First,the top line of corporations has been flat to declining largely across the board with exceptions. None of the Wall Street earnings forecasts allow for a top line contraction on top of razor thin margins and lean infrastructures. If they do, stock prices could not only fall but collapse.
    Secondly,people debate the degree of participation by retail yet margin is at an all time high. Fewer participants? Maybe, but then again those could be the very marginal last percentile of investor who didnt have much in anyway. The others who are in have “cash on the sidelines” One more time to hear that crap at a market top…always do. and if they have 10% still in cash but have borrowed on margin what does that tell you? Everyone is all in and have been for long enough to benefit if they are ever going to be in. Lower participation is more like a gigantic B wave than a new bull market,but that is another completely different discussion.
    If the Fed action has materially effected prices and corporate profitability and for some reason or another some form of taper begins prematurely unbenounced to anyone at this time (except maybe visible in price action should a large decline suddenly occur at this odd season at the time of departure of the current chair demonstrating that someone always knows something),then maybe a major market top could be in place. Price action affects behavior.Remember, Buyers are HIGHER and Sellers are LOWER……..
    1810 may be a short term top or a major top. Markets dont let the majority have a free lunch.Valuation may be construed as excessive here.It is subjective. Bearishness is very low per many surveys,yet I hear chatter on CNBC about lack of bullishness because WS strategists have their lowest ALLOCATION to stocks in years…excuse me ,but that is so close to ridiculous I find it hard to believe that it passes as “research”.
    Sorry for my long winded piece.
    Lastly, I know of only three words that do not exist in trading/investing: Definitely,Impossible,Exactly. Many times over the years ,outcomes or actions I had thought were impossible actually happened. Anytime some forecast definitely had to happen, it did not. Since Perversionofthe mean has raised the discussion of humble attitudes,I thought it appropriate to mention these. I find that Tony’s work rarely provides statements of definitive outcomes until after the fact, as it should be.And even then, there are those who post confrontational gibberish to dispute his assessment.Go figure. The sign of a great captain is that he doesnt panic in the face of danger. Thanks again Tony

  24. S&P down 5 very weak showing by the bears. I see a lot of chatter from people who cannot wait to short the VIX. For once I would love to see that trade not work. COME ON WAVE 4

    • 16golfer says:

      I believe sentiment has been successfully changed to extreme bullishness and prior trades will not work. Time to come out of the cave.

      • I hate to say I am bearish right now but this market has been to easy for the bulls. I am sick of watching CNBC with all these so called traders saying its fine buy every dip.

  25. blackjak100 says:

    did we just see a minor 4 wave complete today? Did we begin the final fifth wave towards 1826 before a significant correction starts around FOMC Dec 18th that will bring Scrooge for Christmas? It would be unusual, but the waves say otherwise IMO.

    Looks like 5 waves down from 1813 to 1788. Now need to see five wave impulse from 1788 to confirm. A 3 wave structure leaves the door open for other possibilities.

  26. Thank you, Tony, for your daily commentary.

  27. Young Tom says:

    There have been some interesting comments here today re Detroit GO Bonds and certificates of participation, as observed by Kloutt. Would be interested in your comments.

  28. kloutt says:

    because of the Detroit bankruptcy ruling municipal (GO) bonds, which were previously the safest form of municipal debt – municipalities would raise taxes, cut services, do anything rather than force losses on bondholders – are safe no more.

    You can bet now that the Detroit bankruptcy is official, the lawyers employed by approximately one dozen other municipalities in similar financial straits have been very busy this afternoon.

    With bankruptcy as an option, GO bonds are unsecured, which potentially forces a loss on the investment.

    “If that’s the case, those formerly secured debts are in fact no safer than junk bonds,” Fitz-Gerald explained. “Which means, all of a sudden, in the blink of an eye, all the ratings on municipalities everywhere are suspect.”

    KABOOOM !!!!

    • tony caldaro says:

      Read Detroit has $576mln of the $3.7tln muni-market.
      Small potatoes. But there are about 12 other cities facing bankruptcy

      • radrian6 says:

        Detroit owes about $18.5 billion to its creditors which is also small potatoes but I’m not sure that’s the point. Detroit has been going downhill since the 1950s so the bankruptcy outcome is not surprising. However, if a number of US cities take the bankruptcy path, things could ugly.

    • moo42 says:

      Insurance also means nothing unless you have BHAC and maybe AGM.

  29. pooch77 says:

    Hit my 1612-1616 range I stated last week.We also got sharp move down on iwm on Monday I was looking for.I think we have small pop up tomorrow before more down on Thur,Fri.Daily on IWM still moving down.

  30. Thanks for the update Tony; noticed you put some new green labels at today’s low and black friday’s high. As we discussed last week; wouldn’t a top on black Friday be a perfect 1yr and 2 yr symmetry!?!? Daily MACD pointing down, daily FSTO pointing down. Daily AI (triple STO indicator) gave a sell signal. Market leaders such as SBUX, NFLX, DAL, CMCSA, AMZN, GOOG, etc all look toppy IMHO.

    On a personal note; stoked to nail that TSLA bottom, the SCTY breakout and to predict some other tickers’ price action. OEW is working and charting has never been easier. Thanks!!!!

  31. Greg Polites says:

    Hi Tony – first thanks for the continued outstanding daily work in the face of a crazy market. From my indicator set tomorrow is key and either confirms a new down trend has started or a recovery to new highs. I don’t have sufficient expertise to define in OEW terms but its clear we’re on the edge tomorrow. If today’s late afternoon rally (B wave?) stalls after the open we could see another leg down. Could you put some narrower limits on the price action of the SP500 to suggest either PIV or int 2?

    • radrian6 says:

      Can’t speak for Tony but I believe in an earlier post he mentioned a break below SPX 1730 would help confirm a P3 top. I’ve talked about RUT breaking below 1079 to confirm a significant correction — RUT 1079 and SPX 1730 are equivalent levels.

      • So, to recap. We most likely will see some sort of decline. A drop to around 1730 puts us at int 2 with a primary 3 target of 1900ish. A break below 1730 will put us in primary 4 and target the prior low of 1626ish. Then up to finish primary 5. And alls primary 5 has to do is make a new high, so at least 1815. Does this generalize basically where we are?

    • tony caldaro says:

      thx Greg
      would like to put some prices on both, but too early
      only the DOW is displaying real weakness

  32. Tony

    When you write “V/i”

    Does this mean you think we topped (Primary III) possible or something else ?

    Dont understand

    Thank you

  33. Jennifer says:

    Thanks Tony 🙂
    Dow Jones and S&P drop for third straight day on Fed tapering expectations:

  34. kloutt says:

    example of DETROIT bankruptcy ripple ……DETROIT derivatives or “certificates of participation” were sold far beyond Detroit, including to investors in Europe. For example, Dexia, the nationalised Franco-Belgian bank, said earlier this week (on july 25) that it would take a €59m charge to cover potential losses on $305m of the city’s debt.

    Detroit is gonna get very ugly very quickly…..DAX sold off hard all day

    Imagine banks with these derivatives on their balance sheets claiming them as ASSETS ….. well today the asset know as Detroit “certificates of participation” vaporized

  35. radrian6 says:

    Hello all,
    As suspected, RUT found intraday and daily support near 1120 and bounced from that level. Now the issue becomes measuring the bounce against Fib retracement levels. It’s too early to say whether RUT has started a serious correction or if this is just a routine pullback. My feeling is that if 1079 is taken out decisively, RUT will be in a significant correction — anything else is just gamesmanship.

  36. pcskier says:

    The seasonal end of year rally ends around the third day of Hanukkah, give or take a couple of days. this year that was last Friday.

  37. torehund says:

    Good to have that ugly GDP over and done with. Yes europe is scraping bottom, if the abyss awaits is another question. Marketwise many shares appear to make wave one and some wave 2 among some undervalued small caps. To me it looks like the selling soon will be over in stocks that have been going down relentlessly for 1-2 years.

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