wednesday update

SHORT TERM: gap down opening then volatility, DOW -25

Overnight the Asian markets lost 1.2%. Europe opened higher but lost 0.6%. US index futures were higher overnight, but then began to fade. At 8:15 the, often not useful, ADP index was reported higher: 215k v 130k. Then at 8:30 the Trade deficit was reported lower: -$40.6bn v -41.8bn. The market gapped down at the open to SPX 1787, dipped to 1786, then started to rally. The market had closed at SPX 1795 yesterday. At 10am New home sales were reported lower for Sept (354k v 421k) then higher for Oct (444k v 354k), and ISM services were reported lower: 53.9 v 55.4. The rally continued until about 10:30 when the SPX revisited yesterday’s 1800 high. Then another pullback began. By 1:30 the market had dropped below the opening low and hit the SPX 1779 pivot. Then it started to rise ahead of the: The rally continued until 3:30 when the SPX hit 1796. Then a dip into the close ended the day at SPX 1793.

For the day the SPX/DOW were -0.15%, and the NDX/NAZ were +0.05%. Bonds lost 15 ticks, Crude gained $1.15, Gold rallied $21, and the USD was lower. Medium term support remains at the 1779 and 1699 pivots, with resistance at the 1828 and 1841 pivots. Today long term Investor sentiment was reported lower: 54.2% v 56.3%. Tomorrow: Q3 GDP (est. +3.1%) and weekly Jobless claims at 8:30. Then Factory orders at 10am.

Wild day! The market gapped down at the open, hit SPX 1786, rallied to 1800, dropped to 1779, then rallied to 1796. The last time we had this kind of volatile activity was November 19th. Possibly going unnoticed: the SPX/DOW have now declined for four days in a row. Also likely going unnoticed, since last Friday the futures market has displayed the same pattern every day: Buy the open before 10am, then Sell short when the rally begins to fade right into the S2 pivot. Are the BOTs raising holiday bonus money?

The decline from the SPX 1814 all time high currently looks like an ABC: 1786-1800-1779. The first decline took four days, but the rally and next decline took only hours. It is possible these last two waves are part of a larger wave. A rally to SPX 1800 would rule that out. With another lower low today the short term trend remains down.

Short term support is at the 1779 pivot and SPX 1746, with resistance at SPX 1810, SPX 1818 and the 1828 pivot. Short term momentum put in a positive divergence at today’s first low, then again at the second low, and ended the day at neutral. The short term OEW charts remain negative with the reversal level now SPX 1797. Best to your ECB/GDP trading tomorrow!

MEDIUM TERM: uptrend weakening

LONG TERM: bull market


About tony caldaro

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111 Responses to wednesday update

  1. uncle10 says:

    Hey Tony, what are your thoughts about the US dollar and it being the “reserve” currency. Been reading about it and trying to understand it. Thanks.

  2. mike7x says:

    FWIW: Via Twitter, a “public service” from John Hussman, who presents this long-term chart of the S&P 500 matched against occasions when the Investors Intelligence poll registered Bears at less than 18.5%, the Shiller P/E ratio stood above 19, and the S&P 500 was at a 5-year high: 1973, 1987, 2007, and today…


  3. quiet day so far, have been mainly selling some positions that I had some (small) profits on and didn’t want to waste in case we get a larger sell-off. One can always catch the next bus up!😉

    Just heard that large areas of the US are now 40-50F below average… Yes people,you read that correct. 40-50F BELOW average. How is it in you neck of the woods Tony? SF Bay Area was 28F (-2C) this morning; cold for this time of year. If it would be 40-50F ABOVE average the press would be all over it. Nobody cares about a deep freeze… or as I’ve heard recently “the cooling masks the warming”…😉

    • torehund says:

      Did an ew -analysis of global temperature from 100 years back. It s an abc up with some cooling in the 1950-1960 as a b-wave. Then warmer still until a c topping we are experiencing now. Last decade there is a flatlining so we may roll over to a mini cold age pretty soon….Good for coal producers if it hits…they surely needs a lift:)

      • torehund says:

        Its kind of funny to talk to uncles and pointing out the fifties when the fjords were freezing and long distance scating was immensely popular in Norway. If it happens once more it would create a new boom in commodities and kids would renew the interest in scaring not just the indoor competitive surrogate..

      • I have a MACD of global temps since 1880 and it produced a sell-crossover in 2007. Both MACD-line and signal line have since been moving down….

    • tony caldaro says:

      currently in a winter storm warning
      sleet for the past hour, turning to snow tonight 4″-8″
      temperatures are expected to drop below ZERO next week
      feels like the 2010/11 winter is back

    • budfox9450 says:

      If you like whee you are, does not really
      matter. But, moderately warm today in
      Florida sunshine, 84F….

    • fbender7 says:

      my son , who studies geo sciences at U of Arizona tells me we are currently at the midpoint between the last ice age and the next one. Someone forget to tell Al Gore and the nazi climate police. Hence we don’t hear much about global warming anymore; it’s now referred to simply as a “climate change” crisis. Trouble is, the climate always has been, and always will be changing. Time to move south. How’s your Spanish?

  4. ewtoriginal says:

    In probability theory and statistics, Bayes’ theorem is a result that is of importance in the mathematical manipulation of conditional probabilities. When applied, the probabilities involved in Bayes’ theorem may have any of a number of probability interpretations. In one of these interpretations, the theorem is used directly as part of a particular approach to statistical inference. ln particular, with the Bayesian interpretation of probability, the theorem expresses how a subjective degree of belief should rationally change to account for evidence: this is Bayesian inference, which is fundamental to Bayesian statistics.

    In the current position of the market, the odds of a massive break down are still remote.Price structure remains overall constructive, amongst other things.However, should a test occur at 1740 and not hold,as strange as that may sound or as low a probability that it currently is,the odds of a bigger decline or perhaps, close your ears, a major top has printed. It is something that extrapolates to the higher markets go the more people get bullish, as is the current environment. I still find it utterly laughable that the talking heads can be so diametric to certain other parties concerning valuation and metrics. Markets are at critical junctures because a long standing liquidity policy may end soon and,regardless of opinion,no one is certain the impact that will have.Indeed, some debate the impact it HAS had.It is important to conduct a short term shakeout to clear the markets of weaker hands.Maybe now is just the right time to conduct an experiment by the printing crowd adhering to the voices of several rational,well regarded money managers.

    • tony caldaro says:

      There are very few A-type investors, most just follow the herd.
      The A-types know why they are in positions.
      The followers try to ‘justify’ their positions with accurate/inaccurate assumptions/data.
      Was that what you were stating, but in simple terms?

      • ewtoriginal says:

        Yeah,I know, I rambled.thanks for the slap. What I am actually saying, in simple terms,is that price movement expectations are a function of the most recent condition. If a price range exists that has support of 100 and resistance at 120 and has been tested many times over, the probability of a bounce to higher levels off 100 when it hits there APPEARS to be greater than 50%. If it held that level 10 times, would the odds of it holding be higher than 75%? It would appear so, but option pricing models tell you that the odds are actually 50/50. The one time it breaks the level, the odds and expectations change. This market has conditioned many participants who think higher is an automatic despite the several warning signs you have adeptly pointed out. Surely no one expects any powerful declines,including me.But it would not shock me either.

      • agree. overheard a recent conversation in SBUX where a lady told her colleague “tell me when you buy, then I’ll buy too”. Herd mentality and EW at work right there and then.

    • tommyboys says:

      The flaw in probability theory (physics) when applied to the markets is that it failed to take into account human emotion. A new theory emerging and I think will overtake and prove Efficient Market Hypothesis, Rational Markets theory and even Random Walk theory wrong is a perspective from a host of sciences combined. Effectively this is a Liberal Art “soft science” taking into account numerous disciplines all together. The term Complex Emergent Adaptive System has been coined as a more accurate description of what I believe markets may actually be. (Investing; The Last Liberal Art: Hagstrom)

      • torehund says:

        Tommy its in our common emotions, the grid or matrix. Thats what we fight, or we just fight ourselves…the better we do it, the more successful we become. Catching a bottom and running the stock is p.a.i.n. Either you take the pain straight face to face or it will come to you later. Thats why there are no easy money in the market. And thats how it should be.

  5. mjtplayer says:

    One more comment on gold and Tony’s ETF comment. Peak holdings in gold ETP’s was in Dec 2012 at roughly 2,700 tonnes. As of the end of Oct, that figure stood at 1,800 tonnes; down 900 tonnes or 33%!! That figure will probably be lower as of Nov 30th and lower still at the end of this month. How low it goes and where it bottoms is anyone’s guess, but it might be pushing a 40% total redcution by the end of this month, which would also be YOY. Hard to get much more bearish than that….

  6. torehund says:

    Folks still bullish on gold, as it can be interpreted DUST has just made 2 waves of the 3 rd wave from bottom. 3 of 3 could make someone famous sing…

    • tony caldaro says:

      Gold has been going down for two years, who could be bullish?

      • torehund says:

        Maybe not bullish (but not really scared yet), still think 800 to 1000 as a washout before a real bounce. That said there could be a squeeze, Avocet mining went up today and can be working on a cup and handle. Difficult, and at a major decision point right here. I am not positioned either way right now.

        • tony caldaro says:

          After the GLD hit the largest ETF capitalization in the world.
          Even against the SPY, everybody has been bailing out.
          The SPY now has a market cap of $163bn, GLD $33bn.
          Nobody left to sell. It’s a traders market now.

    • mjtplayer says:

      Agree with Tony, sentiment around gold and silver is at extreme bearish readings; just the opposite of stocks which are at/near extreme bullish readings. What would you rather own over the next 2 years?

      That said, I still believe the year-end selling will continue to weight on gold and miners. Window dressing (out) of gold and tax-loss selling to off-set gains elsewhere. Also, would like to see several headlines of miners hedging production; that would be the big catalyst. They took off the hedges at the highs, maybe hedge most of their production at the lows??

  7. llerias7 says:

    December pivotal day: 18th. -FOMC. It seems the mkt will drop/sideways until then…and a final rally starts (to 1860/70 by January?) or (unlikely) a rally starts now/tomorrow until Dec18th….and then corretcts…

  8. oneandonlyuniverse says:

    Hey Tony,
    Hope you are well. The shiny stuff looks interesting. +div daily & close on the weekly…gold has a mind of it’s own. taper/no taper not a soul knows how it will trade . I do know masses are short and the crowd will keep shorting the whole way up-assuming it starts to trade up from here. In late 06 to early 07 $wtic went from 80-50, it was a no brainer to keep dropping and the world was short ……it went to $140. Tops and bottoms are all about the psych…thanks for the charts.

  9. llerias7 says:

    I do not like the action today at all. I sold some of my longs…The market never play fair or in a “logical” way…Mr. Spock would not like this either! My guess: 1813 was a médium term top.

  10. gary61b says:

    Water falls are wonderful to watch, no matter what season where in. 🙂

  11. blackjak100 says:

    Aside from breakout levels, the most crucial level IMO is 1775.22. A break of that would also be a break of the upward sloping channel from 1746.

    • ewtoriginal says:

      I see that line as well. Every downside assault bounces hard and I suspect this might as well so I am not naive.It is the change of personality I am looking at and to expect a truly unexpected outcome.How could markets fall in December after such a powerful yearly advance with limited down side moves in price and certainly time?
      But other factors are interesting here and they have been discussed by many.
      This selloff has provided ample opportunity to add to longs for those who want to.I obviously dont with certain exceptions in names such as CLF,NUAN,AVAV,POT,DMND and other special situations.If the line breaks and accelerates lower,there will be no fear but also not many buyers willing to step up who havent already unless the drop is greater than 5%.
      My index shorts are multi point wide put spreads and as the market drops I add some at the money call spreads. Thats my personal prudent money management method.I dont care which side you lean towards but touting your permanent upside bias and genius in a powerful bull market subjects you to the label of “Brains and a Bull market” confusion.

  12. ewtoriginal says:

    Thanks Tony. As an aggressive alt count (and by no mean my most agressive), 3 of minor a starting now

  13. 777daimon says:

    1794.71 – breakout level for new highs!😉
    need the pushers bulls here!
    turn on the engines!

  14. H D says:

    wowza did I party last night…. 10 handles from HWB GL….

  15. ko68 says:

    Thanks Tony
    c of minor ABC in progress?

  16. cicelyalaska says:

    Anyone following the discussions about what happens when(of if) Freddie and Fannie Mae are dissolved? Seems like a great recipe for some more markets busts and booms over the next 20 years.

  17. $SPX $UVXY $FAS $NUGT $AAPL $TSLA $FB market update for wed. and trades for thurs (within remarks sect.)

  18. torehund says:

    Macd has been dipping below zero on the daily without the index giving away much. Looks bullish to me.

    • radrian6 says:

      MACD on what? I assume you mean SPX. On my daily SPX chart, I use a standard 12, 26, 9 MACD and it reads 14.35 as of today’s close and looks quite bearish. Maybe you are describing the MACD histogram which has been negative for three days.

      • torehund says:

        on Tonys graph spx daily looks like a large abc down on the macd that has take some time to develop. Once, and if it hocks up it should be a good rally.

  19. mike7x says:

    Gold may have bottomed and be beginning an uptrend. Along with oil? We should know by the end of Friday…after the Nov. Jobs report. BTW, thanks for the update Tony.

    • At such an inflection point, this board is sooooo quite. Unbelievable. Which means to me the bulls are nervous. Where are all the talking heads saying we are going to 2500 on the sp. nothing but quite.

    • mjtplayer says:


      I don’t think you’ve seen the bottom in gold just yet, I’m looking for a major bottom upcoming in gold, but don’t see it yet. Targeting the $1,000 – $1,100 area for a bottom; $15 – $16 in the GDX

      • mike7x says:

        You may be right mjt, but too many analysts are predicting $1000 gold for me and the bears levels are at cycle lows. Most are usually wrong. Also, the daily and intermediate cycles are stretched and indicating a bottom. Lastly, the dollar may be topping and about to begin a downtrend. We shall see.

    • mcmasoniam says:

      Mike, bought some calls on USO and they’re up about 10% in 24 hrs. Not expecting them to rise like that every day until expiration (waaaay out in 2014), but think WTI retrace will be enough to give you some nice profits. JMO. GL!

      • On GLD chart, the reversal to upside from 06/28 looks like to me is a correction (A-wave, 3 waves) and downside from 08/27 looks like a B wave (3 waves). So we are very close to ending B-wave. That means we should start a C-wave rally soon. Friday’s job’s report could change this projection totally wrong.

      • 16golfer says:

        Good to see you got set up to trade options. See it wasn’t so difficult to understand after all was it? “Nothing to fear but fear itself”.

  20. Anonymous says:

    Great post!

    I might be just seeing things, but the VIX has now had 7 up days on the charts. b

    See here =>

    We have not seen this for some time, maybe it is a warning! I still think the market is not dead, as in the last 50 years DECEMBER has been one of the best performing months, believe it or not!

  21. Chaos beneath the surface.

  22. Best case/worst case DOW SPX NASDAQ [Video]

    Sorry Tony for that last can delete it if you want =) -Ted

  23. Cliff Uzan says:

    Hi Tony,
    What a change a Thanksgiving weekend can make. Did you catch a wave today? Surf is definitely up. Patience is a real virtue. Adding to shorts with any rallys to spx 1797-1801 with stop at 1813.

  24. Thanks Tony. Question on the green count V/i. is that a possible count to show that we have completed minute 1 of Minor 5 of Int. 5 ?

  25. somehow I can’t get it out of my mind that this decline may in fact only be int. med. iv of Major 5. Only a trade below 1729.44 will take my doubt entirely of the table. In this case, iv may easily retrace to 1760s without any violation of EW rules. It is even entirely possible that 1779 was all she wrote for iv (3 wave decline). Let me explain;

    Int. med. i of Major 5 was from 1627.47 to 1729.86 (102.39 points)
    int. med. ii of Major 5 down to 1646.47.
    Using the standard text book Fib-extension for a 3rd wave of 1.618x wave 1 (measured from wave 2), then iii should ideally top at: 1646.47 + (1.618x 102.39) = 1646.47 + 165.67 = 1811.93. So far the SPX peaked at 1813.55…

    alternatively, intermediate v is subdividing into minor waves, per Tony’s count. In that case 1746.20 is the line in the sand. End result is the same though: new highs eventually… before PIII is done.

    sorry to spread doubt, just wondering

  26. radrian6 says:

    Hello all,
    RUT successfully tested rising wedge support and that’s all it really needed to do in order to continue higher but there’s no guarantee that it will go up from here. The issue for the RUT is how much of the recent uptrend is being corrected. The last five significant waves start from 1009: to 1087 (1); to 1038 (2); to 1123 (3); to 1079 (4); to 1147 (5). Unfortunately, wave 4 overlaps wave 1 so I can’t apply these labels. Something else is going on here and it will take more time to sort out. In the mean time, if RUT continues lower, the next significant support is 1109 followed by 1096 and 1079.

  27. mharrison60 says:

    Thanks Tony – an interesting day indeed.

    If this was an ABC we would have entered Int ii of Major A (assuming we are in Piv) – correct

    I am still learning🙂

  28. Hey all; wacky day today. So far this decline doesn’t look like much and I’m seeing buying in Nasdaq and speculative high flyers. More of the same so far. How far up this goes after this bottom will be very interesting. A wave C from a lower high would be swift and painful I suspect. If we get one at all. Cheers to all!

  29. thanks for the update Tony. Do you mean with “It is possible these last two waves are part of a larger wave” that wave a ended at 1786, then wave b up to 1800, and that the ensuing wave down to 1779 and wave back up to 1797 may be part of wave c?

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