tuesday update

SHORT TERM: turnaround tuesday, DOW +91

Overnight the Asian markets lost 0.1%. Europe opened higher and gained 0.6%. US index futures were higher overnight. At 8:30 Durable goods orders were reported lower: -4.3% v +3.4%, then at 9am Case-Shiller was reported higher: +13.7% v +13.6%. The market opened one point above yesterday’s SPX 1782 close, immediately dipped to 1779, then began to rally. At 10am Consumer confidence was reported higher: 80.7 v 78.1. Around 11am the SPX hit 1794, yesterday’s high, and began to pullback. At 11:30 the market found some support at SPX 1785, and tried to rally again. At 3:30 the SPX it 1794 again, third time, and then dipped to close at 1793.

For the day the SPX/DOW were +0.60% and the NDX/NAZ were mixed. Bonds gained 8 ticks, Crude rose $1.55, Gold slipped $1, and the USD was higher. Medium term support remains at the 1779 and 1699 pivots, with resistance at the 1828 and 1841 pivots. Tomorrow: the FOMC statement at 2pm.

The market opened higher today, as the FOMC meeting got underway. It dipped right after the open, then gradually worked it way higher for the rest of the day. From the SPX 1851 high, since many have asked, we see three waves down to SPX 1773: 1832-1847-1773. Each of the declines were also three waves. From the SPX 1773 low we see: 1794-1779-1794-1785-1794 so far. This could also be a series of threes within three waves as well. Since the decline held support at the lower end of the 1779 pivot range, and is trying to get overbought short term, we have had at least a short term low. To be followed by something a bit more meaningful probably starting tomorrow. Probabilities still suggest this was just a short term low in a medium term decline.

Short term support is at the 1779 pivot and SPX 1768, with resistance at SPX 1800 and SPX 1814. Short term momentum continues to rise from extremely oversold. The short term OEW charts remain negative with the reversal level now SPX 1805. Best to your trading the often volatile FOMC statement tomorrow!

MEDIUM TERM: uptrend weakened

LONG TERM: bull market

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

About tony caldaro

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150 Responses to tuesday update

  1. ewtoriginal says:

    If, and only if, my thesis and view is correct,and the test is first done at 1730 on a gap down to trap 1770 dip buyers, then the market will ALSO not allow a proper hedging period for those not hedged. And, should the drop be something larger, those in denial will say,as always ” Its too late to sell now”.

  2. CygnetNoir says:

    DJ-30 15700 holds … for now.

  3. Lee says:

    Everybody having fun yet ?
    This is why they play the games Great market no matter ur “opinion”
    Get all u can while u can .

  4. rc1269 says:

    well that was fun. see ya guys at 1812. i’m over limit. peace

  5. elmer510 says:

    Another 10 billion USD of tapering. Stockmarket reacts negative.
    SPX now at 1772.

  6. rc1269 says:

    1768 i’m lookin at you

  7. Hi Tony!
    Just one thought that I cannot get rid of.
    This Primary 2 wave, that we have decided to be an “elongated flat”, might perhaps have been a somewhat odd zig-zag instead. That would give us another map for the P4 developement.
    Then P4 would rather be a flat corrective wave. Meaning that major A should go straight down to 14.800 in Dow and then turn upwards in the B-wave to a new ATH.
    Just a thought to keep in mind if the 15.700 level breaks down.
    We will soon see.

    Best wishes Sverker

    • robnaardin says:

      Thanks sverker.
      I was wondering if p4 was going to be simple or complex..

      The 50 day bollinger band width is very narrow. Near 5. In 2011 it was near 5 in the summer, In spring 2012 it was near 5 too, both resulted in corrections. This summer it was near 5 and resulted in a rally.

      The configuration of the 20 and 50 ma’s says a correction has started.

  8. RDC says:

    The worst case scenario has already been priced in the market. I expect huge market surge.

  9. gtoptions says:

    Thanks Tony and all for the commentary.
    SPY ~ Last weeks bearish engulfing candle, IMO is still bearish😉
    Looking for a lower low, near 175.97 (a fib level), or 50% fib retrace @ 174.75, then a ‘b’ wave rally possibly near the WPP @ 180.84. A possible scenario not set in stone.

  10. mjtplayer says:

    DOW made a new low this morning but the S&P didn’t – that makes a potential wave count even more confusing. The action over the past couple days does seem like a wave 4 though…

  11. lunker1 says:

    friendly reminders
    – 3 posts/day
    – this isn’t a daytrading blog so posting trades of every little wave just confuses the conversation
    – posting trades only feeds your ego. instead feed the groupthink by posting YOUR ideas, not reposting Tony’s.

  12. H D says:

    ES unbelievably technical, u guys seeing this? 1800, 1790, 1780…
    Did they give it to us on a sliver plate?

    • uncle10 says:

      HD, computers are in charge. Short term. But its always the short term?……………..

      • H D says:

        thx uncle, I’m outta predictions. typically huge gap will stay half of range. We have FED so should that violate, something else. Just too many options IMO. We r down all of January!
        1800 stops hit, what about the 1767?

    • uncle10 says:

      Yea, its hard to be heavy short here with the fed. so I am not. Speaking of silver. I am watching closely to buy.

  13. 16golfer says:

    2 American Bankers commit suicide in London in last 2 days. “Fly in the ointment”?

  14. well, now I know how Icahn must feel, ’cause I for sure ate crow today too on my ED call from yesterday. Price violated that setup totally… nevertheless + div is forming with current price action on the hourly and daily RSI(5), so I closed my SDS position that I bought on Monday’s high. Can’t be careful enough, IMHO, ’cause it’ still a bull market until proven otherwise😉

  15. Lee says:

    Something for everybody Tony.
    Us dummies need to eat also😉

  16. blackjak100 says:

    It’s possible wave 4 is not over and tops near 1800ish today.

  17. JK1987 says:

    Eye on SPX 1814 close today.

  18. 1800 + close today? dont bet against the Bernanke.

    • I also would not rule out a fed that scraps interest rates against job rate….

      • rc1269 says:

        most economists and strategists [and so should the mkt] expect the Fed to drop the link to the 6.5% unemp target. fwiw

      • Last post for today and I can watch the show. VIX futures telling you market is going up. good luck everybody.

      • rc1269 says:

        Truth: vix futures – more coincident than predictive. of course believe and trade what you like. but we do not need to wait for the market to “show who is right” because if you run the data the mkt has already shown this to be the case. just trying to help my man.

        TC: as for targeting unemployment – the belief is they will de-emphasize that metric since the headline unemp rate is declining due to people leaving workforce as much as people getting jobs. so perhaps move it more to an inflation target.
        of course they’re real target is prob just SPX but they can’t exactly say that out loud

        • tony caldaro says:

          New highs have been accomplished.
          Inflationary pressure is in a deflationary cycle.
          Banks are stuffed with excess reserves.
          Rates are at historic lows.
          The unemployment rate is all they have left =)

  19. blackjak100 says:

    1765-1768 looks like a good short term long entry (5-10 days). It would complete 5 waves down, it’s near the 100 DMA and long term uptrend line, and it’s right at dec 2013 low preventing an outside down month for now.

    • 16golfer says:

      5-10 days just long enough to complete right shoulder

    • tommyboys says:

      Think you may be bang on. Doubt it even gets that far actually. This is a very healthy pullback – very much needed to continue the bull. Love seeing all the drama and panic rise so quickly again over nothing. Likely be considerably higher a month from now. Great buying opp – adding again this morning – select stocks. Pullback completed by end of week or sooner – panic and drama to fade – JMHO…GLTA

  20. mjtplayer says:

    Wow, nasty bull trap yesterday, haven’t seen one like that in a couple years. Last Friday, after the S&P dropped 40pts we closed at 1,790 and extremely oversold on the hourly RSI. After Monday and Tuesday trading, we closed at 1,792, but worked-off the short-term oversold conditions on the hourly RSI – classic downtrend action. The bulls got excited saying the low was in and we got the Turkey central bank news, further juicing the markets. But hopes dashed at today’s open, gapping down and taking back all the gains yesterday. Those who are long all have their stops below 1,773 – a break below accelerates the selling.

    IMO, we’re set-up to break the 1,773 low and accelerate lower into Thursday nights’ blackmoon – look for a low at Thursdays’ close or Friday morning, but it could be straight down till then.

  21. bobhopium says:

    I like the look of this flush setup…long @1777-S&P…GL to us all.

  22. JK1987 says:

    As expected, covered shorts from 1793+, switch to long at 1774+.

    JK1987 says:
    January 28, 2014 at 12:02 pm
    Eye on 1777 per Tony’s either a 4, or a B.
    Will cover short at 1777 and switch to long.

  23. manunidhi21 says:

    “””To be followed by something a bit more meaningful probably starting tomorrow. Probabilities still suggest this was just a short term low in a medium term decline”””

    A close below 1767 or break of 1767 defines P3 ?

  24. elmer510 says:

    Seems like a hard wave gonna fall today

    At least FUT is very read, and European stockmarkets are decling even more.
    But I’m not sure if it’s enough to get a confirmed downtrend, cause it’s probably to far from 1793 to 1765 to take it out in one single day.

    Perhaps tomorrow.

  25. rc1269 says:

    Lira gave up all its gains vs USD
    uh oh spaghettios

  26. Lots of bulls in denial, looks like we ended a 4th wave up at the close yesterday and now entering 5th wave down targeting 1760 area.

  27. Kisshu2 says:

    Tony any idea whats going on with the sp futures? The stops are being hit hard.

    • 777daimon says:

      I’m not Tony, but I have an answer.
      During the last 2 days market has built in SPX 500 an ascending triangle (check it out on 60 min chart).
      It has a target in the 1808-1811 area and that area will be hit during US market hours.
      for determining a target of a ascending triangle (bullish) take the hieght of it’s base and apply it to the break-out point to determine the targeted area.
      It’s also funny that 50 DMA is in the 1813 area and descending.
      So , we will have a test today of 1808 – 1813 area.

      p.s. yesterday VIX gave a spx 500 buy signal. of course it still needs market confirmation and VIX follow-thru confirmation.
      but it’s a valid signal.

    • 16golfer says:

      Probably find the answer over on the futures blog.

  28. SPX should hang around 1808 till Friday opening..if that happens, then next DOWNLEG starts. However, if it breaks 1822 by Friday morning trade, then 1860 possible..but very unlikely that 1882 will be seen…SPX movements till Friday are important..

    • ewtoriginal says:

      Do I have different charts/prices than you because I saw 1792, not 1808. And perhaps we see 1740 by Friday cause everybody is now “hedged” thank god and bullish consensus is only marginally off the charts..ask Lee Cooperman et al( Siegel,Birinyi, Bespoke,Fisher,GS,Wells,etc etc)..thank god.
      BTW, what is a black swan? Cause by god, I keep seeing them and the new Fed may,possibly, be more resigned to cautious monetary policy than hedonistic policy. And watch that IWM….could test 100 in first half of year. Tony,are you sensing a possible sea change as well (despite your strict adherence to rules of OEW which I totally get and appreciate your discipline.)?

      • My best guess is FOMC does not announce further tapering today and that takes SPX to 1802 in normal market. then SPX hangs there for a day..then tomorrow (Thursday), after close GOOG results, which should take SPX 1808/12 in off market…and that should be end of it..as I am writing this SPX is at 1777…

      • tony caldaro says:

        A sea change?
        The bears finally have something to blow out of proportion.

      • ewtoriginal says:

        Blow out of proportion as in LTCM? or those enormous derivs. books in London etc that just caused two guys to jump? Not sure I agree, but as is typical, we learn after the fact.

  29. kvilia says:

    This bull market is getting old. The average bull market since 1932 has been about 165 weeks in duration. This bull market is nearly 260 weeks in length, ranking it the fourth longest bull market out of the 16 bull markets we’ve had since 1932. If this bull market lasted another two months, it would be the second longest bull market in history (with only the bull market of 1990 to 1998 being longer).

  30. perversionofthemean says:

    Here’s my 2 (probably Turkish) cents… RUT hourly momentum has recycled in a measured-move from the channel highs that had shown divergence since Oct. Unfortunately, it has gone too far, and has fallen below the 10-month momentum trend channel. Today’s bounce was a snapback that fell short of testing the underside, leaving room for a little more upside (maybe month-end mark-up?). Also, just 7 points higher, RUT will match the 11/29 peak and the triple January lows (now overhead resistance). To me, when a security aborts a momentum trend, it sets up a measured move target down to digest the prior move. Even the daily is confirming this look. Oddly, the weekly RUT’s 2nd-derivative shows a slow rolling-over for all of last year, rather than the historic rip-to-a-peak and then reset.

    IWM has an obvious gap at 104, and while that’s not a fib retracement, it represents a little more than a quarter give back of the move since 10/’12. I find 50% retracements come from 25% ones, so I like using these levels. However, RUT has the 38.2% retrace exactly at the Sep’13 lows (which are the May’13 highs), and the 61.8% retrace at the Feb and April lows, so it would appear they’re active pivots. (I use log-scale retracements, btw.) These represent 15% and 31% drawdowns from the ATH. This is no forecast for these levels, but the 61.8% would return the index back close to the massive breakout from 1/’13. I actually don’t expect more than a 50% retracement, and probably not without a lengthy battle tracing out a larger AB before a C.

    The picture isn’t as bad with SPX, and I can’t tell which will lead the other. However, SPX does appear to have broken a momentum trend of a lower degree than RUT, is now rallying to form a B, and has C ahead of it, which would then likely match RUT’s failure. From here, I do not see more than a 10% SPX correction possible, whether P IV or P V. I know so little about EW though, so caveat emptor!

  31. CygnetNoir says:

    Big Ups set up across the board … need higher cash highs tomorrow, and as always would prefer a higher close in the upper half of the day’s range. Dow and S&P look like more bang for the buck than the naz this time around, but that can change on a dime, so to speak.

    SPX cash target is 1872.28

    • JK1987 says:

      oew weekend update Posted on January 4, 2014
      “the worse case scenario for a Primary III high would be around SPX 1869 and best case around SPX 1970. “

    • buddyglove says:

      Thanks C.N. Your opinions are always of interest.

    • torehund says:

      NAZ hasn’t broken into a high, could do a parabolic one….However many small caps and a churn of 2 waves has made the remaining bunch a reluctant one; they aint selling, so expect abrupt moves. Don’t like to mention individual small caps but many of the bulks are just around the 50 mda like GNK, also a stock like ROSG is playing with a weekly 50 mda. Normally if one tries these volatile stocks and the shipping sectors, know what you are doing…its fire. And there is alway a day you don’t want to own then, if you then dare buy.

    • 16golfer says:

      CN…How did you arrive at 1872? Is it an extension % or something else? Playing any golf lately? HD says golf is great in AZ…I’m in the Midwest where it’s in the teens with frozen fairways and greens……brrrrrrrrrrrrrrrrr

      • CygnetNoir says:

        Just my indoor sim golf league, golfer. Since early december, we’ve had snow cover for all but 3 days. We’ve only been above 32 degrees F twice in January – right now it is a balmy 8 going up to 15 F.

        As for the Big Ups, the new lows have, at the least, delayed them. Whether the delay is hours or days or weeks is yet to be seen. Below 15700 on the Dow would open up a potential 150 points down to 15550. At some point, an old resistance level will provide support.

    • pooch77 says:

      Well that’s all gone this morning as futes are now red

    • tony caldaro says:

      thanks for keeping us in mind CN

  32. bhupal777 says:

    Thanks Tony. Regarding following statement, is it in the context of minor 2 ? Or you are projecting alternate count that we might be in PRI IV?
    “Probabilities still suggest this was just a short term low in a medium term decline.”

  33. pooch77 says:

    Going out on limb here ,fed will not go to 65 bil a month,they will stay at 75 bil until more data comes in….

    • mccarthyti says:

      i hope that happens at some point along the way in this so called taper…. and when the market fails and continues lower, then what? what will the perpetual permabulls do?

  34. joseph3000 says:

    SP futures are up 0.40%. Hope stays that way til tomorrow.

  35. lunker1 says:

    SPX back inside BB
    NYMO back inside BB
    VIX back inside BB (but needs a lower low to confirm signal)

    not my chart. the VIX signal is good one. test it out.


    • Greg Polites says:

      Hi Lunker1 – been using a similar signal set for the VIX but have three BB limits – lower out then in is buy signal as the charts you mention – but the upper three BB limits signal multiple exit points. Works well for the VIX and its related ETFs/ETNs – discussion and charts at: http://hgpolites3.wordpress.com/
      Cheers, Greg

    • rc1269 says:

      pretty sure HSBC reversed course on that one after the bad press

    • tony caldaro says:

      Either in England or at HSBC, or was this guy the exception?

      • rc1269 says:

        i heard they put stops on withdrawals over about 3k pounds for accounts that were not regular movers of large dollar amounts. it’s not exactly clear what the real reason for it was. of course the company line was it was ‘for their own protection’ or something of the sort.
        i, for one, wouldn’t need their protective services as nothing more than about $28 in my household can move without the wife raising an eyebrow…😉

    • torehund says:

      Yeeep Martin Armstrong was spot on on this theme even before it became lucid as gin. Yes they will make electronic dough something to obviate paper and coins….and also prevents a bank run when the rates go substantially negative. And in that case even gold beats bank deposits.

  36. bouraq says:

    Imperfect trend lines:

    • mmmiiikkkeee says:

      I realize Jennifer is a bot; but, what could possibly be the point of posting here with a prosaic recap of the day’s market

      • Jennifer says:

        Come on, don’t be a hater..
        Actually a lot of people come back day after day to read the market’s recap.
        I understand that you find it useless if you keep updated over the day, but some people find it useful to only read a recap at the end of the day🙂

  37. Caldaro thank you for you work I enjoy this blog very sir. many differences of opinion which makes a market.
    tommyboy in response to your last post to me I don’t think the fed will ever stop tapering. they may pull back only to end up buying more.
    QE is really no different than normal open market operations the Fed has used to adjust interest rates for decades. The only significant difference is QE takes place when interest rates are already near zero; which places QE into the pure money printing category. If you want to find one immensely important difference between Q3-Q4 2007, when the stock market peaked, and October 2013, look no further than Fed policy. In 2006 the Fed raised interest rates four times, which takes the QE process and puts it in reverse. QE sees the Fed swap cash for a bond. When the Fed was raising interest rates in 2006, they were swapping bonds for cash, meaning they were draining “liquidity” from the global financial system in 2006-2007.

    • rc1269 says:

      QE is not like normal OMO; normal OMO targets the front end of the curve as the Fed attempts to drive the fed funds rate toward their target. QE is in the intermediate part of the curve. while similar in functional operation the effects are very different. so it’s sort of like saying that slamming the gas pedal on a 1/4 mi stretch with a ford focus is ‘really no different’ than flooring a veyron on the same course. sure, they both just involve your foot and a pedal, but the end result is much different.
      what we have yet discover is how different the market reaction will be to a) liquidity drained from an overheated economy vs. b) stimulus reduced in the face of strong deflationary forces.

  38. M1 says:

    Thx, Tony.
    imo, it looks like 1801 (target suggested yesterday) will be surpassed. It may go over 50dma (1813).

  39. Tony

    I have this latest 5 wave structure (seen better in the ES/) down noted as C (if this was the short term low),
    1 of C (if we break down lower tomorrow).

  40. Thanks for the update Tony! Totally agree with the 3-wave decline from 1851 to 1772 so far.

    On the short-term chart it looks like an ascending triangle is forming, starting at the 1772 low, connecting today’s low at 1779 and today’s into-the-close-low at 1790.70 with a perfect straight line. This forms the lower ascending line. The horizontal top line is at 1794. This would suggest that a break out of this formation targets ~1816: max-width of the triangle: (22 points) + 1794. This would align with a re-test of the 50d SMA, now from below and thus acting as resistance instead of support. Not uncommon, rather classic.

    Also, the advance of the 1772 low surely doesn’t look impulsive, and may have been a wave-a from 1772 to 1794: 22 points, a wave-b down to 1779, (~62% retrace) and assuming wave c = 1.618x a, then this abc could target 1779 + 35 = 1814. Which matches the possible ascending triangle target.

    The technical setup and possible abc formation therefore both suggest a retest of the 1814 OEW pivot as well. Maybe all of this is too obvious!??! It would also align with the possible game-plan I outlined this weekend with a low ~1780, to form “Sverker’s neckline”, a rebound to the 1814-1828 OEW pivot, before big fat C-commences… Could it be that easy?!?!?

  41. Lot of noise around the web; H&S top pattern, B wave or dead cat bounce and more bearish scenarios. New highs into the march/may period from yesterdays low. Correction was a simple abc pullback and lasted almost a month.

  42. JK1987 says:

    “Probabilities still suggest this was just a short term low in a medium term decline.”
    Meaning either a 4, or a B as you posted in the comment section?
    And coming will be new low below 1772.
    And possible PIV underway “in a medium term decline”.

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