wednesday update

SHORT TERM: gap down opening then choppy, DOW -5

Last night the FED released governor Tarullo’s congressional Volcker rule testimony: The Asian markets gained 0.3%. Europe opened lower and finished mixed. US index futures were a bit volatile overnight, mostly lower, and at 8:15 the ADP index was reported lower: 175k v 238k. The market gapped down at the open to SPX 1749, bounced to 1752, then dropped to 1744 by 10am. The SPX had closed at 1755 yesterday. At 10am ISM services were reported higher: 54.0 v 53.0. The market spiked up to SPX 1754 right after the news, and then headed lower again. By 10:30 the SPX had made a new low for the entire decline at 1738. Then the market started to rebound. Just after 10:30 it hit SPX 1746, dipped to 1740 by 11am, then resumed its rally. At 2pm the SPX hit 1756. It then traded between SPX 1750 and 1756, closing at 1752.

For the day the SPX/DOW were -0.10%, and the NDX/NAZ were -0.45%. Bonds lost 9 ticks, Crude was flat, Gold rose $3, and the USD was lower. Medium term support remains at the 1699 and 1680 pivots, with resistance at the 1779 and 1828 pivots. Tomorrow: weekly Jobless claims and the Trade deficit at 8:30. At 10am there is Senate testimony on Dodd-Frank from FED governor Tarullo. Payrolls is Friday.

The market gapped down at the open, bounced around, and then made a new low at SPX 1738 for the entire decline from 1851. SPX 1759 was most likely the end of the 4th wave as we noted yesterday. The decline from that level to SPX 1738 looked a bit odd, with a ten minute 1744-1754 swing in the middle. Nevertheless with positive divergences on the hourly/daily charts, as many noted on the blog, the entire zigzag from 1851 could have ended at 1738. Since this would represent a 6.1% correction, we do not believe it would be the end of the downtrend. As a result we have labeled the decline from SPX 1851: 1770-1798-1738 with Minor waves, and a tentative green Intermediate wave A at the low. An Intermediate wave B rally could rally the market back to the SPX 1790’s, with the recently favorite 1794 level as a target. SPX 1759 would have to be exceeded to the upside to help confirm the Intermediate wave B.

Short term support remains at SPX 1746 and the 1699 pivot, with resistance at SPX 1768 and the 1779 pivot. Short term momentum displayed a positive divergence and has bounced to neutral. The short term OEW charts are still negative with the reversal level now SPX 1764. Best to your trading!

MEDIUM TERM: downtrend

LONG TERM: bull market


About tony caldaro

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141 Responses to wednesday update

  1. Caldaro does this make OEW wrong on p4 for the 4th time or is there still time for the save?

  2. Early morning, two typos, one correct and one incorrect, This is final version: “SELL and FOLD” at 1784

  3. M1 says:

    Congratulations, Tony!!!
    Very impressive =)

  4. waddaguess says:

    Looks impulsive. Bears might need to adjust….

    • blackjak100 says:

      It is impulsive (5 waves) since it’s the C wave of an expanded flat. B of 2 to follow possibly to new lows.

      • Blackjak please explain your thoughts for me. Thanks.

      • blackjak100 says:

        My thoughts have been expressed last 24 hrs. Tony’s going to kill me for the posts. I said last night that i think wave 5 bottomed at 1740 and targeted 1769ish today. So that means wave 2 in progress.

        c=1737-1773 to complete A of 2

        B of 2 up next starting tomorrow which may make a new low below 1737 as a larger expanded flat plays out.

      • To complete A of 2…

        What is the 2? 2 of major 5 of PIII?

      • blackjak100 says:

        I’m an EW guy but not opposed to OEW. I’m counting the decline from 1851-1740 as minor 1 down from a cycle wave B high. Minor 2 in progress.

      • OK, Minor 2 in progress.. Can you give your count (Intermediate, Major, etc..)? where are we on your count? your prediction?

        Thanks BJ!

    • this is a abc correction I think we get better chance to go long,

      • blackjak100 says:

        Yes, after the B wave decline which should last 2-3 days assuming it starts tomorrow after jobs and my count is accurate.

        Then the C wave could take us to 1780-1810 depending on where B ends.

      • JK1987 says:

        I remember you were a buyer at 1761 on Monday the 3rd, possibly more later.
        Wouldn’t be nice for your winning trade to grow?

  5. llerias7 says:

    Tony, today might be na (a) of B considering this wave B should progress as na a-b-c up to 1790´s?

    • waddaguess says:

      I think lows are probably in. But I also think major 4 bottomed. If it ramps higher into the close that will be telling for me.

  6. What possible BEAR counts does anyone see here at 1773?

  7. ewtoriginal says:

    Surprisingly, every talking head is expecting a big rally soon or the biggg rally to continue. Just kidding.Not surprising. I expect a retrace rally as well and then I expect to see the clubbing to resume/begin. Of course, its always been about POMO and literally nothing else.Analysts and strategists are paraded out to tell of cheap valuations etc. Of course companies all see a “rosy future” as these sell siders tell us. Structure allows for a rally into the high 1790s, but too many now expect at least that. If you are unclear on what correct financial analysis looks like, check out Hussman, If you prefer to disregard what a discounting mechanism the market usually is, namely how earnings are “going to be good next year ” versus the reduction of Fed created liquidity then trade accordingly. BTW, even Draghi balked at boosting a QE today.I just dont know how at this level anyone can forecast what earnings are “going to be next year”, but that’s what the people believe they teach at top b schools.

  8. JK1987 says:

    Seems there is a “friendly” objection, please confirm.
    Is it ok to post a chart like this?
    If you say no, I will delete it and do no more of this kind of chart.

    Similar SSO and UPRO major 5 charts awaiting for your OK.

    PS. one day, LK posted a chart with information of numbers:
    “Main account: IRA” …

    It’s internet, I would not show my account information.

  9. hucky2 says:

    If you look at Ron’s 5 min SPX chart;
    there is Negative divergence on RSI, MACD & Stoch, with no real drop in price (yet).
    If SPX closes above 1765 (1/3 off the high) that is short term bullish – should hit Tony’s b target

    • Educate me. Why does a negative divergence on RSI, MACD & Stoch (with no real drop in price) lead to a bullish move? I know it happens, but doesn’t it just increase the risk that the next leg is down? Or does it hint (more times than not) of a blowoff top?

  10. pbnj123 says:

    rc – didn’t you call out the 3 domes and a crown or whatever it’s called a couple weeks back?
    Sure looks like it could be setting up that way anyway

    Cheers Tony 😉

    • rc1269 says:

      think that was maybe november/december or so when i threw that mouthful of a technical formation out here. i just wanted to get it in print so i could go back and claim my riskless ‘like i said’ victory. 😉

  11. lunker1 says:

    tough to resist a touch
    1781 = 9.0% retrace of P3
    1781 = 38% retrace of Int A

    TLT from DEC low….w4 down of w1 up or now in w2 down?

  12. gtoptions says:

    Thanks Tony
    Great calls everyone.
    SPY ~ Low Volume Backtest of the 177.64 Swing Point Break
    Weekly PP @ 178.28

  13. RDC says:

    Gap up tomorrow, markets will surge. VIX to collapse.

    • tommyboys says:

      Hope so. Today’s action so far shoots DeMark’s potential thesis in the foot.

      • RDC says:

        Just do the opposite what he says you will do fine.

      • rc1269 says:

        yeah thinking ol’ demarky mark might have gone just a tad too far out on the limb on that one. ha

      • It would be expected, even logical that markets would take a rest tomorrow, since this is likely ending the wave a or first wave up of B, but then, markets do what they wish. As for Demark’s foot, it has been asleep and numb for quite some time. I surmise he must be sitting on it and cutting off the blood supply. LLAP

    • blackjak100 says:

      I think complete opposite…short S&P and gold to surge tomorrow. Wave count is lining up perfectly for NFP day!

  14. hucky2 says:

    TWTR down 21%
    Who kicked them in the guts?

  15. 777daimon says:

    I repost my message , the first one didn’t appeared
    target high 1780’s- low 1790’s

  16. tommyboys says:

    The 10 Yr Treasury is back above 2.70% which is moving the right direction. Like yields higher and stocks will follow. Good news on economy is good news for stocks again and bad news is bad news. Eventually this relationship will shift but probably not until the 10 year is above 5% somewhere…GLTA

  17. May have called the bottom the moment it happened…remember this?

    • Lee says:

      Nope I was too busy covering shorts …ahhh the internet 🙂

      • CygnetNoir says:

        I bought exactly at yesterday’s low and I will sell at today’s high tick. Unless it goes higher tomorrow, in which case I am holding the longs overnight. A gap down tomorrow will have me short from today’s highs, and I will cover at tomorrow’ low. Unless it gaps down Monday, in which case I will hold those shorts through the weekend, but only if it gaps down tomorrow.

        That’s my plan, and I’m sticking to it. Unless it changes.

      • CygnetNoir says:

        “Don’t gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don’t go up, don’t buy it.” Will Rogers

        What could be easier, right Tony?

      • berniebaruch says:

        I remember he was on the wrong side of 60 handles of the spx the past 10 days.
        That’s real money.

    • H D says:

      Ha, ted it’s funny. “IF, MAY, COULD, TARGET 1719″ ” I called the bottom!” ha… Dude?

      FWIW I do want to congratulate several yesterday. I read a couple of posts of people getting long yesterday, Tony updated the charts, posted in the update B up. We should all be happier today. Good trades all. C’mon guys. :mrgreen: 😆 It’s 5:oclock somewhere…..

      • uncle10 says:

        Yea baby. I closed my GMCR long and covered my Twtr short. Missed that yelp though. 6 billion market cap? what do they do?? All winners all the time. 😉

      • CN, when Joker shows up, the whole blog goes crazy… Bad energy with him.

        Interesting how much the “internet tough guy” likes him so much.

    • rc1269 says:

      Ted I may have called the bottom the moment before the moment you called the bottom. remember this:
      rc1269 says:
      February 5, 2014 at 9:34 am
      Tony – wave 5 in?

      by “maybe” of course i meant “definitely, and i’m going all in long.” like Lee said.

      • moo42 says:

        My staff are now wondering why I am laughing so hard in my office…

      • tommyboys says:

        Yes this guy Aguhob is a real piece of work….”genius” – mmm, ok…modesty will get you everywhere lol…it does take a genius to ride 60 handles the wrong direction…

      • JK1987 says:

        rc definitely called the bottom even there was a doubt of subidivisions, I witnessed.

        Like JK Said
        I am definitely long and let the profits run.

        JK1987 says:
        February 5, 2014 at 11:40 am
        major 4
        I am long, long, very long.

        JK1987 says:
        February 3, 2014 at 8:31 pm
        You know, Mount Rainier becomes Mount Seahawks.
        Anything can happen, nothing to be amazed,
        so there is a new high alert, target SPX 1911, I am fully in at 1741 into the close.
        Lost 20 points for the day, gained 90 last week.

  18. blackjak100 says:

    A perfect expanded flat for A of 2 looks complete at 1770.54! We should start to head lower/sideways for B of 2. I’m favoring a lower low than 1737 for B of 2 to be followed by a C wave to 1780-1810.

  19. rc1269 says:

    i wouldn’t be surprised if we bounced all the way back up to 1809-1813 before we see another big dump

  20. mjtplayer says:

    From the int a bottom at 1,737 on the 5-min chart: up to 1,755 – 1,749 – up to 1,767 would be c=a for minor A?

    Of the whole move down: .382 retracement = 1,781 50% retracement = 1,794 .618 retracement = 1,807. The downside action was very strong, thus far the bounce has been weak (internals, volume, a/d); wouldn’t expect a lot more than a 50% retracement.

  21. CygnetNoir says:

    My longs are doing great, but I’m taking heat on my shorts, and I am kicking myself for staying flat and not going all in both directions.

    Meanwhile DJ- did finally find support yesterday and today’s rally sees price back above the level that was broken down on 2/3. The area bounded by the 12/12 low and the 1/31 low would be the next obvious place where sellers may be hiding.

    Long, short, and flat here in the Nor’East USA

    Good luck to all!

  22. JK1987 says:

    XLY int b
    At pivot, at 89 ema, back to Bud’s recommended 63.

  23. pooch77 says:

    IS the worm turning finally turning on daily charts???

  24. GM 10 handle open. 10 AM wait for it.

  25. 777daimon says:

    int.a confirmed on Tony’s charts.
    we are in int b – target: the 1790’s

  26. market update for wednesday and strategy for thursday (within remarks sect.) :

  27. hucky2 says:

    Trend lines possibly producing a flag

  28. perversionofthemean says:

    Anyone use Gecko Software’s “Track ‘n Trade” software? Claims to help track wave counts, whether manually or automatically. I’m doubtful on the automatic part, but I suspect that anything that auto-calcs fib retracements and projections is much faster than me. I use TradeStation, so I’ve got tools, but I lack an EW add-in that might work a little magic… Thanks!

    • budfox9450 says:

      Think EW is a fine toy. The subjectivity,
      and dual recommendations, is something
      to also decide the value of…

      • chrisk44342 says:

        EW is entirely subjective, so an add-in of any kind is of doubtful value. Also, counting waves in tiny futures market is of doubtful value. Cash market is bigger and more reliable.

  29. lunker1 says:

    2 diamond formations and now a potential 3rd
    1. 1848/1816/1851 area
    2. 1770/1797 area
    3. 1740/1759/1738/1756
    maybe a higher low tomorrow to complete the diamond and then it’s either a reversal up or continuation down

  30. gary61b says:

    Tony, ty for the update. ES chart with some of Tony’s verbage.

  31. Hi,Tony,are you expecting a new low on Dow?could this leg down be a wave “c”?thanks

  32. Young Tom says:

    Let the killer beeeeees begin. Suck in the the wanna be longs. Then slam the door shut. Seems like the “Never Ending Story”. Something my kids we’re enamored with 25 yrs ago. Let’s ride Gandolf for awhile.

  33. It might not seem logical, but the possibility is that investors do not expect a strong Jobs number this Friday. Therefore, have already discounted it. LLAP

  34. blackjak100 says:

    OK…the expanded flat wave 4 has a slight problem and one I was thinking of earlier. It will become more clear tomorrow. If we just witnessed a b wave to new lows, then the c wave is usually at least 1.618 * A which puts it at 1769ish. What does this mean? It means the fifth wave ended at 1740 and we are in a wave 2 correction. However if 1770 completes A of 2, then B of 2 CAN MAKE A NEW LOW BELOW 1738. If tomorrow is a decent up day, this is my preferred scenario suggesting B of 2 will begin Friday with the jobs #.

  35. lunker1 says:

    1801 = Daily 34EMA
    1791 = 1.236 ext 1576->667 (resistance)
    1790 = Weekly 13EMA
    1787 = 60min 89EMA
    1785 = Daily 13EMA
    1781 = P3 9.0% fib retrace
    1772-1786 Pivot
    1770/72 H&S Neckline
    1764 = 60min 34EMA
    1738 = 150DMA
    1738 = P3 14.6% fib retrace
    1734 = Weekly 34EMA
    1718 = C=A
    1709 = 1.146 ext 1576->667 (should get tested)
    1709 = 200DMA
    1692-1706 Pivot
    1691 = H&S Target
    1687 = C=1.38A
    1687 = Weekly BB
    1673-1687 Pivot
    1677 = 250DMA
    1668 = C=1.62A
    1667 = P3 23.6% fib retrace
    1658 = 1.09 ext 1576->667

  36. ewtoriginal says:

    Thanks Tony. i agree the market is ready for a bounce soon, within days and maybe as a reaction to Friday number as a contra to the newly felt short term discomfort. My target area is 1788, more or less the same as your figure at 1794. RUT /IWM should begin a serious underperformance in general vis a vis SPX and DJIA. No one is overly concerned yet and the relief rally shouldnt have legs I suspect.

  37. RDC says:

    Thanks Tony!

  38. manunidhi21 says:

    Namaste Tony !
    on Dow charts we are not considering P3 yet ?
    Huge variance in dow and spx back again. whats the best way to overcome it as a trader of options ?

  39. 777daimon says:

    a chart that I don’t like at all … quite scary.
    this can’t and won’t happen.

    • RDC says:

      Interesting chart … Yes it is scary.

    • perversionofthemean says:

      Just my opinion, but won’t a lot of charts overlay nicely? If not, then we wouldn’t have H&S, triangles, zig-zags, etc. Impulse waves should be similar. It’s the self-similar nature of the market:

      Additionally, this chart fails to show the three *decades* leading up to the ’29 peak. This chart shows just five months of 30 years. Leading up to the ’29 peak was a run from $66 to $370 (460%) over eight years — after two decades+ of basing (my data starts in ’01). Would the analog be compelling if we showed the 1920’s eight-year impulse with the most recent eight-years?

      Last, our market didn’t base for 20 years prior to starting the run from ’09, but it’s also up only 200% since then. For the equivalent performance, the SPX would be at 3730.

      Anything is possible, and I’m sure that as P IV unfolds, the ’29 analog will be paraded, but I’ll bet I can find some hourly charts that overlay with ’29 pretty well too…

    • 777daimon says:

      according to this chart, starting 20 February (+/- 2 days) a bloody mayhem will start until 21-22 March.
      20 Feb is during OPEX week.
      so watch out what you are doing with your long term longs up until then (OPEX week).
      it could be something big.
      @ perversionofthemean:
      the conditions are not the same but also the potential variation of the fall is not the same as %.
      maybe the bots are applying the pattern at a different (smaller) scale (15-20% not +40%).
      anyway, the patterns are mind-shaking as they evolve …
      after a +32% year (2013) anything can happen.
      we have to understand that anything can happen considering also that the FED punch-bowl is taken and the party is over – that in the conditions of the highest (!) leverage ever met in US stocks until present.
      This market is extra-full with bulls don’t you see?
      They fostered bulls to make money … it’s like in case of a farm…. growing chickens but not for their own good, but for yours ….

  40. mharrison60 says:

    Hi Tony,
    Please pass on my appreciation to Alistair for reviewing and updating the count on the FTSE and giving this a big green Primary C. I note CAC shows a similar tentative top.

    It will be interesting to see how Europe now tracks relative to Dow / S&P PIV and PV paths. In particular does PV truncate, although I lack your good memory of whether there is precedence to make this likely or not.

    Many thanks !

  41. Francesca Stanton says:

    I’m always confused with the timeframes. You say that he market will go up again Q3/4 does that mean it will reach top of largest wave 5 then? when will the upmove start? I don’t think we have started yet as the market should be down in May.. what do you think? thanks

  42. Pingback: wednesday update | Traders Flash

  43. torehund says:

    On Strata in stocks—————————-

    Sometimes issues that are explained in a difficult fashion are just plain wrong, whats easy is often most the right approach. As I haven’t learned anything at all from the books, I am a virgin explorer in the world of economics. Sometimes its the one who hasn’t read any books about “how to survive alone in the jungle” is the one that actually do survive there, as most writers only have an academic approach to the jungle, and therefore inflicts misconceptions upon the reader.

    Companies can be judged on their market cap

    1) 1-10 million, I call them dirtbags as they have done everything awfully wrong for a prolonged period of time. Sometimes in a miraculous way they do strike gold and will visit the 30 mill mcap area briefly or possibly permanently. Here you find the lottery tickets.

    2) 20-60 million mcap, I call these “bags” as this is where you would normally go hunting for the multi baggers. If they have a sound backbone they may ascend to the 200-600 million mcap range, which is your aim when buying them.

    3) 200-600 mill mcap established companies, with or without a revenue stream. A sell area if you bought at 30 mill.

    4) 1-10 billion, larger companies with an approved business model,

    5) 10 bill to 500 bill. Larger multinational companies.

    I try to pick companies in the 30 mill range and attempt to hold them until they reach multi bagger
    status, sometimes they use a lot of time in attaining it, sometimes they don’t. Normally the fluctuations you see is just optimism and pessimism coming and going, what you want is to pick the ones that have unfortunately fallen down from the 200-600 mcap area or those who aspire to take the climb from this base level of 30 mill. Use some time evaluating your own stocks find out where they belong among the strata if they are high or low in their range or if they may descend or ascend a level. Go hunting….

  44. thanks for writing “int a” Tony! 😉 much appreciated!

  45. bouraq says:

    Bullish channels brewing?

  46. pooch77 says:

    Wow twittered getting hammered, wont help tomorrows cause ,looks like we bottom Friday on a weak jobs report,book it 1725

    • blackjak100 says:

      While I don’t think twitter will have an affect on the market, I agree the bottom is 1-3 days away near 1730ish.

      Gold has been correlating well inversely with the market lately. I’m certain gold just broke out of a B wave triangle with a target near $1300. If I’m correct, stocks should fall during this time.

      • ariez5 says:

        While I get nervous when anyone is “certain,” you have been calling the S/P and the gold markets very well. I don’t see the triangle in gold. Do you have any way of showing or explaining it? Also, though I was in GDX until last week, I found it was very strongly correlated with $TNX, which seems to need a pullback. If GLD is about to break out, it also bothers me that SLV and GDX are not acting impulsive. Thanks for your input, and
        THANK YOU, TONY as always.

      • chrisk44342 says:

        Yes I just had another look at gold again, across multiple time frames. I don’t see a triangle anywhere. Then again, I only look at spot price charts, not the tiny gold futures market charts 🙂

    • P, don’t read too much into it IMHO. It’s just one ticker. E.g. GOOG was up 4-5% last Friday, whereas the market was down 0.8% or so that same day. GOOG is surely weighted heavier than TWTR on many indices IMHO.

    • pooch77 says:

      Earnings A.F. across the board weak, gonna be a bad E.O.W

  47. 777daimon says:

    thank you Tony for the answer at my question related to possible int.B targeted area.

Comments are closed.