weekend update


Another wild week volatile week that started off quite choppy to the downside. Then ended with a strong rally to the upside. After closing last week at SPX 1783, the market dropped to 1738 by Wednesday morning. Next it rallied, over the next two days, to end the week at SPX 1797. For the week the SPX/DOW were +0.7%, the NDX/NAZ were +0.8%, and the DJ World index gained 0.7%. Economic reports for the week were slightly to the downside: 7 to 6. On the uptick: construction spending, ISM services, monthly payrolls, consumer credit, plus both the unemployment rate and weekly jobless claims improved. On the downtick: ISM manufacturing, monthly auto sales, factory orders, the ADP index, the WLEI, the monetary base, and the trade deficit worsened. Next week we get a look at Industrial production and Retail sales.

LONG TERM: bull market

We continue to count this bull market as Cycle wave [1] of Super cycle wave 3. Cycle wave bull markets unfold in five Primary waves. Primary waves I and II completed in 2011. Primary III has been underway since then, and may have topped in January. Primary I divided into five Major waves with a subdividing Major wave 1. Primary III has also divided into five Major waves, but both Major waves 1 and 3 subdivided. The recent uptrend high at SPX 1851 could have ended all of Major wave 5, therefore completing Primary III. Or, it could have only ended Intermediate wave one as Major wave 5 also subdivides.


As noted last week, two potential outcomes were, and still are, possible. If Major wave 5 ended at SPX 1851, then a 3-5 month Primary IV correction would be underway. This would probably unfold in three trends/waves, as the market loses 15% to 20% of its value. If Intermediate wave one of Major 5 ended, then a 1-2 month correction would be underway. This would probably unfold in one trend/wave, and the market would likely lose a lesser 8% to 9% of its value. Regardless of the outcome the bull market is still unfolding.

MEDIUM TERM: downtrend

After the recent uptrend topped at SPX 1851 the market started to pullback, and a downtrend was confirmed not too long after. We counted five waves down to SPX 1770/1771, and we labeled that wave a. The rally that followed was a one day affair to SPX 1799, and we labeled that wave b. Then there was another five wave decline to SPX 1738 this Wednesday, and we counted that as wave c/A to complete a zigzag. Next we expected a rally into the SPX 1790’s to complete a larger B wave. This unfolded by Friday, as the SPX hit 1798. Normally, we would expect this B wave to top between a 50% and 61.8% retracement, or SPX 1795 to 1808. Next, after this B wave concludes, we would expect another decline, possibly another zigzag, to put in a more substantial low.


On the SPX charts we have labeled the potential Primary wave III top scenario. Under this scenario the recent low is labeled Intermediate wave a, with a Minor a-b-c decline, and Int. wave b underway. On the DOW charts we have labeled the potential Intermediate wave one scenario. Under this scenario the recent low is labeled Minor wave a, with a Minute a-b-c decline, and Minor b underway. Normally after the current rally completes, we would expect the next series of lower lows to end either SPX Major wave A, or DOW Intermediate wave two.


The SPX scenario suggests the market would drop about 15% to 20%, and not make new highs for several months, while Major waves B and C complete. The DOW scenario suggests, new highs would immediately follow after the next decline ends. Medium term support is at the 1779 and 1699 pivots, with resistance at the 1828 and 1840 pivots.


Short term support is at the 1779 pivot and SPX 1768, with resistance at SPX 1800 and SPX 1814. Short term momentum ended the week extremely overbought. The short term OEW charts remain positive with the reversal level SPX 1774.

While the market has been generally tracking the two scenarios we have been expecting. There have been a few notable quirks along the way. On Wednesday the market made a quick, 10 minute reversal, on its way to SPX 1738. This threw us a curve for a bit. But at the close the zigzag low looked like it had ended at SPX 1738. The next quirky observation occurred between that low and Friday’s high. The market rallied into the SPX 1790’s fine. But it only has one notable pullback along the way: 1788-1777 on Friday. This is quite unusual for an expected B wave, even of this degree. Normally they are clearly a lot choppier, with overlapping waves.


As a result of this impulsive activity, we did a very short term momentum analysis for the entire bull market. What we found is that these types of upward surges have most often been kickoffs to new uptrends during this bull market. The exception being the B wave during the Major 2 correction in 2010. For now, we are using the SPX 1814 resistance level, which is above the 1808 61.8% retracement, to signal if a new uptrend may be underway. This has two possibilities as well. We are being objective: project, monitor and adjust when necessary.

Should SPX 1814 be exceeded, and a new uptrend may be underway. For the SPX count this would suggest Major wave A has ended, Major wave B is underway, and the labeling would have to be upgraded one level. For the DOW count this would suggest Intermediate wave two has ended, Intermediate three is underway, and not only would the labeling have to be upgraded one level, but the market is heading to new highs. In effect, we are now dealing with three variables heading into next week. If it all sound quite confusing just remember, regardless of the outcome, we are still in a bull market. For now we are leaving the labeling as it pending further market data, especially SPX 1814.


The Asian markets were mostly lower on the week for a net loss of 0.6%.

The European markets were nearly all higher on the week for a net gain of 1.6%.

The Commodity equity group were all higher on the week for a net gain of 1.5%.

The DJ World index gained 0.7% on the week.


Bonds remain in an uptrend and gained 0.1% on the week.

Crude confirmed an uptrend and gained 2.8% on the week.

Gold is in a choppy uptrend and gained 1.8% on the week.

The USD is close to confirming a downtrend and lost 0.8% on the week.


Tuesday: Wholesale inventories. Wednesday: Treasury budget. Thursday: weekly Jobless claims, Retail sales and Business inventories. Friday: Export/Import prices, Industrial production and Consumer sentiment. As for the new FED. Tuesday: FED chair Yellen gives Congressional testimony on the Semiannual Monetary policy report. Thursday: Fed chair Yellen gives similar testimony to the Senate. Best to your weekend and week!

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

About tony caldaro

This entry was posted in weekend update and tagged , , , . Bookmark the permalink.

166 Responses to weekend update

  1. rc1269 says:

    desparately seeking 1800 [formerly known as ‘Susan’]
    try as they might the VIX futures ramp camp couldn’t get us over the hump. tis a shame

  2. Young Tom says:

    Tony just posted Neg Divergence on 60 min

  3. Dow has confluence resistance at 15817.18
    Kathy Garber | Dow Jones, Education, Structural Trading, Technical Analysis, The Opening Print | Monday, February 10, 2014 |

    The DJI day chart perspective shows 15817.18 as a confluence resistance region. Confluence is derived from different aspects of analysis merging into a zone. The day chart shows that price has been in an uptrend channel since October 2011. The finale of 2013 was the high of 16588.20 at the retest of the channel resistance line; 2014 began with a stall at that region followed by a breakdown of consolidation to push below the channel midline, and price is currently bouncing back to that midline for a resistance test.

    Looking at the day chart shows that this test of the midline of the channel correlates with the GRZ (Golden Ratio Zone, aka the zone of the Fibonacci levels 38.2% to 61.8%). Confluence behaves as a magnet calling price to it, then acts like a stronger level and has more meaning if that level fails to hold price from pushing through it. In this case, since it’s a resistance level, it makes a statement for the bullish bias if can hold above that 15817.18 region.

    The harmonic rotation scenario is that the test of the confluence region is a requirement to form the third leg out of four legs needed to complete a harmonic pattern. To play out this emerging pattern as shown in purple fibs and triangle, the upside move to form this third leg can go as high as 16588.20 and remain a valid pattern; however, a test and hold below 15817.18 implies the leg has completed, and the probability of completing the final leg and completion increases with first a breakdown of 15266.96, then 14719.40.

    Note the initial support region to break down and increase the downside probability correlates with a retest of the channel support line, so again, confluence, and again, it makes a statement with what price does once it gets there. I’ll be watching to see how price behaves at this GRZ — it is an important test. The harmonic strategy offers an opportunity to trade long if price holds above 15817.18 with the next important tests aka scaling points at 15964.40 and 16111.62. Above there increases the probability of upside continuation with the ideal target at 16588.20.

    Final post. LLAP.

  4. llerias7 says:

    All years on Yellen tomorrow!…

  5. What a mess it is getting into…Unconfirmed reports; XXXX from top banks have been issuing indirect threats to Ben and now to Janet..”Support us, else will pull the rug and your QE theory goes in tailspin”..No way out?? My SPX “1784-SELL AND FOLD theory” also sent packing by these XXXX

  6. waddaguess says:

    Tony, 9 waves up on sp?

  7. oneandonlyuniverse says:

    Hey Mr. T,
    Who cares about the mkt- All one had to do is follow that gold piece you put out the first week of Jan.
    om shanti peace peace

  8. 777daimon says:

    found something really, really funny on Ted Wavegenius’ account
    I Just CAN’T STOP LAUGHING!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!:))))))))))))))

    sorry if I disturb with this link,….but it’s just too funny! :))))))

  9. Maybe it’s just me; but I am having a hard time not counting this as 5 waves up off the 1738 low.
    This is what I am seeing
    wave i, mostly on Wednesday 2/5, consisting of
    1: 1738-1746
    2: 1742
    3: 1754
    4: 1750
    5: 1755
    wave ii down to 1750 also on 2/5
    wave iii, 2/5 through Friday 2/7 consisting of
    1: 1750-1756
    2: 1751
    3: 1771
    4: 1766
    5: 1788
    wave iv, Friday 2/7, down to 1777
    wave v, Friday 2/7 through today, consisting of
    1: 1777-1780
    2: 1778
    3: 1798
    4: 1792
    5: currently in it.

    Either a 1st wave or an A-wave… IMHO…

  10. based on VIX and VIX futures this market is going a back to the highs

    • truthtrader, no offense but your vix predictions haven’t been exactly spot on. Also, do you really think fraudstreet futures are going to give you any notice ahead of time, when shit hits the fan- it hits the fan. When this ship goes down they wanna take all and everybody with it.

      • i take no offense sir to your comment no worries. But if you recall this was my last post on the vix when RC asked my opinon. the S&P is up 60 points. now i will take your thoughts

        thetruthtrader1 says:
        February 6, 2014 at 1:02 am
        RC always willing to share my opinion with you. VIX futures in slight backwardation but telling you this is not the BIG wave 4 correction. I mean we are where we were mid DEC before the year end ramp for no reason. Its just everybody wants to go up everyday. I would love to short this market and have tom demark be right and go down 40%. but not going to happen with Central banks and the FED

  11. Pingback: Risk-Reward Market Report – 2014.06 | The Risk-Reward Report

  12. blackjak100 says:

    I wish I could post a chart but AAPL is perfectly back testing it’s daily uptrend channel going back to July 2013 after falling significantly below it after last earnings. Great low risk/high reward short IMO! I will try to post chart tonight

    Short from $531ish

Comments are closed.