weekend update


Interesting finish to quite a positive week. The week started off by gapping up Monday/Tuesday and hitting a record high. Wednesday/Thursday also produced record highs, and the DOW made an all time high too. The NDX/NAZ, however, came under selling pressure at the open on Thursday, and remained under selling pressure into Friday’s close. The SPX/DOW gapped up to new highs early Friday, but then gave way ending the week with moderate gains. For the week the SPX/DOW were +0.5%, the NDX/NAZ were -0.8%, and the DJ World index rose 1.0%. Economic reports for the week were again mainly to the upside. On the uptick: ISM manufacturing/services, construction spending, auto sales, the ADP, factory orders, Payrolls, the WLEI and Investor sentiment rose. On the downtick: Chicago PMI and the monetary base, plus weekly jobless claims and the trade deficit rose. Next week we get the FOMC minutes, Export/Import prices and the PPI.

LONG TERM: bull market

The US bull market is currently five years old. Historically, since 1885, there have only been four other bull markets of this duration or longer: 1921-1929, 1932-1937, 1987-2000 and 2002-2007. When we reviewed the previous two 5 year bull markets we observed they were quite similar in wave structure: waves 1 thru 4 took two years, and wave 5 took three years. This bull market does not look like either of them. Actually its wave structure currently looks more like the 1921-1929 bull market: wave 1 two years and wave 3 three years. However, since this bull market has had a tendency to truncate fifth waves, the structure alone is not considered enough evidence to anticipate a potential 8 year bull market. So we dug a bit deeper.


What we uncovered was quite interesting. Each of the previous four lengthy bull markets were quite oversold during their fourth wave, except for 2002-2007. In each of the other three bull markets their fifth waves then lasted for another two-three years. Currently our bull market is still in the process of completing its third wave: Primary III. When the fourth wave does arrive we will likely be able to determine if the fifth wave, Primary V, will end this year or extend into 2017. The key, of course, is the wave structure, and the extent of the Primary IV selloff. If during Primary IV the market loses substantially less than 20% of its value, Primary V will likely be short lived. If during Primary IV the market loses 20% or more of it value, Primary V is likely to extend for another three years. Then we would have an eight year Cycle [1] bull market instead of five years. As a result we have upped our Q3 – Q4 target of SPX 1970, to SPX 1970 – 2070. It is still too early to tell if it will end the bull market, or just end Primary III. Stay tuned.

MEDIUM TERM: uptrend

Last weekend we noted the market had hit an interesting juncture and offered the following. Currently we see three potential scenarios, in order of preference, short term. One: the NDX/NAZ confirm a downtrend next week, bottom within a few days, then all four major indices are aligned for the next wave up. Two: the NDX/NAZ is currently bottoming, with no downtrend confirmation, and all four major indices remain out of sync for the next wave up. Three: the situation in Ukraine/Russia worsens resulting in a panic selloff in equity markets, and all four major indices realign at the early February lows.



The market opened the week like it was taking on scenario number two. The NDX/NAZ began to rally and the SPX/DOW rallied to all time new highs. At the open Thursday, however, the NDX/NAZ started to selloff again and by Friday’s close had reverted to scenario number one. Interesting week! Currently we have the NDX/NAZ in confirmed downtrends, and the SPX/DOW still in uptrends. This suggests, despite Friday’s sharp decline, the four major indices are trying to realign for the rest of Primary III.


Currently we have the NDX/NAZ in Intermediate wave four downtrends. When this downtrend completes these indices will still need two more uptrends to end Primary wave III: Major wave 3 and Major wave 5. The SPX/DOW are more advanced as they are already in Major wave 5. But their Major 5 is subdividing into five Intermediate waves. Currently they are in Intermediate wave iii, and require another uptrend after this one to complete Primary III. Should the NDX/NAZ reverse next week and enter an uptrend without the SPX/DOW entering a downtrend they will realign. Then the four major indices can complete their trends in unison to end Primary III. Yes, it is a bit confusing since these indices are unfolding in different wave patterns. But the potential alignment is now setup. All we need is for the NDX/NAZ to reverse and start uptrending early next week. Medium term support is at the 1841 ad 1828 pivots, with resistance at the 1869 and 1901 pivots.


Short term support is at the 1841 and 1828 pivots, with resistance at the 1869 and 1901 pivots. Short term momentum ended the week extremely oversold. The short term OEW charts are negative with the reversal level now SPX 1879.


We have been counting this uptrend, since early February at SPX 1738, as Intermediate wave iii. Thus far it has completed Minor waves 1 and 2 at SPX 1884 and 1842 respectively. The recent rally to all time highs at SPX 1897 should be Minute one of Minor wave 3. And Friday’s decline to SPX 1863 should be all, or most, of Minute wave ii.

We counted five waves up from SPX 1842 to 1897: 1867-1853-1894-1883-1897. Since the fifth wave was the shortest in the structure, and it ended in a diagonal triangle on the one minute chart. It was not too surprising to see Fridays pullback go below the high of the first wave (1867). Pullbacks are usually fairly steep when fifth waves are short. On Friday the SPX dropped from the OEW 1901 pivot range (1894-1908) to the OEW 1869 pivot range (1862-1876) which is currently creating support.

With the short term momentum extremely oversold the market should experience at least a bounce quite soon. The down trending NDX/NAZ are also displaying a positive RSI/MACD divergence at Friday’s low on their hourly and daily charts. In the past this has usually led to an uptrend. While Friday’s selloff looked quite nasty, it may be quite positive longer term. However, should the SPX continue to decline and break below the OEW 1841 pivot range (1834-1848) it will likely be in a downtrend as well. Next week we will be watching the NDX/NAZ for signs of a reversal, plus the 1869 and 1841 pivots.


The Asian markets were mostly higher on the week for a net gain of 1.3%.

The European markets were also mostly 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 2.5%.

The DJ World index is still uptrending and gained 1.0% on the week.


Bonds remain in a downtrend and lost 0.2% on the week.

Crude remains in an uptrend but lost 0.6% on the week.

Gold is also in a downtrend but gained 0.6% on the week.

The USD is uptrending again and gained 0.2% on the week.


Monday: Consumer credit at 3pm. Wednesday: Wholesale inventories and the FOMC minutes. Thursday: weekly Jobless claims, Export/Import prices, and the Budget deficit. Friday: the PPI and Consumer sentiment. As for the FED. Tuesday: Congressional testimony from General counsel Alvarez, and a FED board meeting right after the close. Wednesday: a speech from FED governor Tarullo in the evening. Sunday afternoon: a speech from FED governor Stein. Busy week for the FED and likely for the markets too. Enjoy your weekend and week!

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

About tony caldaro

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156 Responses to weekend update

  1. lunker1 says:

    Hi Tony,
    Do you see something like this?
    minute A = 44pts
    minute B = 57.71pts 131% A
    minute C = 127.2% B = 75.69pts =1823.87
    minute C = 131% B = 75.69pts =1821.59

    or more in general that C would target the 1828 pivot?

  2. JK1987 says:

    c of Minor 2 at 1841.48?

  3. Covered my short entry (of 1857.5) at 1843.6. But..but, again shorted, this time at 1851.2. I am likely to short one more large, any time but wont update about that. Next update on Sunday.

  4. I’m done trading today, lost on two trades with GE but won on my last trade with GE. Using five minute trading system, best trade today, short of Yahoo shares.. Mr. Peter Worden suggested shorting a Yahoo few days ago. Time to get ready for final NCAA game tonight. Go Huskies! Should be great game!

    Markets tired! Most likely more selling coming in the next few days. Have fun!

  5. SPX testing 50d sma, lower BB, as well as the 1840 support range (1841 OEW pivot). Bears need to recharge, i.e. take the OS pressure off the hourly in order to stab through it (an hourly RSI(5) reading of 3.4 is as OS as OS can be) with conviction, but then at the same time may also face a problem of dip-buyers that may step in at these important support levels and drive price up.

    Daily RSI(5) at near OS levels is neither helping the bear case (short term), IMHO. Of course OS can always become more OS, but an up day tomorrow, especially on NDX/NAZ will set-up some serious + div on the daily RSI(5), as well as among many individual stocks (logically since it’s a market of stocks).

  6. blackjak100 says:

    Bouncing nicely now but the important thing is we traded below 1842.11 confirming a downtrend. Minor 1 of Int C may have just completed at 1841.5 a little more than a fib 55 pts from high.

  7. CygnetNoir says:

    I couldn’t help myself – I just bought some ES at 1835 😉

    • +1, thinking about buying some more too. 😉

    • Lol you go dude! I got some Ibb calls. Deep itm and many months out. Not much time value to lose. Sold some otm near month calls to help pay for it. Hopefully those are itm next month and I can cash out the whole thing at opex. Whole thing is theta neutral and has a lot of room for error with little premium. Hoo boy these moments make me happy. Lol

    • bobhopium says:

      Yep…I stepped up to the plate as well….Good luck to everyone.

    • perversionofthemean says:

      Great price! Time frame for hold?

      • perversionofthemean says:

        ES morning high 1857.50 to low at 1846 gave target at 1834.50. Retracement was 50%, back to 1846. Easy to see in hindsight. Even the bottom of the 12:05pst low stopped on the median of the lower half of the day’s range (1st quartile of the days full range), before returning to the 50% retracement.
        For a guy new to EW, what is the count of the move off the day’s low up to the retracement high? There are 5 waves, and the smallest is the 5th. Or, is it a large A, small B into the 12:05pst low, and a C up to the retracement high?

  8. uncle10 says:

    Im out on a limb here saying there are some serious stops just under 1840. Maybe get another flash crash? then we could put to rest what happened the last time and just accept the fact that the market is run by computers/traders. gl

    • rc1269 says:

      i didn’t think there was any doubt left about that

    • Now this a C wave! Time to go shopping when we see some support. Actually I see some buying under the surface in a few biotechs. Big money to be made next month.

    • JK1987 says:

      flash crash? Why?
      Last time PUG visited oew blog in mid Jan, SPX corrected 122 points.
      PUG visited oew blog again at the SPX top on April 3rd.
      Another major correction? deja vu.

      • uncle10 says:

        Hey JK. No flash crash until we break 1840. If/when 1840 breaks maybe a flash crash because everyone has their stops there….. I see we have a few more longs today with stops there 😉 lol

  9. H D says:

    stairs up, elevator down. 55 point hit @ pivot

  10. Friday saw a great head-fake: break out of a range only to see it reverse back hard and far below the breakout level (thursday’s retest was classic, but not enough). Bull flag pattern and break out probably caused many to think “ah finally here we go”, me included, that obviously did not happen. This pattern is now negated IMHO.

    Possible near term alternate count: 1897 was end of c-wave of an even larger abc, where wave-a 1883-1839, then wave-b consists of 3 smaller waves (abc): 1839-1884 (a), 1884-1842 (b), 1842-1897 (c) !?!?! , and now in (c) down. If not, (break below 1828 pivot) then Tony’s DOW count becomes preferred, IMHO, and the market just experienced an intermediate b-wave finish, IMHO.

    Namely, it will the likely be an expanded flat (wave b -1897, 16632- terminates beyond the level of the beginning of wave a, in this case Primary III -1850, 16588, and wave c terminates a slight bit past the end of wave a -1738, 15340-), or a running flat (wave c fails to end below the end of wave a). Regardless, a flat correction, especially expanded flat corrections, is in this case bullish in it self, since even the correction travels in the same direction as the prevailing trend (in this case up), showing significant market strength.

    • ps: tony, Given that the 15340 low on the DOW was only intermediate a, do you think we may see a double flat like the one in 2004, if the market goes below the SPX 1841 pivot range? But, after that particular double-flat (abc-x-abc) the DOW added another ~45% for major 5 to end SC1, while in the weekend update you expect that a Prim- IV off less than -20% (which will likely have to be a flat correction) will only lead to a short lived Primary V?


      • tony caldaro says:

        Should the DOW confirm a downtrend next.
        The advance from Feb looks like three wave uptrend.
        Think this would favor an Int. C, with Int. D underway, for a potential diagonal Major 5.
        Keep in mind, even though the NDX/NAZ had led this selloff they still have two more uptrends before PRI III.

      • magicianme says:

        Sure. My analysis on Wednesday was on the relevant blog post: https://caldaro.wordpress.com/2014/04/02/wedneday-update/
        “- the last couple of days have been marked by extremely low volume. Low volume at the top is not a sign of strength.
        – other indices from the FTSE to the Nasdaq are warning a small correction. The S&P is unlikely to continue making new highs if all other indices are falling
        – the main S&P momentum indicator I use is showing a H&S in the indicator
        – Big news items are due today and tomorrow (good excuses for the market to correct. And that’s possibly why the market’s been pushed up on low volume)
        – For those of you who follow sinewaves, there is cyclical resistance forming on the daily”

        The pushing up on low volume alongside big news days is classic priming the price for some profit taking.

        We are still under daily cyclical resistance (sinewave). I also look at bond prices, CFTC figures (HUGE reversal in COT – professional money seems to have gone bearish in a big way last week), the performance of the carry trade pair (UY), volume analysis etc.

        But I don’t know much about OEW and am hoping to learn.

      • magicianme says:

        You’re very kind, sir.

    • magicianme says:

      Thanks for that, soulsurferusa. I did reply to your Wednesday post where you made out the bullish case …to explain why I thought the reverse would happen on Thursday/Friday and why I saw a correction due. Obviously it’s too late today for the bulls to take back control, but my analysis suggests they’ll struggle to do that even tomorrow. (I’m expecting a bit of a ranging day tomorrow)

  11. Lee X says:

    some very generous and insightful answers from Tony the chainsaw today Thanks

  12. radrian6 says:

    RUT has contacted a rising support trend line but this line is not well tested so I am ignoring it unless it holds. The drop on this leg down has matched the previous leg down — 61 points. Also RUT is approaching the 61.8 % fib retracement of the 130-point February rally. Traders responded to the 50% Fib retracement level (1147) with a 47-point rally so they may respond similarly to the 61.8% level near 1132.

    The bounce will come but the more important issue is the bigger picture. It’s difficult to classify this choppy downtrend as impulsive because there is so much overlap among the waves. RUT has dropped about 6.6% so far which is extreme for a minor correction but still possible. It is my feeling that RUT is at a significant inflection point. If RUT is able to rally beyond the previous high of 1194, that rally should carry the RUT to new highs and beyond. If, however, the coming bounce is sold off before reaching 1194, I will conclude that RUT is in a major or primary correction.

    • radrian6 says:

      The RUT 60-min chart is showing some trend exhaustion so we may see a short-covering bounce starting from 1124-28. If so, that would potentially complete an A-B-C correction from 1208.14. Once again, this has been extreme for a minor correction so be aware of the possibility that it is the first wave of a more serious downtrend. Watch the reaction on the way back up as RUT encounters resistance at 1147, 1162-64, and 1169-72. The 50- and 20-day MAs are near 1163 and 1178 respectively and the previous high is 1194. If RUT can’t resume the uptrend, I doubt that it will be able to rally past the mid 1170s; if it resumes the uptrend, it will eventually take out 1194.

  13. most oversold I’ve seen the hourly RSI5 over the past 6 months!?

  14. uas2014 says:

    Hi Tony, Can you see a -div on Ibovespa Chart?
    tks for your help

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