weekend update


The market started the week with a gap up opening on monday, hit SPX 2005 on tuesday before noon, then traded in a 14 point range for the rest of the week. For the week the SPX/DOW were +0.7%, the NDX/NAZ were +0.8%, and the DJ World index gained 0.6%. On the economic front positive reports outpaced negatives ones, led by a Q2 GDP +4.2%. On the uptick: new/pending homes sales, durable goods orders, the FHFA, consumer confidence/sentiment, Q2 GDP, personal income, the PCE, and the Chicago PMI. On the downtick: the WLEI, Case-Shiller, and personal spending. Next week will be highlighted by the FED’s beige book, ISM, and the Payrolls report.

LONG TERM: bull market

As we start our 10th year of publishing this blog it appears the market is entering another inflection point. The bulls have won them all since 2010, with the exception of 2011. Is another exception in the offering, or is Primary III set to extend once again? The next several days to weeks will give us the answer.


Last weekend we offered a potential alternate count should Primary III extend. Yet, we continue to follow our main count which has worked well for us this year. As you can see from the weekly chart: the SPX should be in Intermediate wave v, of Major 5, of Primary III. When this uptrend concludes, Primary III ends, and the largest correction since 2011 should follow for Primary IV. Supporting this scenario are the negative divergences in the weeklly MACD/RSI, plus we are in Q3 and within our long standing target range: 1970-2070. These negative divergences also appear in the DOW/NDX/NAZ. On the monthly charts we have the most overbought MACD in the history of the stock market, plus a double negative divergence in the RSI.


There are additional headwinds which can be considered more fundamental than technical. The FED’s QE 3 ends in October. The end of QE 1 and QE 2 coincided with market declines of 17% and 22% respectively. Europe has renewed deflationary pressures, as their inflation rate is currently 0.3%. The ECB and FED both target 2% inflation. The recent uptrend to new highs has occurred with some of the lowest volume this year. Traders are likely to start returning next week, as Labor Day marks the end of summer in most areas. Geopolitical events continue to flare up: ISIS in Iraq and Syria, Russia in the Ukraine. Both have the potential to create volatile markets, which usually occurs during steep corrections.

MEDIUM TERM: uptrend

The current Intermediate wave v uptrend started in early August at SPX 1905. Thus far the market has risen to all time new highs, as it hit 2005 this week. At the low there was a positive RSI divergence and an oversold MACD. Recently this uptrend looks more like Int. wave i, than Int. wave iii. That uptrend took only about four weeks: early February to early March. This uptrend will be about four weeks old next week.


While the SPX/NDX/NAZ have all hit all time new highs, the DOW/NYA have been struggling to keep pace. The DOW did make a new high by just 2 points, while the NYA (new york composite index) has yet to do so. This suggests the advance is being driven by market leaders and growth stocks. The typical fifth wave narrowing of market participation. The DOW has also remained within its expanding triangle, limited by that upper trend line. Until we see a substantial rally breaking that upper trend line an extension of Primary wave III seems doubtful. Medium term support is at the 1973 and 1956 pivots, with resistance at the 2019 and 2070 pivots.



Short term support is at SPX 1985 and the 1973 pivot, with resistance at SPX 2005 and the 2019 pivot. Short term momentum ended the week overbought. The short term OEW charts turned positive with the reversal level now SPX 1998.


We have been counting this uptrend with five Minor waves. Minor waves 1 and 2 ended at SPX 1945 and 1928. Minor wave 3 divided into five Minute waves: 1964-1942-1995-1985-2005. Minor wave 4 appears to have ended on thursday at SPX 1991 with a positive short term divergence. During this bull market fifth waves have been somewhat limited: from less than the length of wave 1 to 1.618 times wave 1.

With wave 1 travelling 40 points (1905-1945) the upside limit for wave 5 would be about the OEW 2070 pivot. The minimum upside would be marginal new highs above SPX 2005. Assuming the short term count is correct, no Primary III extension, the uptrend target range is between these two numbers. Our next pivot is 2019, with a range of +/- 7 points. Within this pivot are two fibonacci relationships: @ SPX 2014 Int. v = 0.618 Int. iii, and @ SPX 2016 Minor 5 = 0.618 Minor 1. With all the indices setting up for potential negative daily RSI divergences at higher highs, let’s see how these numbers work out next week.


Asian markets were mostly lower for a net loss of 0.5%.

European markets were all higher for a net gain of 1.8%.

The Commodity equity group were mixed for a net gain of 0.1%.

The DJ World index gained 0.6%.


Bonds continue to uptrend gaining 0.4%.

Crude is still downtrending, but gained 2.7%.

Gold remains in a downtrend but gained 0.5%.

The USD continues to uptrend and gained 0.4%.


Tuesday: ISM manufacturing and Construction spending at 10am. Wednesday: Factory orders, Auto sales and the FED’s beige book. Thursday: the ECB, ADP, weekly Jobless claims, the Trade deficit, ISM services, and a speech from FED governor Powell. Friday: Payrolls and the Unemployment rate. Best to your three day weekend and week!

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

About tony caldaro

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166 Responses to weekend update

  1. 7dayyss says:

    Quite an accomplishment Tony on the 10 years, especially with the ever present trolls, although it’s been pretty nice lately, speaks volumes on your character! Still busy rehabbing the shack I bought in spring 13, usually catch the blog at the end of the night. May you live long to enjoy the fruits of your labor!

    CN: Do you keep in touch with Laurent/or he with you from time to time since he quit posting here? Be nice if he’d drop a tidbit, or razzle dazzle us once in a while with a “how’d he do that!”!

    Thanks again to all the regular contributors!

  2. pooch77 says:

    Futes starting its early Sunday move up despite the crumbling situations across the big pond….amazing

    • torehund says:

      ..some are buying the sold news, or something. Maybe its the boots..or maybe RUT needs AIR after a 6 months double wave holddown. Or could the market be celebrating Tonys Anniversary 🙂

  3. Botticelli says:

    Ten years is quite a milestone.

    To place this accomplishment in proper historical perspective, it is 405.83 times longer than Cher was married to Gregg Allman.

    Happy Anniversary!

  4. chicotheman says:

    Congratulations Tony on entering your 10th year. I have had the good fortune to witness about half of that and look forward to many more.

  5. Adelizzi says:

    Tony, congratulations on a decade of your very informative blog. I’ve read every post since 6/6/11. Thank you for your hard work.

  6. purplember says:

    Tony, congrats on 10years. Man, I wish I new about you & your blog many years ago. the rise and fall are great for traders but not buy and hold. I’ve done 20x better off real estate than the stock market.

    keep up great work and love reading you blog. i’m learning more and more each week

  7. mharrison60 says:

    Tony, congrats on 10 years!

    Does it look to you likely that Dax and Cac are in Major B waves whereas FTSE is only in Int B of Major A? These markets all topped around the same time but FTSE just has not seen the same level of decline as the other two markets.
    Likely FTSE is in part waiting for US market PIV before down momentum kicks in.

    Many thanks as always

  8. chrisk44342 says:

    Tony congrats. I rarely pay attention to anyone’s blog or comments, with yours definitely being the exception. You are the only person I’ve seen that’s been able to tame the ‘wild beast’ that is EW. OEW has some really nice features that are the perfect compliment to trend analysis. Nice going and many thanks.

  9. magicianme says:

    Tony, I thought this occasion, your tenth anniversary, a good time to catch up on some of your posts from before I discovered this blog. Very interesting. Especially that tricky period of 2007-2008.

    I don’t know if you’re aware but some of your earlier posts are riddled with spam comments. An example: https://caldaro.wordpress.com/2007/10/11/oew-past-present-future/

    That’s not a complaint, just a heads-up as I thought you might want to know.

  10. sweinv says:

    Thx Tony and Congratulations to the 10 years of blogging!

    I have been reading your blog for 18 mounth and it´s really good.

  11. thoth8 says:

    Tony, Congratulations on your 10th year anniversary!
    We are so Blessed to have you around : ) Thanks a million times for all your hard work and dedication !!!

  12. robslob64 says:

    Hi Tony and Congrats on producing a site for all flavors of traders!

    Am I reading the SBUX chart right in that it’s grand SC 3 is complete and it is now going into a bear market stage SC 4?

    Thanks Much!

  13. Gary Lewis says:

    Tony, I was reviewing the last market top in 2007 and noticed a number of similarities: There was a big market spike down in August which was the low of the final leg up, NDX/NAZ market leaders with R2K a market laggard, Fed behind the curve, lots of market complacency, SPX PE of 17 which many were saying was cheap, everyone still looking for higher waves to come.

    Did market cycles occur naturally? Or would the market have gone even higher had the Fed cut rates more aggressively? (And then came bank downgrades.)

    If history repeats, the October option expiration should be a doozy and then the selloff into the end of the year and beyond.

    In the end, it’s the August 2007 spike down that really caught my eye. Might we repeat 2007?

    • valunvstr says:

      Yield curve inverted in 2006 a predictor of things to come. The 2-10 right now is in the 1.8’s. We not likely in the Aug 2007 time frame. Recession is still likely a ways off.

      • Gary Lewis says:

        Valu – Point taken. Tony mentioned in his blog back then the economics had nothing to do with the bear market, it was about liquidating excesses. At that time, the outlook was still for a future P5 that would take SPX prices up to 2000 by 2010. Things were looking great back then until they weren’t looking great any longer. Anyway, just posting my observations. Thanks for your insight.

      • rc1269 says:

        Of course, we didn’t have unprecedented QE back then distorting the curve either. Apples/oranges, IMO.

    • Gary Lewis says:

      Looking further at this, I find more data similarities: March 2007 low 1386 vs April 2014 low 1815, then rally through July: 2007 1552 – 2014 1995, then Aug low 2007 – 1445, 2014 1905. A minor difference here is that in 2007, prices made a three week test of the low before rallying five weeks. 2014, no test of the low, rallied four weeks thus far. After the five week rally in 2007, the market dropped 4% the next week and the bear market began. (data used = weekly closes)

    • pcskier says:

      I agree with you Gary. What i see most similar from now and 2007 is Weekly $bpcompq. In 2007 it peaked in Feb 2007 now it peaked in Jan 2014. After peaking than and now $bpcompq rolled over and the market kept going higher for about 8 month until it didn’t. The time frame is now to match 2007 with ending divergence with $bpcompq and price. $bpcompq has never screamed such a bearish grand canyon size divergence than right now. It’s 50 weekly average has been pointing down for a while pushing $bpcompq lower. $compq closed friday with a perfect hammer formation, a lower close on tuesday would indicated the hammer is in fact a “hanging man”. If you look at a summation chart of $NYMO we had a perfect double recently sold off at resistance(double top) and now retraced about 50%(key reversal at hand now) Plus we had perfect double top in $INDU and high yield last week. If you look at a 2 hr chart of most high yield right now it’s 200 MA is flat and lower than it was than the previous top. High yield only has to fall a little below it’s 200 on the 2 hour charts the algo will sell sell sell everything with risk.

      • Great post, pcskier, thank you.

        Do you have any projection regarding the timing of the expected drop? Would seem Sept or Oct.

      • pcskier says:

        You are welcome and thanks. I got my first buy on the vxx last Tuesday after noon. I am hoping that was it for Spx. I am expecting a 1987 or 1929 event by mid nov, but that is from my gut. But the charts tell me the 7 year top like 2000 and 2007 are here real soon. If not last week. I respect tonys calls, when he calls a p4 bottom I will pay attention. I am front running him on the p3 call Spx last Tuesday, just waiting for confirmation. Thanks for the open forum tony, congrats on the decade and I wish you multiple more. I spend hours a day trying to be creative with charts. If you look at the right places you can see a clear story.

      • pcskier says:

        Dave Tice a bear mutual fund manger has not made a media appearance that I am aware of since 2012. I don’t think it was coincidence that he was on CNBC late last week saying he was never so sure of an upcoming crash in his life. If my memory serves me right he was very timely in 2007 with his call for a top. Indeed he was really close in 2007,

      • pcskier says:

        Take a look at comments back in 2007 from David call seems similar to today except this one. {Doubt it. Not unless the “money pump” springs a leak.
        Oct 1, 2007} that is exactly what is happening now with QE ending here.

  14. magicianme says:

    Many congratulations on the anniversary, Tony. And many thanks.

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