weekend update


After establishing an all time high on OPEX Friday a week ago the market went into volatility mode this week. Every day we observed the DOW moving triple digits: three down and two up. For the week the SPX/DOW were -1.2%, the NDX/NAZ were -1.3%, and the DJ World index lost 2.0%. Economic reports for the week were skewed to the downside. On the uptick: the FHFA, new home sales and Q2 GDP. On the downtick: existing home sales, durable goods, the WLEI and weekly jobless claims rose. Next week, end of month/quarter, will be highlighted by Friday’s Payrolls report and the PCE and ISM during the week.

LONG TERM: bull market

The Cycle wave bull market from the March 2009 continues to unfold in five Primary waves. Primary waves I and II completed in 2011, and Primary III has been underway since that October 2011 low. Primary I divided into five Major waves with a subdividing wave 1, and simple waves 3 and 5. Primary III has also divided into five Major waves, but wave 1 was simple and waves 3 and 5 have subdivided.


After the Primary I high in May 2011 the market declined for five months and lost 23% of its value during Primary II. So it is important to identify the Primary III high as we are likely to experience a similar type of correction for Primary IV. We estimate it will last about three months and the market should lose between 15% and 20% of its value.

During Primary III Major waves 1 and 2 completed in late 2011. Major waves 3 and 4 completed in early 2014. A subdividing Major wave 5 has been underway since that February 2014 low. The SPX count suggests the market is currently in an Intermediate wave v uptrend. When it concludes, if it hasn’t already, Primary IV should be underway.

MEDIUM TERM: uptrend in jeopardy

The current uptrend started in late august at SPX 1905. We count five waves up into the recent SPX 2011 high. Then the market pulled back to SPX 1979 just before it rallied in three days to the 2019 pivot. After that, which was last Friday, we had a very volatile week. Initially we thought the pullback to SPX 1979 ended Minor wave 2 and Minor 3 was underway to new highs. When the market dropped back to SPX 1979, rallied to 2000, and then dropped to 1966 we realized something bigger than just a pullback might be underway. So we set some parameters and dug a little deeper into some historical charts.

For the past month or so we had been considering an extending Major wave 5. This would require a few more uptrends to complete. The basis for this reasoning was the shallow Major wave 4 correction in the NDX/NAZ, the odd pattern in the DOW since the beginning of the year, and the ECB initiating their form of QE. Over the past week or so two of these potential positives appear to have diminished.

The ECB is counting on their TLTRO programs 1 thru 8 to generate most of the $700bn increase in their balance sheet. TLTRO 1 was a small $86bn, and the other programs are not until December. Their ABS program, according to the vice president of the ECB, is not expected to amount to much. We originally thought it would be the biggest part! The recent small Major 4 correction in the NDX/NAZ is not as big a factor as we originally thought. We knew that second and fourth waves, during a bull market, are usually quite similar. But the second and fourth waves of this bull market are Primary waves, not the Major waves during a rising Primary wave. We will continue to carry the extending wave alternate count on the DOW charts, but no longer consider it a high probability. Certainly not 50/50 against the current SPX count.


The main question, due to all the recent volatility, is did the uptrend end at SPX 2019. The uptrend on the daily charts does look like three waves up to SPX 2019: 2011-1979-2019. But some are counting it as a five wave pattern. If one looks closely at the last uptrend of Primary I, it also looked like three waves up when it topped. But it was clearly a five as that was the top of Primary I. Are we again seeing a similar pattern to end Primary wave III?

A review of the charts displays many negatives. The monthly RSI has a negative divergence and the MACD is sky high. The weekly and daily charts both have negative divergences on the RSI and MACD. The NYAD is close to confirming a downtrend, suggesting the advances are getting narrower and narrower. The R2K has already confirmed another downtrend after peaking during the SPX Intermediate wave iii in July. And now, the recent volatility is looking similar to the early stages of Primary wave II. In 2011 the market gyrated wildly too: -42 +30, -40 +28, -35 +33, then down 79 and so forth. From the SPX 2019 high so far: -40 +21, -34 +20 as of Friday. This is starting to look similar.

We noted during the week, after the market pulled back to SPX 1979 and rallied to 2000 the following. Should the SPX drop down to 1979 again and break the 1973 pivot range the probabilities would increase that a downtrend, and Primary IV are underway. Later we added should the SPX break the 1956 pivot and confirm a downtrend the evidence would be most conclusive. On Thursday the SPX traded below 1979, and closed at the lowest end of the 1973 pivot range (1966). Then Friday the market gapped up avoiding a break of the 1973 pivot. Nevertheless, we have seen enough to raise the probability of a Primary wave IV underway to 60/40. Medium term support is at the 1973 and 1956 pivots, with resistance at the 2019 and 2070 pivots.


As noted above we have an odd configuration from the SPX 1905 low that could be counted as three waves to SPX 2019, or five waves. The activity since that high is clearly corrective: SPX 1979-2000-1966-1986. The bulls could count the SPX 1966 low as the end of Minor wave 2, with Minor wave 3 underway. The bears can count the SPX 1966 low as the end of Minor wave A, with Minor B underway. The bulls need a rally above SPX 2019 to confirm their Minor 3 scenario is underway. The bears need a decline below SPX 1966 to confirm their Primary IV scenario is underway. Bullish and bearish these are our two parameters: SPX 1966 and SPX 2019.


We had also noted above four parameters: SPX 1979, the 1973 pivot, the 1956 pivot, and confirming a downtrend. At this stage of the wave pattern, a break of the 1973 pivot heading towards the 1956 pivot will likely be enough to confirm a downtrend. With the market closing at SPX 1983 on Friday, this is less than a 2% decline. Clearly the current pattern, technical indicators, and some specific indices favor the bearish scenario. And, a downtrend confirmation will probably confirm Primary IV is underway. Short term support is at the 1973 and 1956 pivots, with resistance at SPX 2000 and the 2019 pivot. Short term momentum ended the week overbought.


The Asian markets were nearly all lower losing a net 1.2% on the week.

The European markets were all lower losing 2.2% on the week.

The Commodity equity group were all lower losing 1.2% on the week.

The DJ World index lost 2.0% on the week.


Bonds continue to downtrend but gained 0.3% on the week.

Crude remains in a downtrend but gained 1.7% on the week.

Gold is also downtrending but gained 0.3% on the week.

The USD remains in an uptrend gaining 1.1% on the week.


Monday: Personal income/spending, and the PCE at 8:30, then Pending home sales at 10am. Tuesday: Case-Shiller, Consumer confidence, the Chicago PMI, and a speech from FED governor Powell. Wednesday: the ADP, ISM manufacturing, Construction spending and Auto sales. Thursday: weekly Jobless claims and Factory orders. Friday: Payrolls (est. +228K), the Trade deficit and ISM services. Best to your weekend and week!

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

About tony caldaro

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280 Responses to weekend update

  1. Gary Lewis says:

    finally filled the gap. That was a struggle but perhaps we will never be up in this rare air again…

  2. 16golfer says:

    rc1269….How’s the mother-in-law indicator tracking? Close to the greed level yet?

  3. FiveStars says:

    Let’s do flip flop … OK forget all the pullbacks, corrections etc etc … How about this we are going to test all time high🙂 LOL

  4. buddyglove says:

    Just a few more points on Nas-100 fut and Bazinga.

  5. Greenlander says:

    This looks bullish bc of hollow candle and low volume. VIX printing a very favorable black reversal candle outside of Bollinger. If we stay around -.40% in SPY, I’m going long EOD. If we have strong close, I will be less likely to go long bc of the continued countermoves.


  6. uncle10 says:

    got a buy stop for GDXJ at 35.05. short term trade with tight stop. prolly wont hold over night. gl

    • uncle10 says:

      missed my buy stop by a penny. saved me some dough. hehe 😉 prolly a short but Im not going to press my luck.

  7. buddyglove says:

    …Just sayin.
    S&P Fut 5min

  8. John B says:

    could be building some kind of b wave rest of today and then gap up tomorrow for a c,who knows,but I agree with TC this is no 3rd wave ,,see tomorrow folks

  9. winslow80 says:

    If this low holds, we have the postmodern Nostradamus in our midst:

    Posted on September 25, 2014 by lunker1
    both INDU and SPX are calling for a slightly lower low to like 1964.
    this would also give the 55 fib # down from 2019.

  10. John B says:

    as long as the low of day holds,i have very short term support at 72/74 will see if it holds

  11. buddyglove says:

    Falling megaphone inside falling wedge and large pos/div…that’s good enough for me as a long setup in a Bull mkt aimho and GL.

  12. Ok.. I have my buttered popcorn ready in anticipation of this steep upcoming drop.

  13. buddyglove says:

    Hey All…Here are my thoughts to the collective. No change of opinion from me and still Bullish from last week. Todays low could be tested or one more stab to slight new Bear-trap lows is possible before onto new highs for end of this week or early next.
    To summarize…Trying to get this Mkt to go down is like trying to keep a large inflatable ball underwater. Aimho and good health and luck to all.

  14. blackjak100 says:

    Battle royale at 50 Dma! Interbals suggest Bears win and cheap short here

  15. gasman88 says:

    Quarter and month end tomorrow, no way this market sells off until then

  16. fishonhook says:

    Who knows what the count is? Breaks 1966 then rallies up strongly. Shaking longs and shorts out. Tough to trade!

  17. Big up triggers over Fridays high, Only 8-9 point higher

    • ariez5 says:

      Maybe CN will explain, but I think it only triggers if the market closes in the top half of its trading range when it breaks Friday’s high.
      I would also suggest this market needs a 2-day setup and then a trigger. Today would be Day 1.

  18. the smart money is slowly rotating to their big shorts before the waterfall P4 hits on all cylinders

  19. pooch77 says:

    Wow bears cant run out the door fast enough

  20. uncle10 says:

    taking half my short copper position off and going long some grains/corn. JJG or ZC. as always pretty reasonably close stop. gl

  21. ariez5 says:

    CN, Please explain why 1890. Thanks.

  22. Tony

    Looks like we can stick a big fork in Primary III now as SPX went below 1966 today.

  23. blackjak100 says:

    Cheap short on its way @ 1975ish???

  24. gtoptions says:

    Thanks Tony
    SPY ~ WPP @ 198.18
    Now below WS1 @196.61 ~ WS2 @ 195.65
    GL all

  25. H D says:

    So many words/comments, what’s so hard about 1978.50 fib control and 1964 SPX midpoint of pivots. GL guys. Time for the HD to take a break and find his namaste.

    • lunker1 says:

      be the ball Danny

    • H D says:

      So who bot 1964 based on this? Nobody? exactly! We each trade our own plan and analysis. So why get all worked up about comments here?

      • uncle10 says:

        I agree HD. Traders by nature are independent people I think. The people here that are actually trading are going to do what they want and think for themselves even if they think or say otherwise. I use Tony and a few others as a check and when I am trading against them I usually trade smaller and am quicker to take profits and or losses. When my trade is with them I trade larger and a bit longer term.

      • lunker1 says:

        HD you typically post after the trade is completed, but when you do provide set ups you show your chart and reasoning.. Thx

  26. If the flash crash taught anyone anything, it is that a market can fall much farther and much faster than many care to admit.

    I see 1890 in the SPX’s future, though I won’t post a time frame, as some would judge that to be irresponsible.

    Have a good day.

  27. lunker1 says:

    depending on bottom watching +D on 60 and daily

  28. mjtplayer says:

    Looks like 1,966 will be tested sooner, rather than later. or perhaps we gap-down right under it

    Tony – congrats on the red birds winning the NL Central!

  29. FiveStars says:

    This correction will end at SPX 1940 (+/- 3).

  30. uncle10 says:

    Morn all. Thanks Tony.
    My easy short call late on Friday was just for the short term ( gap and or first hr or 2). I’m mostly a short term trader. I have covered over half my short from late Friday. Prolly will cover it all sometime day and may even flip long. gl and good trading.

  31. wildmick says:

    OH SH—–! so much for the bullish indicators! guess that trin is only good for one day now which was Friday. I dropped a position in sqqq Friday afternoon. my baaaad! still think we get some upside this week but staying on sidelines until I see an entry again.

    • Gary Lewis says:

      Isn’t Draghi doing something on Thursday? You know what that means . . .

      • wildmick says:

        draghi on Thursday. lets hope so because if he doesn’t its not good.

        used to be that some of the indicators lasted much longer than one day but that was 2010 – 2013. I bet you dollars to dnkn that another trin and bullish candles shows up again sometime today. after what uncle said I wouldn’t doubt it.

  32. Hi Tony

    The markets are weak this morning , it looks like we are in wave 3 of 3 possible. With DAX below both MA50 and MA200 it looks like we are in Primary IV as you also suggest.

    I guess a break below 1950 the trendline you got on charts will tell us that Primary IV confirmed.

    My question is , you think the Primary IV if starting is unfolding in 3 big waves , like Wave A down – then B bounce and then wave C down ?

    If im right markets are about to start wave 3 of 3 to downside and after we got 5 waves down from 2020 , we likely ended the first wav A down in the correction.

  33. mrgreen2010 says:

    My 2 c… I expect more spasmotic action and have bought volatility via VIX calls. 1-2 % moves maybe over the next week or so with no real upside progress and a minor downside until a break…maybe when earnings start being reported. Remember the old adage…chop before the drop…in the meantime the the VIX will pop. Note : One month ago SPX @ 1980; VIX @11. Today SPX @1980; VIX @ 15. If the market manages to grind to near ATH’s and internals and volume deteriorate further I will short more on a reversal. For now I expect some minor upside bias (ABC continuation from Friday) with chop until midweek position squaring is done…although a brief downdraft is possible Tuesday. AMZN looks ready to break and almost did Friday but could be held up till Oct 1. So mostly on the sidelines till mid week I suppose.

  34. lunker1 says:

    check out the entries the +D on Daily RSI5 has given.
    the other buy signal is below 15.
    below 10 is even better.

    and the 667 low had double +D

    Thanks Tony.

  35. rc1269 says:

    Boy lots of intensity on here this weekend. I suppose it’s too much to recognize everything on here is merely opinion with some small facts thrown in now and then. Caveat emptor. And then get over it/move along. Just another opinion, so take it or leave it

  36. fishonhook says:

    Would love to hear your interest rate views. I believe a while ago you said the lows were in for bond interest rates. However you also believe commodities have had their bull run for now and are in a bear market and you have been right.
    Higher rates and deflationary commodity weakness? Could happen. Could be USD strength and higher rates knock the stuffing out of commodities.
    Anyway if you have the time and inclination would be great to get an up-date.

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