weekend update


Another wild and volatile week. The week started off calm enough, for this market, with a continuation rally gap up on Monday as the SPX hit 1978 in the first few minutes. Then the market declined to a slightly lower low for the downtrend at SPX 1925 by Wednesday morning. Wednesday afternoon, however, the market rocketed to SPX 1970 just before the close. Then after a quiet opening on Thursday the market gave it all back and made new downtrend lows on Friday. For the week the SPX/DOW lost 2.9%, the NDX/NAZ lost 4.2%, and the DJ World index lost 2.8%. Economic reports for the week were light, but decidedly negative. On the downtick: consumer credit, export/import prices, the WLEI and investor sentiment. On the uptick: wholesale inventories. Next week we get the FED’s Beige book, retail sales, industrial production, reports on housing, and it’s options expiration Friday.

LONG TERM: bull market

The five primary wave bull market continues, but we appear to be in correction mode now. Primary waves I and II ended in 2011, and Primary III appears to have recently ended in September. This suggests a potentially nasty Primary wave IV is currently underway. We counted Primary I as five Major waves with a subdividing Major wave 1, and simple Major waves 3 and 5. We counted Primary III as five Major waves as well, but with a simple Major wave 1, and subdividing Major waves 3 and 5. During Primary III Major waves 1 and 2 ended in late 2011, and Major waves 3 and 4 ended in early 2014. Major wave 5 divided into five Intermediate waves, with the fifth wave ending on September 19th.


Last weekend we pointed out several reasons why we expected Primary IV to be underway. The market had closed last Friday only about 2.5% off the all time high. We displayed charts of the NYSE, the DJ World index, and the R2K. All three had topped either in July or September and had already fully retraced their most recent uptrend. We also displayed how market breadth was declining despite the fairly significant rallies since September 19th. We also displayed how volatile Primary wave II was during its initial stages. Now the NYSE has nearly fully retraced the past two uptrends in only five weeks.


Since the September 19th all time high we have been in a downtrend, which has nearly fully retraced the entire Int. v uptrend. This suggests we have entered Major wave A, of a three Major wave, Primary IV. When Primary IV does conclude we should get a rising Primary wave V to all time new highs. The size of the Primary IV correction should help determine to length and duration of the Primary wave V to follow. A shallow Primary IV should lead to a short and quick Primary V. A steep and lengthy Primary IV should lead to a long and strong Primary V.

MEDIUM TERM: downtrend

Since second and fourth waves of bull markets are typically similar. A review of Primary II will helps us in determining what to expect during Primary IV. Primary II took five months to unfold, ended in an elongated flat, (similar to the 1987 crash), as the market lost 22% of its value. Since that wave formation was a flat we would expect a zigzag to unfold for Primary IV (alternation). The first two down legs of the Primary II correction would fit this scenario. They are easily observed in the weekly chart above.

Notice how the weekly RSI dropped to quite oversold during both of those declines. And, the MACD turned negative before the correction was over. Notice where we are now. Barely oversold on the RSI and still quite high on the MACD. This suggests not only are we in Major wave A, but Major wave C should take this market much, much lower. Since Major wave 5 was stronger than Major 1, we would expect support to be found at previous fourth waves of a lesser degree. The three levels we are looking at for a potential Primary IV low are: SPX 1738, SPX 1627 and SPX 1560; Major 4, Intermediate iv, and Minor 4 of Primary wave III.


The current downtrend, Major wave A, is dividing into three Intermediate waves. Intermediate wave A ended at SPX 1926, Intermediate wave B ended at 1978, and Intermediate wave C has been underway since then. We will get into more detail on this downtrend below. Medium term support is at the 1901 and 1869 pivots, with resistance at the 1929 and 1956 pivots.


Intermediate A divided into three Minor waves: 1964-1985-1926. Notice how Minor a was a bit complex, and Minor c was simple. Then we had a strong simple rally for Intermediate B to SPX 1978. Intermediate C starts off with a simple decline to Minor a at SPX 1925, a strong rally to SPX 1970 for Minor b, and now we should get a somewhat complex Minor c. Which has already begun. What is also interesting about this downtrend is that many of the moves are approximately 55 points. Minors a and c of Int. A, Int. B, Minor a of Int. C, and now, Minute a of Minor c. Also two of the counter rallies, Minor b of Int. A, and Minute b of Int. C are approximately 21 points.


Since we are now, theoretically, in the last wave down of Major wave A. And we have several completed waves we can make some more precise Fibonacci calculations for its potential end. We first have a cluster of price/wave relationships between SPX 1879-1885. Next is the 1869 OEW pivot. After that we have another price/wave relationship right at the OEW 1841 pivot, and finally another at the OEW 1828 pivot. So with the exclusion of SPX 1879-1885 Major A should end at one of the three pivots under 1901. Since this downtrend has essentially moved pivot to pivot, i.e 1901, 1929, 1956, 1973 and 2019. It is likely to end at a pivot as well. We have an idea of how this last wave should unfold and will keep everyone updated in the daily updates. Short term support is at the 1901 pivot and SPX 1879/1885, with resistance at the 1929 and 1956 pivots. Short term momentum appears to be trying to set up a positive divergence again.


The Asian markets were mostly lower for a net loss of 1.0%.

The European markets were all lower losing 4.2% on the week.

The Commodity equity group were mixed for a net loss of 1.6%.

The DJ World index continues in a downtrend losing 2.8% on the week.


Bonds continue their uptrend gaining 1.2% on the week.

Crude continues its downtrend losing 4.7% on the week.

Gold remains in a downtrend but gained 2.7% on the week.

The USD may be in, or getting close to, a downtrend losing 0.9% on the week.


Wednesday: Retail sales, the PPI, the NY FED, Business inventories and the FED’s Beige book. Thursday: Industrial production, weekly Jobless claims, the Philly FED, and the NAHB. Friday: Housing starts, Building permits, Consumer sentiment, Options expiration, and a speech by FED chair Yellen at 8:35. Busy mid to end of week. National holiday on Monday, but equity markets will be open. Best to your weekend and week!

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

About tony caldaro

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429 Responses to weekend update

  1. reddragonleo says:

    Sorry about the video being locked on the new post guys. I accidentally set it to private when it should have been set to public so everyone could see it. I fixed it now. Try it again if interested.(http://reddragonleo.com/2014/10/12/will-there-be-a-stock-market-crash-in-2014)

  2. infantguru says:

    My 2nd post of the day.

    Folks are very jumpy over here.

    SPX just broke below a critical level today and everyone wants to kill it off so soon? Lol.
    Fibo target to meet is 183.x. That where my 2 cents believe A will end (with Goog).

    RSI-5 has room to go below; Avges 10 & 3 look terrible as does MACD. RSI-21 very weak; No +D on hourly.
    Cant imagine a turn around yet.

  3. hawkeyes2014 says:

    WATERFALL, anyone 🙂

  4. omahared says:

    My pigs get fat, hogs get slaughtered rule just went into effect.

  5. nailed those clusters tony… nice to “see” you again

  6. gtoptions says:

    Thanks Tony
    SPX sitting on 09 ~ 11 TL Support
    GL all

  7. ariez5 says:

    Bullish D on hourly, penetration into Tony’s 1st target range, blowout TICK, better A/D, Emerging markets / Junk / Europe holding up.
    Just covered.

  8. rc1269 says:

    we couldn’t possibly get another repeat of PII, breaking the 50 day and making a b-line straight down to the 100 day (1740). hmm…

    • rc1269 says:

      sorry those are the weeklies (50 and 100). not daily

    • alexhartley1 says:

      10-13/10 was due to be a bottom in my cycle following rc and I expect a decent rally tomorrow. 17-20/10 should mark some kind of top. Not sure if that will prove to be a Major B high though. Might not be enough time in which case it will top slightly further out. Cheers.

  9. Gary Lewis says:

    SPY Nov puts closed 🙂 I’m really “ripping my face off” with a grin…

  10. buddyglove says:

    Fut prices reacting as if we have just seen a washout low…worth a stab imho.

  11. mjtplayer says:

    SPX 1,880 – 1,885 achieved, do we hold here and bounce or break lower towards 1,860’s?

  12. cmucha68 says:

    Is it Friday again with another flush down the pipe ?

  13. reddragonleo says:

    SPX Update for Tuesday October 14th, 2014: http://screencast.com/t/COGLwtdJCR

  14. elmer510 says:

    What I learned is that a big bounce upwards most often has a really oversold market as condtion, and SPX can still decline 20-30 points before such a situation.

    So far the direction is downwards.

  15. Oh goodie….another BB pinch clamp (aka BB squeeze) on the hrly chart coming…..and it should put a fork on the Major a bottom at around the 1880 (+/-5 pts)……
    We saw the this pinch clamp at near the SPX P3 top and near the recent gold bottom and now we are seeing it again near this Major a bottom…..

  16. mjtplayer says:

    Potential cup and handle low on the JJG agriculture ETF over the past few weeks. Also, huge inverted hammer on Friday’s daily candle. A solid break up and through $35 would set-up $37.50 – $38.75

  17. herringjd1 says:

    Transports at low of the day

  18. cmucha68 says:

    Like Friday. Last hour play.

  19. thecustomer14 says:

    Posting this again for those who might have missed it:

    fionamargaret says:

    October 12, 2014 at 2:58 pm



    Fiona, you are awesome. 🙂

  20. ariez5 says:

    Going by hourly closes, there is no bullish divergence yet in the SPX or Dow. I suspect Major A will not be over until there is one on the hourly at least.

  21. berniebaruch says:

    Face Ripper Into the Close?
    I would expect next 15 handles pointing north.

  22. 21 pt (1891-1912), say micro b, sure feels like Mr M is in a flush, rinse and repeat mode.

  23. wiggin4u says:

    Up 21 now down 55? Is it that easy? Again?

  24. lunker1 says:

    21 up from 1891 to 1912
    34 up is 1925 and could signal Major A is complete
    34 down from 1912 is 1878

  25. blackjak100 says:

    80/20 Major A bottom is not in. I’m seeing the move from 1891 as wave ii of Int C tArgeting 1915ish. I don’t expect to see heavy selling into close but if we do, it’s possible wave ii completed at 1910ish but unlikely.

  26. cmucha68 says:

    Double Top like on Friday in the 10 min. and down. 1986 can come.

  27. soulsurfer says:

    Note the + div on the hourly RSI5 between today’s low and the SPX 1925 minor a low, as well as the + div on the daily RSI5 between today’s low and the SPX 1926 intermediate a low. Let’s see if it amounts to anything or nothing…

    Time to have your shopping list ready!? IF you did your home-work … 😉

  28. sibyn says:

    SPX right now 1908… Now down to 1901 then goal 1926,8

  29. be careful with that Min C of Minor C subdividing into micro abc….imo we are in micor b and micro shall bottom at either 1880ish or 1869 pivot (+/-5 pts)……just think about how many times one need to flush the toilet for the turd to go down…..lol

    • soulsurfer says:

      +1 !!! 🙂

      But also be careful with shorts, inverse etfs, puts etc as the market is indeed in the final wave of major A down: minute c of minor c of intermediate c of Major A… Ideal Fib target is 1885/1888, so 1890 could simple have been close enough… Market breadth is improving and much better than on Friday…

  30. H D says:

    Hope u guys r killing it today! srry that 1894 was a tad bit early. :mrgreen: needs > 1913 HWB to get 1929 pivot IMO

    • Ryan Parker says:

      Seeing same HD. 1913-1914 looks like the line in the sand here. 50% retracement of 1936-1891 and its also ~23 points off the 1891 low. All of the momo stocks finally got hit this morning so it looks like we finally saw some panic. Looks like AAPL and a few other blue chips also managed to hold up. Small caps also leading this morning which is encouraging. Also note what Urban Carmel published this weekend on http://www.fat-pitch.blogspot.ca. Market will generally try to hold its 200dma on the first test. May fall lower than 200dma by 2% or so before reversal but generally the first test holds. Its usually the retest that fails.

      I had two targets pointing to 1886 as a bottom. 1891 is probably close enough. Watching 1914-1919 like a hawk. Then again if we get another 45 point retracement like we saw from 1925-1970 that would take us up to 1936 which was a congestion period late last week and also around the 150dma which was support and is now resistance.

  31. ariez5 says:

    Hi all,
    Not sure about US markets, but I am scaling into EEM/VWO. Double bounce on better technicals. Benefitting from a weaker dollar.
    The Yen hit upper BB and I am out.

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