weekend update


What a week! After the SPX dropped 3.1% last week ending at 1906, it started off quiet enough with a push to 1912 by around noon Monday. Then the bottom fell out, as the market dropped, gyrated on Tuesday, then dropped to 1821 by early afternoon Wednesday. After that it staged one heck of a come back rally, hitting SPX 1898 on Friday then ending the week at 1887. For the week the SPX/DOW were -1.0%, the NDX/NAZ were -0.9%, and the DJ World index dropped 0.8%. Economic reports for the week were biased 8:6 to the positive. On the uptick: business inventories, industrial production, housing starts, building permits, consumer sentiment, the monetary base, plus the budget surplus and weekly jobless claims improved. On the downtick: retail sales, the PPI, the NY/Philly FED, the NAHB and the WLEI. Next week is highlighted with the CPI, Existing/New home sales, and Leading indicators.

LONG TERM: bull market

The five Primary wave Cycle wave [1] bull market continues. However, the market is currently in its largest correction since 2011. Primary waves I and II completed in 2011. Primary wave III just recently completed in September 2014, and Primary wave IV is currently underway. Historically, the two most significant corrections during a five wave bull market, Primary waves II and IV in our bull market, are generally similar in the percentage of market decline. Using the DOW are a reference:

1982-1983: wave 2 -8.8%, wave 4 -8.6%. 1984-1987: wave 2 -7.9%, wave 4 -10.8%. 1987-1990: wave 2 -9.4%, wave 4 -11.3%. 1990-1998: wave 2 -10.1%, wave 4 -16.8. 1998-2000: wave 2 -7.5%, wave 4 -12.2%. 2002-2007: wave 2 -9.0%, wave 4 -10.7%. Even the lengthy 13 year bull market, 1987-2000 in OEW terms, met these parameters: wave 2 -22.4%, wave 4 -21.6%.


Since Primary wave II took fives months while the market declined 22% in the SPX. We are expecting Primary IV to take about three months with a market decline between 15% and 20%. It could be higher, but not likely lower. The rising channel in the weekly chart above looks like it will provide good support.

MEDIUM TERM: Major wave A may have bottomed

Primary wave III topped in mid-September at SPX 2019 after completing the five Intermediate waves of Major wave 5. All Primary waves divide into five Major waves. As the market was correcting we set five parameters to help confirm that the top was in place. By a week ago Friday all five were met, including a downtrend confirmation which had occurred a week earlier.

The market then declined from SPX 2019 in three Intermediate waves: A 1926, B 1978, and C 1821. At the SPX 1821 low the market had lost 9.8% of its value. This was the largest correction since mid-2012. Refer to the weekly chart. On Thursday we posted a tentative green Major wave A label at the SPX 1821 low, when the characteristics of the market changed. Throughout most of the Major A decline we had observed seven wave declines, separated by quick one wave rallies. On Wednesday we observed a five wave advance from SPX 1821 to 1869. We knew when SPX 1869 was exceeded the characteristics had changed. This type of change often suggests a change is trend is underway.


As noted above we are expecting Primary IV to correct for about three months. We are also expecting it to unfold in three waves: Majors A, B and C. Since Primary II took the form of an elongated flat, we are expecting a simple zigzag for Primary IV. If Major wave A ended on Wednesday at SPX 1821, we should now be in a counter rally Major wave B. Typically these counter rallies during a prolonged decline retrace anywhere from 50% to 61.8% of wave A. This suggests to rally to SPX 1920, or SPX 1943. They can also retrace back to the high of the B wave of the first ABC decline. In this case SPX 1978. Since the market has already rallied back to SPX 1898 in just two days we think the 1956 and 1973 pivots should be the upside targets for Major wave B.

Medium term support is currently at the 1869 and 1841 pivots, with resistance at the 1901 and 1929 pivots.


The downtrend decline from SPX 2019 unfolded in three Intermediate waves, with each of those three waves dividing into three Minor waves. The first Minor wave decline of Int. A was complex and the second simple. The first Minor wave decline of Int. C was simple and the second complex. Some alternation as the downtrend was unfolding. At Wednesday’s SPX 1821 low Int. wave C equaled a near perfect 1.618 relationship to Int. A.


If we are indeed in Major wave B we should observe a three Intermediate wave advance, with three Minor waves within each Int. wave. The same as Major wave A only in reverse. From the SPX 1821 low we have had quite a complex rally: 1869-1835-1868-1852-1876-1857-1898-1878-1892. Notice nearly all these waves overlap each other as expected. We certainly would not consider this an impulsive advance. Thus far it appears the entire rally from SPX 1821-1898 can be counted as Minor wave a of Int. wave A. The pullback to SPX 1878 is probably part of Minor wave b. Which suggests some downside early Monday, providing the market does not exceed SPX 1898 first. After Minor b completes we should get a Minor c rally to the 1929 pivot ending Int. wave A. Keep in mind this market remains quite volatile with triple digit DOW swings nearly every day. Short term support is at the 1869 and 1841 pivots, with resistance at the 1901 and 1929 pivots. Short term momentum ended the week below neutral after getting extremely overbought.


Asian markets were mostly lower on the week for a net 1.0% loss.

European markets were sharply lower all week but rebounded Friday for a net 1.9% loss.

The Commodity equity group were all higher for net gain of 0.6%.

The DJ World index lost 0.8% on the week.


Bonds had a wild week, remain in an uptrend, and gained 0.9% on the week.

Crude continues to downtrend losing 3.0% on the week.

Gold is trying to uptrend and gained 1.2% on the week.

The USD looks like it is in a downtrend, unconfirmed, and lost 0.9% on the week.


Tuesday: Existing home sales. Wednesday: the CPI. Thursday: weekly Jobless claims, FHFA housing prices, and Leading indicators. Friday: New home sales. Best to your weekend and week!

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

About tony caldaro

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182 Responses to weekend update

  1. johnnymagicmoney says:

    losing trade today oh well …………Tony said weakness EARLY Monday followed by a C rally into 1929 ………….guess early Monday didnt register in my brain for some reason………..you were on AGAIN Tony……………..if Apple reports good maybe its another day like today into that 1929 PIVOT range (which at that point is a 50% retrace from 1824) and its another case of sell the news………….be curious what signs of divergence occur tomm if any if we get a big up day again

    • CB says:

      hearing that Fannie will accept mortgages with 3% down payments – could be pretty significant for the markets…

  2. CB says:

    AAPL earnings & some TA http://www.seeitmarket.com/apple-earnings-key-technical-patterns-16002/
    I think it was Lee’ mother-in law indicator, wasn’t it..🙂 have a great evening all!

    Thanks Tony!

  3. elmer510 says:


    DAX had it’s 1,9% pull back from yesterday’s high, which could be a typical minor B of IM A.
    Yesterday SPX had a smaller, short time 1 % pull back. Is that enough for a minor B label?

    Or does minor A march on above 1900?

  4. mjtplayer says:

    What was resistance is now support

    Spot VIX down to the 19 area, support lies at previous resistance around 18. The backwardation in the VIX futures curve has been wiped-out, spot VIX now trading in-line with front month futures (Oct 22nd) and Nov futures; curve is now flat.

  5. Gary Lewis says:

    Getting resistance at the 1900 “neck line”. Bought more Nov and Dec puts.

  6. fishonhook says:

    really mixed messages technically.
    1) a bit of negative divergence creeping in
    2) however there is a bit of an inv head and shoulders – granted the head is rather tall. But if we break over 1900+/- it could come into play.

    So for now I am sitting on my hands. Closed out my shorts this am for basically no gain.
    Sometimes you gotta wait for on the sidelines.

  7. gtoptions says:

    Thanks Tony
    Great WE Update.
    SPY ~ WPP @ 186.92 ~ WR1 @ 190.74 ~ 13 DEMA @190.80

  8. johnnymagicmoney says:

    today reminds me of a typical Primary Wave 3 bleed up day – which is worrying me …………..lots of idiots drinking kool aid………no risk out there – QE saves the day!!

  9. johnnymagicmoney says:

    I am going short here at 1896 on the SP with SPXU ………….keeping a short leash on it …………lets see what happens

  10. H D says:

    SPX managed 10 handles from Fridays close, only clue, still .382, they have me guessing. Should I go over all the percentages of scenarios:mrgreen:

  11. nickokc says:

    looks like S&P following crude movement to a certain extent due the fact that energy represent 15% of the index..

  12. sibyn says:

    Triple top Max 1898 then>1859 Lis… Down now.

  13. mjtplayer says:

    Hey Tony,

    Just curious, you wrote in the weekend update that the bounce thus far to SPX 1,898 looks like minor A of int a. Why do you favor minor A over int a?

  14. 1970 B Wave? wow. ES flatlined at .382, maybe not even 5 down for A complete yet.

  15. reddragonleo says:

    ES Futures/SPX Cash Quick 5 minute video: http://screencast.com/t/ncIV0SiwZfa

  16. rc1269 says:

    rally looking corrective out of the gates here this am

  17. rabbittrader1 says:

    No gap up opening today. maybe a .day off My BAD.

    • reddragonleo says:

      Looks like a wave 4 down inside a C wave up. Should turn around by mid-day and rally back up to start the 5th wave. Then a gap up on Tuesday morning to hit 1905-1910 SPX area to end the ABC up. The rest of the day on Tuesday we should drop I think.

  18. If my astro analysis is correct the rally will keep going higher until mid this week.

  19. Hi Tony

    When this Primary IV ends – are there any stocks/sectors which you like a lot for Primary V up ?

    Any sectors or stocks you think could then be starting wave 3 of 3?

    Thank you Tony

  20. blackjak100 says:

    Between DAX and IBM pre-market results, futures dove pretty fast into the red. I now believe major A ended at 1821 and would be looking to start going long at the upper range of 1841 pivot. NYMO needs 1-2 days to cool off. GL and Cheers!


  21. mrgreen2010 says:

    I have some new pivots for an ABC play on SPX cash and based on Fridays trade and close. This scenario just jumped out to me after crunching some pivots. It looks obvious and seems to match expected Monday sentiment.
    USING PIVOTS A=1861.55; B= 1898.16; C=1877.55. Ideal entry would have been X =1886.70 (coinciding with Fridays close which tells me this trade has a higher probability of sucess). Since futures look to be higher and look to open near p the midpoint of recognition where the rally either motors through or fails at P=1895.86. The Final Target D=1914.16.
    1) IF P = 1895.86 Target is not exceeded by 0.5 and tape looks like stalling/reversal action around 1895.86 then I will short by either buying weekly OCT 24 $OEX PUTS or SELL SPY with a get out STOP @ 1897 and a TARGET 1878 for first 1/2 position and 1861 for 2nd 1/2 position.
    2) IF 1897 is HIT/exceeded I will go long using same OEX CALLS or BUY SPY with STOP @ 1884 (stop is just below trendline connecting OCT 16 1835.02; 1858.85; and OCT 17 1877.55 lows on 15-min chart and can be moved up if this happens later in the day) and a D Target of 1914 to CLOSE.
    3) I WILL SHORT/SELL 1914.16 +-0.25 w/ STOP = 1915.75 and TARGETS = 1877 1st 1/2 and 1861 2nd 1/2.
    Yes, some stops are tight because when these numbers hit they tend to hit and reverse on a dime and having Friday close at X only increases the probality they will do so. Trade #2 require some speed to execute as you have to wait for the market to trade those levels and reverse/rally and enter and the STOP is loose because it could potentialy chase a fast market, not an ideal situation and a smaller position size is warrented. Trade #3 if 1914.16 is higher probabilty short trade if it gets there. NO SUCH THING AS A SURE THING SO POSITION SIZE/STOP MANAGEMENT IS KEY.

    • cmucha68 says:

      Or simply: go short ES at 1892 and exit for long 1866

    • mrgreen2010 says:

      TRADE UPDATE: Looks like cash SPX will not gap up and the X= 1886.70 is key as a long entry point. If 1886.70 is reached it would be a signal to go long with STOP =1881 that is just below trendline connecting OCT 16 1835.02; 1858.85; and OCT 17 1877.55 lows on 15-min chart and can be moved up if this happens later in the day. TARGETS are P=1895.86 (you could close and go scalp short at P or hold and try for D, Original TRADE #1 or #2) and a D Target of 1914 to CLOSE

    • mrgreen2010 says:

      IF P exceed by 1 pt could go straight up to 1904 first then 1914

  22. JeffMilano says:

    Rabbit – good stuff. Now ebola. Bt usually what happens in the market and what happens in the real world is not in sync. Mkts precedes what will come. The 666 that hsppened in 2009 perhaps was an indication what was to happen. That bottom was cyclacal in nature. What is happen with ebola is also cyclical but in two different prospectives. Usually n.2 brongs on pestelance and wars. What I am saying that there will be a correction like you are talking about but may not get down to 666. But if it gets there it does not invalidate the n.2 scenario or do you have a different count.
    In terms of a gap up today I think you may be corrent expecting “c” wave and usually they come fast and furious. ButI not not see how K cycle have to do with monday “c” wave. You have been on a spot on call. Tx

  23. IMO The daily SPX chart appears as though we could have another wave down to new lows. However, we will probably hit SPX 1910 first.

  24. rabbittrader1 says:

    Meant to say: We should be at the bottom of etc. Not beat. sorry.

  25. rabbittrader1 says:

    Fishonhook- We should beat the bottom of a Kondratieff wave NOW. that is why therewill be a failed FIFTH and a drop to early 2017 (.TO CATCH UP ) After what VOLCKER then GREENSPAN Then Bernake did to Mess things up. I think it is very useful in TRADING Just like my call for a GAP up MOnday should have .been useful in trading

  26. rabbittrader1 says:

    For the information of those who do NOT believe the SPX could (WILL) drop to 666 by 2017. In 1926 Nicholas Kondratieff ( a Russian) published a paper for , the Moscow Institute of Conjuncture . that showed that the Western World experinced a Cycle of expansion and contraction that lasted 54 years.. He showed that we had already gone through THREE such cycles. (Another part of that cycle later occurred in 1932,( called The Great Depression) We were due for another downward part of the Kondratieff wave to begin about 1982 to 1986 (say 1984) . However a man named Paul Volcker ,Chair oft the Federal Reserve aborted that cycle by raising interest rates from 6% to 20% in late 1979 to early 1980 (Obstensively to choke off inflation and punish the Hunt Brothers for buying Silver. He also instructed the CFTC (Commodity Futures Trading Commission) to DIS-ALLOW purchases of Silver and Gold on the Commodity Exchanges, allowing ONLY SALES. of both commodities. In other words the United States aborted FREE MARKET PRINCIPALS. But the Kondratieff Cycle has only been delayed through continued interference in market forces by THE FEDERAL RESERVE. Cycles can shrink or be stretched, but they always come back to SYNCHRONICITY.. THATis why we will see a drop to 666 in early 2017, my friends.

    • fishonhook says:

      Then the Kondrotiaff cycle will be off by 33 years!
      Not much help in trading for sure.
      anyway looks like your call of a gap up for tomorrow will come to pass

      • blackjak100 says:

        Not so fast on gap up tomorrow. Let’s wait for Europe to open which can and has driven futures right to the ground.

      • playitkool says:

        I would not be surprised to see spx 1912 before noon where c = a of this first move higher, then a .38 retrace.

      • chrisk44342 says:

        The bullish VIX signal occurred on the 14th where the spx closed at 1877. Those moves are usually worth 40 pts at least so i think 1920s should be in the cards at a minimum

      • playitkool says:

        chrisk , I’m with you on the 1920 call that’s a 50 % retrace and most of the b waves thus far are close to 50 % but I have my eye on 1944 62 % area at a trend line where the b’s line up. What I see though is the strongest pomo week in the past few months followed by a week with a fed meeting and press conference so I’m guessing B wave top on thur. oct. 30 and not much room to go up in price meaning choppy action .I would also like to see the vix in the 17’s or less at B wave top. Here’s a working chart with some of my notes http://tos.mx/0AU98n

      • chrisk44342 says:

        good chart playitkool. Makes sense to me.

      • chrisk44342 says:

        playitkool, the fooler trade is that A was minor 1 of P5. So I always have an alternate or 2 or 3 or 4 (lol). 1821 to 1898 looks like motive so it could be counted as either. Looking forward to see how C (or 3) plays out.

    • chrisk44342 says:

      or maybe they weren’t cycles after all?

    • tommyboys says:


    • chrisk44342 says:

      I’m really trying not to make it personal on here. The stuff that really bugs me are things like this. Unfortunately, even though Tony has done a great job of ‘demysifying’ EW, it still brings out the end of the world/doomsday crowd, especially when the market goes down by any meaningful measure. i think the term Garbage in/garbage out must have been invented for people speculating on things like this happening. I used to let external material I read affect me as well, and I can remember this really pissing off the guy who was mentoring me at the time. It takes a while, but all I can say is that it really is a big time hindrance to effective speculating in the market. It doesn’t make you stupid, but it might mean you’re being foolish when it comes to making money in the market.

  27. mrgreen2010 says:

    Hello everybody. This weeks option analysis leaves more confusion than any directional bias. This is to be expected after OPEX week as new positions can be rolled over or created over the next few days so all signal should be taken with a grain of doubt. The upstart/downside is that this can lead to volatility or chop early this week.
    Last Fridays final Put/Call ($CPC) ratio rose to 1.20 from 1.01 today. This is still moderately bullish but this is contradicted by the $CPCI (smart money) blowing up to a strong sell signal at 1.70 from 0.96 while the $CPCE (dumb money) moved marginally higher from 0.64 to 0.76. The SPY P/C settled at 1.67 with heavy call buying.
    Bottom Line…Overall except for the $CPCI being a real strong bearish sell, everything else is neutral. Again because this is OPEX close I would use these numbers as info only until midweek and as the futures are up greater than 10 (so far) for Monday open at this time that could change and with the USD/JPY above key resistance at 107(so far) is likely adding support to an SPX bounce for Monday morning.
    It is possible that the SPX get to 1920 by midweek as this could be a b wave but if it is a 4th of this a then 1904 is a good spot to look for a turn to go short…either way expect a wild and wooley trading this week both up and down. Personally I will be looking to add longer term OTM index puts on any strength this week into the 1890-1904 area and a 2nd tier up to 1929. VIX calls are also on the menu in the 19-20 area and outside the 17-18 area should the VIX fall to these levels. We have a weekly reversal on the VIX so some downside follow through is expected. Currently short via DEC puts on CMG for Mondays earnings and NOV PCLN puts for NOV 6 earnings announcement expecting an increase in implied volatility to offset time decay and a slight upward bias. PCLN is further along in its topping process and looks ready to start a distributive waterfall decline soon. Also NOV MU puts rebought for same reason as PCLN and as put IV really dropped Friday afternoon on this and many other equities. V, GILD, FB, AMZN put options starting to look cheap again for purchase which is why I expect this rally to fail fairly quickly this week. Also the QQQ’s look like a good AAPL earnings play instead of AAPL options which has IV still too high. But based on IV so far, complacency is already starting to run amuck again on this pissant rally even with all the crash talk so far. Last week was a real good week both up and down and will be using the houses money as the 1987 analog needs 5-6 trading days of upward chop to be still relevant. GL to all.

  28. cmucha68 says:

    1987 anniversary. Coming back soon to your town.


  29. If Major B Wave moves up to 1980, and Major C ends up around 1650, Major C by itself would be collapsing 16.7% (1/6), a large portion of the entire Primary 4 decline.

  30. Gary Lewis says:

    Here’s my 2 cents worth for the week http://assetdesigncenter.blogspot.com/2014/10/large-caps-fall-small-caps-gain-in-wild.html Thanks everyone for your insightful ideas.

  31. opader says:

    Thx Tony, really appreciate your work …… My thoughts: http://balancetrading.blogspot.com

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