weekend update


A quiet week as the market remains in drift higher mode. Monday and Tuesday we saw marginal new highs, a pullback Wednesday, then new highs again on Thursday. For the week the SPX/DOW were +0.4%, the NDX/NAZ were +1.4%, and the DJ World index rose 0.5%. Economic reports for the week were biased to the downside. On the uptick: business/wholesale inventories, consumer sentiment and retail sales. On the downtick: export/import prices, long term investor sentiment, the monetary base, the WLEI, plus weekly jobless claims and the budget deficit were higher. Next week we get the FOMC minutes, Capacity utilization, the CPI/PPI and housing.

LONG TERM: bull market

With this bull market now fully into its 68th month, the third longest in modern history, the dynamics appear to have changed. Since the bear market low in March 2009 this market had risen higher with the FED spoon feeding it liquidity. At no time, in the prior 67 months, had this market made higher highs without either a FED liquidity program underway or pledged. In fact, in anticipation of QE 1 ending the market dropped 17%. It only bounced off the lows when QE 2 was rumored and then announced. In anticipation of QE 2 ending the market dropped 22%. Then it made a double bottom only after Operation Twist 1 was announced. Operation Twist 2 was announced just as OT 1 was ending, and the market continued higher. When OT 2 was about to end the FED started QE 3, and again the market continued higher.

Over the entire 67 months there were only two periods when a FED liquidity program was ending, and nothing was announced suggesting another one to follow. Those two periods saw the market drop 17% and 22% respectively. Recently in anticipation of QE 3 ending the market dropped 10%. Surprisingly, however, the market quickly turned around and made new highs without any announcement of another program pending. In fact, the FED has been suggesting, when the time is right, they will be raising short term rates. Something they have not done since 2006. It appears, from this view at least, the dynamics of this bull market have changed.


We continue to count this bull market as Cycle wave [1] of a new Super cycle, multi-generational, bull market. The last Super cycle bull market unfolded in five Cycle waves and lasted from 1932-2007. There will be bull and bear markets, quite a few, along the way. But no bears markets, like the one we just experienced, until the entire Super cycle ends. Each rising Cycle wave unfolds in five Primary waves. Primary waves I and II of this Cycle wave [1] occurred in 2011. We had initially thought Primary III ended in September, just prior to the ending of QE 3 in October. The market did correct 10%. But with the recent uptrend to new highs Primary III may be extending yet again.

MEDIUM TERM: uptrend

After projecting that Primary III topped in mid-September at SPX 2019, we expected a 15% to 20% decline for Primary IV. The market did decline about 10%, it largest correction since 2012, then immediately turned around and started to uptrend. The uptrend, we thought, was just a B wave of a multi-month Primary IV. However, when it nearly made new highs, two weeks ago, we offered an alternate count. The alternate count suggested that Primary III was continuing to extend.


For the past two weeks we have carried both counts, giving the alternate a 55%/45% advantage, since the uptrend looked impulsive and the market was making marginal new highs. For the past two weeks, however, the market has only managed to gain about 1%. Prior to that, off the downtrend low, it was gaining about 3% per week. During the last two weeks we have been patiently awaiting to see how the internal structure of this uptrend unfolds. Despite the new highs, if it rallied in three waves, it would be corrective, and probably wave B of Primary IV. If it rallied in five waves, it would be impulsive, and probably an extension of Primary III.


During the entire uptrend it had been difficult for us to somewhat quantify the advance. This week, however, that changed. We now see two five wave advances from the downtrend low at SPX 1821 to 2046. Should this be all of this uptrend, then Primary IV is likely to resume before this market makes new highs. Should the market continue to make new highs then it is likely an impulsive five wave structure in an ongoing Primary III. Next week may confirm one way or the other. Medium term support is at the 2019 and 1973 pivots, with resistance at the 2070 and 2085 pivots.


This week we updated our SPX hourly chart to display a three wave structure from the SPX 1821 downtrend low, up to the high at 2046: 1898-1878-2046. This structure could either be an a-b-c or a 1-2-3. If an a-b-c, the market should rollover and head lower. If a 1-2-3, we should complete a small pullback for wave 4, and then make higher highs during wave 5.

Thus far, we do not see the typical negative divergences that have occurred during recent uptrend highs. The last five uptrend highs have all been accompanied by negative RSI divergences on the daily chart. There have been uptrends, during this bull market, that peaked without a divergence. So for now we need to rely more on price activity.


Should the market drop below SPX 2000 it would clearly represent the largest pullback since the uptrend began. This would suggest, from the recent high, a Major C wave may be underway. However, a drop below the OEW 1973 pivot range would be more convincing. Should the market continue on to new highs, we see the 2070 and 2085 pivots offering significant resistance in the days/weeks ahead. Until one or other occurs it makes little sense to us speculating on the level of the next downtrend. Short term support is at the 2019 pivot and SPX 2000, with resistance at SPX 2049 and the 2070 pivot. Short term momentum ended the week around neutral. Best to your FOMC/OPEX trading next week!


Asian markets were mostly higher on the week gaining 1.3%.

European markets were quite mixed on the week losing 0.1%.

The Commodity equity group was also mixed losing 0.8%

The DJ World index gained 0.5%.


Bonds remain in a downtrend losing 0.3% on the week.

Crude remains in a downtrend losing 3.3% on the week.

Gold remains in a downtrend too but gained 0.6% on the week.

The USD is still in an uptrend but lost 0.1% on the week.


Monday: the NY FED at 8:30, then Industrial production at 9:15. Tuesday: PPI, the NAHB index, and Congressional testimony from FED advisor Sullivan. Wednesday: Housing starts, Building permits and the FOMC minutes. Thursday: weekly jobless claims, the CPI, Existing home sales, the Philly FED, Leading indicators, and a speech from FED governor Tarullo. Friday: Options expiration.

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

GUIDELINES: https://caldaro.wordpress.com/2014/11/01/guidelines-how-to-use-this-site/

About tony caldaro

This entry was posted in weekend update and tagged , , , . Bookmark the permalink.

215 Responses to weekend update

  1. BTW – I’d STRONGLY, STRONGLY consider you get long oil via USO here. This chart speaks for itself. Just look at the Stochastics…


    • Also, PnF chart setting up for pretty serious sell signal with a trade at $73. Smalls seem to be immune from all the dip buying in the Dow and SPX. Makes sense considering the market as we all know doesn’t trade on fundamentals anymore. It’s all funny Monopoly money. Managed money on its last leg trying to play catch up in the casino with other people’s money. When this all plays out in the end within the next few years I’d think, most will probably just go into ETFs and never pay 2/20% again for professional money managers. Heck, I’m up almost 35% for the year just trading simply my own little system with only TNA pretty much and don’t pay anyone anything. If you don’t have time to watch this stuff like we all do, just buy TNA on the weekly chart at bottoming Stochastics and you’ll beat the market every year.


  2. blackjak100 says:

    If the market fools the most people…wouldn’t it be prudent to begin P4 this week and bring the grinch to Wall St and not Santa?

  3. lunker1 says:

    SPX has a diamond the past few days. Lately diamonds have been continuations to the downside but here we have a diamond in an uptrend so will it continue to the upside?

  4. johnnymagicmoney says:

    Here are my headlines……

    A) VIX up again (flat or up for fifth day in a row)

    B) Rusell lagging again

    C) Industrial production here in the states a negative suprise (plus capacity dropped significantly – thanks strong dollar!!)

    D) Japan is a f-ing mess …………. 1.6% GDP contraction with how much stimulus???

    • afarsid says:

      Lots of stocks in the red, but the indexes are holding… Truly amazed how nothing seems to be able to bring this bull down. Even with a couple darts in the jugular it’s still going. Don’t worry though, the poison is circulating…

    • soulsurfer says:

      add to that the NYMO, ZB and A/D are all down as well….

    • And yet we make new highs. Tuesday will be a gap and go day. Always the case when market hits resistance. Simply hurdle all obstacles in pre market. Will see if it works yet again.

  5. mike7x says:

    Pull out the rug and take it down? Maybe…

  6. johnnymagicmoney says:

    Here is all you need to know about how rigged this is ………

    Reuters top 3 stories…………..

    Allergan agrees to 66 billion Actavis deal

    Halliburton to buy Baker Hughes

    ECB stimulus gains traction

    so let me summarize…………….Baker Hughes (old news), Actavis (old news), and ECB stimulus (old news)

    Then below Japan’s massive recessionary suprise is listed and the industrial production contraction here in the US doesnt even make the headlines

    I wonder how many off shore accounts the editors of new organizations have thanks to Goldman and the likes

  7. For all the nannies on the board Pretzel is not a paid site.

  8. Not trying to start a fight, but Pretzel – who’s usually more right than not – says no b wave

      • blackjak100 says:

        He simply thinks we are in Major 5 in OEW terms and it will not subdivide. I’ve been going with that count for awhile now, but doesn’t mean it’s right.

    • soulsurfer says:

      Thanks for sharing Pretzel’s count and Avi’s recently as well. Much appreciated. I know you don’t mean it this way, and I am just speaking in general terms here, but it’s not about who’s count is right or wrong, the market is all about probabilities so some counts are more right or more wrong. No absolutes. What matters most is being on the right side of the trade regardless if you label this as b, or 5, or v, etc!


      • I just think it’s fascinating how three completely independent experts can look at the same thing and come up with three different options. Reminds me of my engineer on my home a few years back when my architect was fighting with his engineer and the city’s. Two well trained experts looking at the same math and coming to two different results. Kinda like global warming. But don’t get me started on that bs.

        A month ago everyone was on the same page. Now, no one is. I just love it.

  9. Gap up move in the $VIX this morning, currently up more than 8%. Not good for the bulls.

  10. agzbt says:

    Avi weekend report becomes public on MarketWatch on Monday or so. You can post a link to that then.

  11. FiveStars says:

    Gold Miners are in the Break Out Mode, expecting a mega short squeeze in this sector.

    • tony caldaro says:

      Repeat last years pattern:
      underperform until near yearend …. then rally into the spring?

      • FiveStars says:

        Not sure if this was the bottom for Gold and miners BUT right now Gold and miners have 95% shorts and 5% Bull, so now that USD is going to correct itself before makes next move higher close to $90, Gold and miners will outperform.

  12. stephenk1980 says:


    Not sure I agree the dynamics of the market have changed; we have simply swapped FED fixed and then open-ended liquidity for the Japanese pension fund adding fixed circa $300 million to foreign stocks. Whilst the transition of money occurs out of Jap Bonds and into stocks, the plug is not going to be pulled.

    • stephenk1980 says:

      Obviously I meant billion. 😉

    • tony caldaro says:

      BOJ has little to do with the dynamics I was noting.

    • johnnymagicmoney says:

      honestly its possible Japan says “more stimulus tomm” and the terms are buying another 20 bucks worth of Jap equities and the market could go higher due to their addiction with hearing the word QE but if you think that their latest plans does anything meaningful whatsoever is kidding yourself. It doesnt even provide any more liquidity that the market doesnt already have. We simply are at the end of believing that QE works and when people finally start thinking otherwise is when we have our correction but dont kid yourself into thinking that liquidity is the reason markets go higher. It’s belief and that is waning. Here is why I know we are due for a down move…………….Japan issues QE and we bust through all time highs and all kinds of resistance on the Japs doing theior 64th QE. Today UNEXPECTEDLY Japan has a 1.6% contraction in GDP when it was expected to be 2.2% HAAHHAHAAHAH THATS A JOKE. And the markets are having a hard time being in the red today. Everyone is complacent. Everyone thinks this can never go down. Everyone thinks QE is the fix for all ills. And whats even more hysterical is it doesnt even have to be our QE for peopel to believe this crap. It can be Europes! It can be Japan’s!! How is it that when their economy is mired in deflation and recession we can stand over here push the market higher and say “their economy is not menaingful to ours” but when we end QE and they have a half assed not well supported stimulus we say “see see QE in Europe is now filling our plug” Cant have it both ways. Is Europe meaningful or not menaingful. The market is good is good bad is good anything is good. That smells like a top………………delusion, and lack of intelligence. All of you perma bulls are no different than the JAPS buying real estate in the late ninties at high prices thinking it will never go dowm.

      • Gary Lewis says:

        And while everything that you say is probably true, the bottom line is – and always will be – The Market can stay IRRATIONAL much longer than I can remain solvent! And that, unfortunately, is the bottom line.

  13. Gary Lewis says:

    Sure does appear that the SPX is just trending sideways to meet the 20 day moving average. Then another push up, or so it seems.

    • In my opinion, markets will not go down until interest rates go up. No P4 until then. The worse the world economy gets means the longer interest rates stay low. Bulls are going to smoke the bears again and have rabbit for dinner. P3 Extends and extends. We may drop but no P4 this year.

      Best of luck

    • alexhartley1 says:

      Agreed. I think it’s a push up this week from tomorrow till the end of the week and then we have Major IV of PIII before Major V (and new highs) into late Jan 2015.

  14. I was trying to show how very different everyone is in counts. It was a single post. Geeze everyone. Point is someone is gonna be very wrong when this plays out.

  15. buddyglove says:

    Good morning all. Some interest in gold on this blog, so here is my take :-
    Still don’t see any bottom in sight imho, and have shorted Gold today @ spot 1189…targeting 1068/72. Good health/fortune to all.

  16. blackjak100 says:

    As Dr Robert McHugh said….”The S&P 500 has closed the last five days within a range of 1.57 points, at 2038.26, 2039.68, 2038.25, 2039.33, and 2039.82. With average daily volume of 1.8 millions shares traded each day, this is almost a mathematical impossibility. Not sure what to make of it.”

    It is pretty amazing when you think about it! GL and Cheers!

  17. pooch77 says:

    Green Shoots by 9am

  18. jparkins10 says:

    Not cool to put up the full content of a pay site up on a public site, IMO

  19. torehund says:


    The corrective phase has been upward tilted as the macd resided very elevated, I think most of wat we have been counting as 3rd of 3rd could be corective,and major parts of it doesnt look very impulsive to me.

Comments are closed.