Wednesday update

SHORT TERM: gap down opening again, DOW -268

Overnight the Asian markets lost 0.7%. Europe opened higher but lost 0.4%. US index futures were lower overnight, and the market gapped down to SPX 2054 at the open. The SPX had closed at 2060 yesterday. The market continued to decline until about 10:30 when the SPX hit 2042. Then it spent the next three hours in a choppy pattern: 2049-2043-2048-2041-2047. At 1:30 the market started to break lower again. At 2pm the Budget deficit was reported in line with expectations: -$56.8bn v -$135.2bn. Around 3pm the SPX hit 2024, rallied to 2035 by 3:30, dropped to 2024 again, and then closed at 2026.

For the day the SPX/DOW lost 1.55%, and the NDX/NAZ lost 1.70%. Bonds gained 18 ticks, Crude lost $2.50, Gold slipped $2, and the USD was lower. Medium term support remains at the 2019 and 1973 pivots, with resistance at the 2070 and 2085 pivots. Tomorrow: weekly Jobless claims, Retail sales and Export/Import prices all at 8:30. Then Business inventories at 10am.

The market gapped down today for the third day in a row. Nothing like this has occurred since the market gapped down four days in a row in May 2012. The market opened at SPX 2054, dropped to 2042 in the first hour, bounced around for three hours between 2041 and 2049, then dropped to 2024 in the last hour of trading. Thus far, from the SPX 2079 high, the market has declined in five waves to 2034, rallied straight up to 2061, and now has declined straight down to 2024. We labeled the first decline with an ‘a’, the rally with a ‘b’, and we are now in wave ‘c’ of what appears to be the first decline of a new downtrend. Thus far the market has lost about 2.5% in three trading days. At today’s low the market entered the 2019 pivot range and displayed a short term positive divergence. We could count today’s decline from SPX 2061 to 2024 as a wave 1 of the next five waves down. Or, since it was straight down, the completion of wave ‘c’. This will depend on the market tomorrow. Should SPX 2024 hold then ‘c’ ended, if not, a third wave down from SPX 2061 is underway. Short term support is now at the 2019 and 1973 pivots, with resistance at SPX 2061 and the 2070 pivot. Short term momentum displayed a positive divergence at the low then bounced to neutral. Best to your trading!

MEDIUM TERM: uptrend may have topped

LONG TERM: bull market


About tony caldaro

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240 Responses to Wednesday update

  1. rc1269 says:

    Tony re HY packaged by banksters: i would say HYG, JNK and BKLN already qualify.
    frankly i’m amazed JNK and HYG survived 2008 and still have a following. HY credit is not something you want to package like and index tracking stock fund. liquidity in that market vaporizes, and when somebody (retail investor) sells these ETFs the ETF managers just send out list after list indiscriminately hitting bids. they have no choice. same goes for the buying side too. but it’s not like the XLF manager at State Street hitting bids on mostly big cap financial stocks – those stocks have massive liquidity and deep markets, relatively speaking. HY isn’t exchange traded and if there are no buyers on a name that day then you can see some crazy gap downs. in fact, there are some of us who make a killing picking off bond fund bid lists, since we know they are forced sellers and have no clue, and on some issues there literally might be zero buyers that day. it’s a joke. most discretionary bond managers can’t stand credit ETFs because they totally ignore market technicals and valuations and when they trade it’s like a bull in a china shop, both when they buy and sell. ultimately all this poor timing and execution gets passed off to retail investors in the form of substandard returns and heightened liquidity risk.

  2. Tony:
    Is a b-a-d pattern a variation of the a-b-c corrective wave?

  3. gasman88 says:

    Question to Elliott Wave experts(since I’m not one) Most energy names show the count below, I thing we see 5 clear waves down. Are oils bottoming out here?

  4. scottycj1 says:

    Would guess the a and b wave of B is over……c likely complete tomorrow at ___?
    Then down

  5. lbhkinqa says:

    Hi Tony, Is there a reason minor b might be complete already, rather than just minute a of minor b? I’d have thought minute c up to complete minor b tomorrow?

  6. lunker1 says:

    Looks like we’ve got another diamond….an island diamond. Today kind a looks like October 15 and 16. That low at 2036 was at the 61.8. From 2024 is that minute 1 and minute 2?

  7. buddyglove says:

    Still looking very good for Bulls imo…Right shoulders of I.h.s. forming as I type, on S&P and Dow. Glta.

  8. scottycj1 says:

    closing below 2033 would be quite negative

  9. ariez5 says:

    NYA is still lagging, and NYAD is lagging NYA, and it is not due to bonds, which are flat/up. Not good for the bulls.

  10. llerias7 says:

    Tony, according to your SPX chart we are probably in a Major 4 of P3? is that it?Thanks.

  11. Looks like Natural Gas is in a wave 4
    NGF5 (futures – Jan 2015):

  12. fotis2 says:

    Looks like a bullflag on 15min spx

  13. Tony, I admit that I am not a wave man (hence learning from your blog), so I may have this totally wrong, but could this not be wave 5 of Wave A of a downtrend that started form 2079 Dec 5th?

    2079 -> 2033
    2033 -> 2061
    2061 -> 2024
    2024 -> 2056
    2056 -> x?

  14. I think every bear and their mother is looking for 2058 -2064 to go short, that’s why it may never happen.

    • drwarmington says:

      Coulc that be it Newbe? The hour4 chart just broke below two hourly lows. That would be very bearish if it broke down here. Don’t get too excited yet.

  15. Is today going to be one of those 180 degree turns or are we going to have to wait till next week>

    • CB says:

      both, most likely ; ) plus some more tomorrow.. spx needs to correct off of this 5 min neg D first, I think

      • magicianme says:

        The M5 chart is showing a little H&S with the RS just forming. But the reversal may not travel far. Days like this usually finish close to the highs of the day. If you’re still (day)trading look for opportunities to go long.

        A lot of people have been caught out be this rebound and the speed and ferocity. As someone who just day trades I didn’t form an opinion last night. I waited and watched the opening action, saw the momentum at the open, immediately hit long and stayed till the little hestitation just above 2046 when I closed and packed up for the day. I’ve no idea how you guys handle the stress of the roller coaster!

      • CB says:

        nice job on that long, magician
        For practical purposes, (if you are a very ST trader) maybe we can focus on an IHS forming here(?) …RS going to 2030ish-2040ish which gives us a nice upside target ahead of the weekend…after that?…look out below, like John said : ) and we’ll figure out the details later..

      • magicianme says:

        Thanks, CB. I’m always cautious about all the talk on this blog about IHS formations at the top and HS formations at the bottom. Classical tech wisdom is that these are reversal patterns i.e. you look for a HS at the top and IHS at the bottom.

        I’m done trading for the day but the 2047 point price is at now is worth a long with a 4 point stop and an 8 point target, IMO.

      • CB says:

        Thanks M. Good points.
        GL all!

      • CB says:

        +d here intraday ..5 min.. who doesn’t like “managed markets,huh?” – they do everything by the book 🙂

  16. tommyboys says:

    Blankfein on oil…”think of it as a tax cut”. Also compares economy of the 80s to today…
    FWIW I agree with him.

    • My accountant has given me a number for my 1040 ES, due Jan 15. If you are saying that number is too high, that is indeed a tax cut.

      No disrespect to tommy or Mr. Blankfein, but the drop in $WTIC is fuel cost cut.

    • CB says:

      let’s face it…there are only positives here…another way they are spinning the oil story now is that the long bond rates won’t have to go up (which the market feared recently, right? 😉 b/c the Fed has ended QE)..because low oil price means low inflation (so there is no need for rates to go up)…Love the spin – it creates volatility 🙂

      • tommyboys says:

        Just his opinion. Don’t think he’s spinning anything – nothing mystical or magical.

      • CB says:

        oh no, wasn’t being critical at all, TB..Blankfein is a smart guy..and he’s telling the truth, of course; he’s focusing on the consumer in that particular statement. Just one angle to consider. Interesting post, Tommy. Thanks.

    • simpleiam says:

      Cleaning house this morning, had one of the old cop shows from 1985 on TV and just happened to look up in time to see a Shell gas station sign displaying regular gas at 1.20gal in LA. Just thought it was interesting. Makes you wonder…

  17. John Arella says:

    Looks like oil has temporarily bottomed here according to the count, rally to 69 for first target or 76 for second target, then drop to 35-40 🙂 so it may bring the market back to previous high of 2079 if that occurs but this rally will be short lived because oil has one more leg down to go.

    • fishonhook says:

      Ok John now you are talking from both sides of your mouth. Two posts down you say relax the bounce will end at 2060 and now that the market 2079. Throw enough stuff up here and you will never be wrong like the squiggle counters.

      • John Arella says:

        30% probability only because oil may or may not affect the outcome, 80% probability of hitting 2061-2064, is that better, I am just speculating that oil price may have an effect on the market movement.

    • John Arella says:

      30% probability that it will go back to 2079 🙂

      • CB says:

        c’mon, fish, be grateful that John provides not only LT counts, but also ST counts. We just want you to be happy, OK? 🙂

  18. CB says:

    $spx fibs @ 2051.86 & 2058.37
    GL everyone.

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