Wednesday update

SHORT TERM: gap up opening, DOW +288

Overnight the Asian markets lost 0.1%. European markets opened lower but gained 0.2%. US index futures were higher overnight, and at 8:30 the CPI was reported lower: -0.3% v 0.0%. The market gapped up at the open to SPX 1978 and rallied to 1988 by 10am. Then after a pullback to SPX 1979 by 10:30, the market rallied to SPX 2000 by noon. Another pullback followed to SPX 1990 by 12:30. Then the market drifted higher ahead of the FOMC statement at 2pm: After that the market rallied to SPX 2012, then started to pullback again. While FED chair Yellen was giving her press conference the market pulled back to SPX 1992 by 3pm. Then it began to rally again. At 3:30 the SPX hit its high for the day at 2017, then dipped to close at 2013.

For the day the SPX/DOW were +1.85%, and the NDX/NAZ were +2.00%. Bonds lost 21 ticks, Crude added 10 cents, Gold dropped $7, and the USD was higher. Medium term support remains at the 1963 and 1956 pivots, with resistance at the 2019 and 2070 pivots. Tomorrow: weekly Jobless claims at 8:30, then the Philly FED and Leading indicators at 10am.

The market started off with another gap opening for the eight day in a row. The market gapped up to SPX 1978, rallied to 1988, then pulled back to 1979. It has closed at SPX 1973 yesterday. After that, by around 11:30, the market started making a higher high. This is something the market had not done during the entire downtrend: three waves up from a low. Every rally from a low had been straight up with no subdivisions. The rally then carried the market to SPX 2000. This was followed by a pullback to SPX 1990, holding above the 1988 high, then another rally, post-FOMC took the market to 2012. We now have not only three waves up from SPX 1973, but five waves. An interesting change of characteristics during this downtrend.

As we noted yesterday after the close. All the technicals we follow had met the minimum levels for a potential downtrend bottom. So if one was expecting just a 5% correction in a subdividing Intermediate wave v, that low may have been it. With this in mind, and after today’s impulsive looking activity, we are updating the hourly chart to display both counts: Major 3/Int. v or Minor 1/Int. v at the SPX 2079 high, and Int. A/Major 4 or Minor 2/Int. v at the recent SPX 1973 low. It may take a few days of market activity to confirm which is the most likely count. Right now, after the five waves up we will have to favor the subdivision of Int. v. Short term support is at the 1973 and 1956 pivots, with resistance at the 2019 pivot and SPX 2056. Short term momentum got overbought today, for the first time during this downtrend. Best to your trading!

MEDIUM TERM: downtrend, but interesting juncture

LONG TERM: bull market


About tony caldaro

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266 Responses to Wednesday update

  1. fibs-R-us says:

    Good morning Tony. I was looking at the move up from the 1976 bottom Tuesday, until now. I’m a novice at counting, so bear with me….If we correct to the 4th Wave level of the 2026.75 to 2041.25 basis the march futures contract, then up in a 3rd wave, does that sound about right?

    • fibs-R-us says:

      I’d post a chart with my question on it to make it simple, but i’m not sure how to link a chart to my post.

    • tony caldaro says:

      It is quite difficult to count waves on futures because of the volatility.
      However, that area appears to be short term support for now.

      • fibs-R-us says:

        The overnight high was a textbook perfect ending diagonal, right up until it touched the all time March contract high of 2071.75 on Dec 5th, then the stops were all taken out in a fraction of a second. Been lower ever since.

      • tony caldaro says:

        That may not mean much at the open if the DAX rallies

      • fibs-R-us says:

        True, i’m counting tiny waves. Could easily get squashed from a simple fed comment, or if Janet so much as sneezes. That area equates to 2033-2046 on the cash chart.
        Thanks Tony.

      • fibs-R-us says:

        little c wave working just fine

  2. Walter Crane says:

    You must have picked it up from my good friends twitter site, I have warned him too many times about posting the secrets… Last time he did it three years ago, they stopped that code for two years. and now that they are employing that method again? What does he do? He tweets it… Argghhhh… People always spoil the broth.

  3. uncle10 says:

    some code just sent out. SPY 212.97 lol

  4. Peter Sliney says:

    Isn’t this about the time Mark Cuban should be commenting that the markets are moving to fast.
    Dow 18000 here we come.

  5. Kisshu2 says:

    market manipulation can be fun…

  6. the measured target price (1961) of the CH I mentioned yesterday has been achieved. I’m short here for a short term pullback….GL to all

  7. Like I posted this morning, Wave 2 of Primary 5 is over…. 38% shallow. I knew because the last time we had a technical chart like this was Oct 2012… we had a 150 point rally off that from lower levels. 1972 plus 150 is 2122…. well on the way. Also, over the 61% fib at 2038 was a confirmation that this is early face ripping wave 3 of primary 5

    Dont look for that C wave down folks…. same as we said in October…

  8. Hey that was fun, Can we do it again tomorrow?

  9. llerias7 says:

    Santa is in a hurry of bring the spx 2100 for xmas?!

  10. vivelaamo says:

    Bears please try and short and make my Christmas a merry one🙂

  11. Wedgie forming up here at this top cheat short around here for a short term pullback .

  12. That’s the top of this wave see you back at 2018 tomorrow or KAbooommmmm tomorrow!

  13. mjtplayer says:

    Oil market has reversed, down $2 to $54.50

    The XLE just went red and junk bonds have given-up most of their gains and are about to go red. Russia is down and the VIX is back up to 18. Short-term Russian notes are blowing-out, the 3mo and 6mo notes are now yielding over 28%, up 6% in yield just today. The rest of the curve from 1yr – 10yr is basically unch and still inverted from 16.3% – 13.5%

    The bulls should pay close attention, if you have gains from this 24hr rally I would take some off the table, if not all.

  14. FiveStars says:

    Market is extremely overbought right now, I am expecting SPX 10-15 points pullback tomorrow then move higher towards ATH.

  15. johnnymagicmoney says:

    hey when Yellen changed “considerable time” to patient man o man it solved all the problems of credit spreads, overbought conditions, hot money, Russia, and oil’s free fall. Thank God she changed a couple words in a meaningless statement……………o wait all you longs give it meaning my bad

  16. fotis2 says:

    Looks like $/yen finished with upside maybe time for a wee short on SP

  17. purplember says:

    2047 broke so does that mean minor 1 / minor 2 complete and minor 3 up ? today is up but light volume – only 50% of yesterday.

  18. rc1269 says:

    2yr TIPS breakevens are negative now. take what the mkt gives you but be smart and don’t get greedy…

    • tony caldaro says:

      does that mean zero inflation?

      • tony caldaro says:

        have you ever known debt traders to be wrong?

      • rc1269 says:

        nobody is always right. but this much i know:
        a) they have a much better track record of predicting future Fed actions than does the Fed or Fed governors
        b) changes in the shape of the yield curve tend to pre-date and accurately predict economic cycle changes; it has correctly predicted 7 of the last 7 recessions. even the Fed now uses the curve steepness as one of their primary predictors of following-year GDP growth
        c) relative to fixed income investors, equity investors and strategists are notoriously poor macro-economists. i don’t mean any offense by that of course, and won’t get into all the general reasons why that tends to be the case. but my experience working on both sides of the balance sheet has shown me this is true.
        d) in general i think fixed income investors tend to think about things a little more rationally and a little less emotionally than some other assets classes. the main driver of this emotional difference is the risk/reward. it doesn’t pay to be greedy in bonds the same way as it does in other, unlimited upside assets (like stocks). my best case is i earn my yield (maybe a little more if i’m an active trader); my downside is 100%.

        what this all distills down to is this: they are good at predicting economic shifts, and they are less concerned about missing a little bit of remaining upside (which doesn’t exist for them) and so they tend to be willing to move sooner on the information they have.

        the Fed, of course, could always make them ‘wrong’ later on. in fact, i expect the Fed to make the deflation call wrong. hence my belief they do not raise rates and maybe we’re even talking about QE again next year. we’ll see. either the Fed changes their tune and course of the action, or fixed income guys are right. that’s how i see it right now.

      • tony caldaro says:

        thx RC
        Certain the FED follows the forwards along with a lot of other things the market offers.
        Since they have the flexibility to do what they want, and when. Think you’re right.

      • hkloon says:

        Hi Tony/rc, don’t really fully understand your conversations here, but maybe what I’m thinking is you are saying Fed is miscalculating this move which is deflation in the nearer term… so they may start with a QE again next year… ? to introduce inflation…. ? something like that?

      • tony caldaro says:

        The market is starting to price in deflation.
        The FED sees this and may hold off on raising rates.
        If the economy does start to deflate, then another QE.
        But in the mean time, the market is also starting to price in a rise in rates.
        So it looks like a stalemate.

    • magnus1234 says:

      🙂 take it … .and SNB punishing Oligarchs at the same time. What a wonderful world!

  19. simpleiam says:

    Can you belieeeve this?! LOL! The RUT has just torn it up over the last 2 days!

    Think most of the money will be in by Wed, of next week. Doesn’t mean it won’t go higher, but think these MIGHT be the bigger moves.

    Good trading/investing to All and VERY Happy Holidays!

  20. Tony, I find it interesting that the traders blogospheres have practically gone mute today. I guess they most traders were catch off guard looking for a down day.

  21. CLG5 is having tough luck getting back into its bear flag. Best seen on an hourly chart, CL is trying to ride the lower channel higher, and is putting in a little 3-bar drift. I think below $55.30 or so we get the decline to sub $50 oil. If the oil bulls can inspire some oil bears to buy, then the upper short term bear channel is at $59 and rising.

  22. simpleiam says:

    Reminder: ETF’s trade as ex-dividend tomorrow.

  23. mjtplayer says:

    Meanwhile, in Greece last nights election went as expected – no president elected. Dimas received 160 of 300 votes in the first round of voting (needed 200 to win). The 2nd round of voting is Dec 23rd and no president is expected to be elected – again. All eyes will be on the 3rd round of voting on Dec 29th where Dimas would need 180 of 300 votes to be elected president and avoid a national general election in early 2015 – this is what markets don’t want.

  24. I was saying HEROES remain only for week and then another HERO emerges on this board. All HEROES end up losing. Only last chance for BEARS is 2063 area. If that breaks out, then 2120, which I mentioned (in last weekend update) having heard.

  25. fotis2 says:

    What a steamroller did not give much of a dip similar upside like just before boj days

  26. Tony, great job in calling the recent top. Many bashers here last month but you highlighted SPX 2078-2084 as very possible top weeks before the fact and allowed any who acted thereupon to make some great gains, myself included. Thanks for your selfless generossity, as well as the regular posters, have a wonderful Christmas and New Year!

  27. y332 says:

    Mr. Caldaro,

    What is the SPX upside level that will verify the current rally as being wave 3?

    Alternatively, what is the downside level that will confirm C has begun?

    Thank you for helping in my attempt to determine risk/reward.

  28. lunker1 says:

    Daily EMAs 2026/27.
    Top of pivot 2026

  29. mjtplayer says:

    In the very short term, the market looks exhausted. It’s been a complete melt-up over the past 24hrs thanks to santa Yellen’s dovish comments and leaving the “extended period” language intact. I think a consolidation and digestion period is in order, perhaps a couple days of sideways trading here on low volume and shrinking volatility…

  30. manunidhi21 says:

    Namaste Tony !
    amazing work……
    also, still both counts on charts ?
    what lvl you are expecting to put in one scenario..

    • afarsid says:

      Yes thank you as always Tony! Can you also comment on if you think crude bottomed at this recent low? I believe you mentioned something in recent comments but I couldn’t remember.

      • tony caldaro says:

        probably heading into a $20 trading range now

      • afarsid says:

        Thank you Tony! Here are the market scenarios based on oil price:
        scenario 1: low oil= low inflation=more QE/low interest rates= markets go up!
        scenario 2: oil goes back up= inflation will rise at a “normal” pace again= markets go up!

        Of course there’s the more rational yet unlikely scenario 3 where markets go down with lower oil prices, but even if it does it probably wouldn’t be for long…

      • afarsid says:

        Regarding crude- I see an abc up from the lows and now perhaps 5 waves down? Seems to be in a lower degree 3 wave…

      • ABchart says:

        The majority of banks in recent days think that oil will drop between 25 and 35 USD.

    • tony caldaro says:

      let’s see some more impulses first

  31. ISINCODE says:

    Going in for a short position here for a half gap fill maybe around 2030 then add to more longs

    • ISINCODE says:

      Looking to grind up to 2058 before another small pullback. Then we load up more longs and reach for new highs. Enjoy the ride we will be in Santa’s Village by Christmas !!! Ho Ho Ho. Happy Holidays to all !!!

      btw…I am sensing the markets aren’t caring about the oil trade anymore? Could be we become drunk and delirious by New Years and we wake up to a viscous headache in January???

  32. So now that most are Bullish again, what count lays hope for the bears?

  33. fishonhook says:

    S and P here is my line in the sand. If busted I am stopped out and outta here and done with counts and Rabbits and all such self delusions that one can predict the market and make money on it trading. Good luck to all

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