weekend update


Another wild week in the markets. The market opened the week at SPX 2002 after last week’s 3.5% selloff. After a gap up opening on Monday carrying the SPX to 2019, it gapped down on Tuesday hitting 1973 right at the close. After that the market gapped up Wednesday, and on Thursday, then came with one point of its all time high on Friday. For the week the SPX/DOW gained 3.2%, the NDX/NAZ gained 2.2%, and the DJ World index was up 2.2%. Economic reports for the week were slightly biased to the downside. On the uptick: industrial production, capacity utilization, housing starts, leading indicators and weekly jobless claims improved. On the downtick: the NY/Philly FED, the NAHB, building permits, the CPI, and the WLEI. Next week, a holiday shortened week, we get Q3 GDP, PCE prices, and more reports on housing. Best to your holiday week!

LONG TERM: bull market

As we enter the last two weeks of 2014, a look back displays quite a choppy year. For example, in 2012 we had just 4 trend reversals for the entire year. Then in 2013 the same, just 4 trend reversals. In 2014, however, there has been 9 trend reversals with a possible 10th one on the way. A traders delight, but a most difficult one to track with Elliott Waves. The year started at SPX 1848, ticked up to 1850, then the first week was down and the month was down. So much for the January effect, as the market currently looks to gain about 12% this year.


We continue to count this 69 month bull market as Cycle wave [1] of SC 3. Cycle wave bull markets unfold in five Primary waves. From the March 2009 low, Primary waves I and II completed two years later in 2011. At the October 2011 low Primary wave III began, and has been unfolding ever since. While Primary I was relatively simple with only 9 waves. Primary III has been extraordinary to say the least, as it is nearly 21 waves long, and has travelled nearly 43% further in points. While Primary I had a subdividing Major wave 1, and simple Major waves 3 and 5. Primary III had a simple Major wave 1, a very long subdividing Major 3, and possibly will have a subdividing Major wave 5 as well. Yes, Primary wave III may last for quite a while longer.

However, before we get too far ahead of ourselves we must note that we are still carrying three potential counts. The one we prefer, with a 50% probability, that is posted in this update. One count posted on the DOW charts, which we give a 30% probability. And the third posted on the NAZ charts which we give a 20% probably. The recent market action has done nothing yet to change, nor eliminate, any other these counts.

MEDIUM TERM: uptrend probable

After identifying the September Int. wave iii uptrend high right at the 2019 pivot. We identified the downtrend low within the range of the 1828 pivot, when the downtrend characteristics changed. As it turned out that uptrend took the market to new highs, but we again identified the next uptrend high within the range of the 2085 pivot. The selloff that followed could have been a 5%, 10% or 20% correction. On Tuesday, at the low, we noted the minimum parameters had been met for the 5% correction. Then on Wednesday the market characteristics changed within the first few hours of trading. After that the market took off to the upside, nearly reaching its all time high in the last hour of trading on Friday. The market had bottomed right at the 1973 pivot.


Pending the extent of the December correction we suggested either Int. v/Major 3 had ended at SPX 2079, or only Minor wave 1 of a subdividing Int. wave v. Just a glance at the weekly chart will display just how much Int. wave iii subdivided, and even Minor 5 of Int. iii. Since mid-2013 this market has had a number of 4% to 5% corrections. We counted the downtrend as a double zigzag on the hourly chart, but it was actually more complex than that using the lower time frames. We are currently still carrying both potential counts pending an uptrend confirmation. Probabilities suggest a subdivision of Intermediate wave v is underway. Medium term support is at the 2070 and 2019 pivots, with resistance at the 2085 and 2131 pivots.


During the recent downtrend we counted the decline from SPX 2079 to 1973 as a double zigzag. The first zigzag did look like a 5-3-5, but the second zigzag was actually a series of zigzags within itself. Quite a complex pattern. Nevertheless, coming off the SPX 1973 low we observed a small five waves up to 2012: 1989-1979-2000-1990-2012. Then after a pullback to SPX 1992 we observed a larger five waves up: 2047-2033-2071-2062-2078 on Friday. With this market quite overbought, after rallying 105 points in just three days, and displaying a slight short term negative divergence, we “could” see a sizeable pullback (30 points more or less) early next week. If the market starts making higher highs, this five wave advance “could” be extending. So a drop below SPX 2062 suggests lower, and a rise above 2078 suggests higher.


Currently we are labeling the first five waves up Micro wave 1, and this second five up Micro wave 3 of the first of five Minute waves in this potential uptrend. Since there is not much room on the hourly chart to post these labels we will verbally keep you informed as the market progresses. The implications of a subdividing Intermediate wave v, into five Minor waves, are quite bullish. Since the last uptrend travelled 258 points, this uptrend could travel about 258 points as well. For now, our uptrend target, once this rally  confirms and uptrend, is the 2214 pivot. The next pivot above 2131. This would suggest an uptrend slightly shorter than the last: between 234 to 248 points. More details to follow once the uptrend is confirmed. Short term support is at the 2070 and 2019 pivots, with resistance at the 2085 and 2131 pivots. Short term momentum displays a slight negative divergence.


The Asian markets were mixed on the week but gained 0.9%.

The European markets were all higher and gained 2.7%.

The Commodity equity group were mixed but gained 1.5%.

The DJ World index gained 2.2% on the week.


Bonds are still downtrending and lost 0.3% on the week.

Crude is still downtrending and lost 1.0% on the week.

Gold remains in an uptrend but lost 2.3% on the week.

The USD just keeps extending its uptrend gaining 1.7% on the week.


Monday: Existing home sales at 10am. Tuesday: Q3 GDP (est. +4.2%), Durables goods orders, the FHFA index, Consumer sentiment, Personal income/spending, PCE prices and New home sales. Wednesday: weekly Jobless claims, and the market closes at 1pm. Thursday: Holiday. Friday: normal trading hours. Best to your weekend and week, plus Happy holidays!

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


About tony caldaro

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244 Responses to weekend update

  1. scottycj1 says:

    SPX needs to close below 2070 to turn down—Dow below 17910

  2. rc1269 says:

    212.97 spy. believe the bots.

    and happy holidays

  3. I have a question for most here. why not just buy the indices? how can you lose in a market that for the most part never corrects and if your lucky to get a 5 or 10% correction why not just add as the fed and central banks wont let the markets go down? I mean are we not just making it difficult? are we not just making it confusing? Here is the pattern. somebody comes labels a counts calling for a correction or sell off and 2 weeks later we are at all time highs. Is it me or are we making this hard? just a thought. happy holidays to all enjoy your friends and family

    • JD C. says:

      Back in 1999/2000 I told people a monkey could make money with a dart hitting just about any stock. I made a small fortune not knowing what I was doing. I gave part of that back though! Now using SDY, SSO, and UPRO is the best way I know to do it. Along with some SPY monthly and quarterly CALL options. Hold long and only trade a small portion. Happy Holidays.

    • buddyglove says:

      You refer to “We” a lot in your post as if all bloggers here have found it difficult and confusing. There are many here who have been successfully buying pullback bullish set-ups for years, have you considered you have made it “Hard” for yourself by fighting the trend ? GL in 2015.

      • Buddy I am not fighting the trend. I have all managed money account and only very little play money that I trade. I hope everybody does well. But remember the fed has made a lot of trader feel smarter than they are. Happy holidays to you sir

    • afarsid says:

      ttt1, because lately the markets have become a volatile game of musical chairs. We’ve been fortunate to find a chair (bottom) to catch us in the short term, but the volatility is what creates the fear that one of these days you might wake up and the music has stopped and “all” the chairs are gone…. As we all know, we are not immune to these black swan events which have in the past 15 years have become slightly more frequent.
      If you are investing for the long term though your strategy is as sound as investing 101

      • we had a few days of volatility and that it. For the most part we cannot get scary correction. 5% or 8 % in an overbought and way over extended bubble is nothing. I see the market at all time highs and nobody concerned about a correction or sell off. market sells off to force the fed to come out and talk. the market forces the feds hand.

    • vivelaamo says:

      Certain traders on here keep trying to short then when they lose money they blame TA, charts, erratic markets, QE etc etc.

      For the past 3 years the market has risen on low volume around Xmas yet their are one or two talking about shorting. Why can’t people just show a little patient?

  4. Till 31st, not much movement. Christmas/boxing day sale figures will start flowing from this weekend and that will decide. If they are not so good, market will put in top this week. If they are average, market will put in top next week. They wont be good for sure.

  5. fibs-R-us says:

    So Tony, with this thing probing the upper area of the previous 4th, it’s pretty much free to go on up to new ATH?

  6. cicelyalaska says:

    This is going to have an entertaining outcome no matter what it is. Saudi Arabia: We’ll never cut oil production. http://money.cnn.com/2014/12/22/news/economy/saudi-arabia-oil-production/

  7. scottycj1 says:

    Today is the likely day for the low in nat gas

  8. tradeanimal says:

    GT…Noticed that Stockcharts adjusted the Thursday SPY spike from $212.97 to $211.80 Wonder if you or anyone knows anything about this adjustment.

  9. mjtplayer says:

    The 2nd round of Greek elections are tomorrow, expectations are that Greece again fails to elect a President. Last week Greece failed to elect a President in the 1st round of voting, as expected, leading to a 2nd round of voting tomorrow – Dec 23rd. We’ll know the results late tomorrow, but this should be a non-event for the markets this week.

    If Greece fails again to elect a President tomorrow, which is expected, then voting goes to a 3rd and final round next Monday Dec 29th – this is the day to watch. Results will be available late Monday and if Greece fails for a third time to elect a President then a national general election is required, which will take place early 2015 (probably Feb); this is what financial markets do not want.

    Pay attention to the Greek elections next Monday, Dec 29th.

  10. scottycj1 says:

    3 to 5 points down in the SPX will most likely turn the Volume Trading indicator negative and generate a sell signal…. I believe the 19th was the high in SPX—90 days (Gann) from the Sep 19th high—-down to the 26th.

  11. rc1269 says:

    nice small article on the bottom left of WSJ C1 today for all those stimulative lower gas price pundits out there
    “History’s Hard Lesson on Energy”

  12. There is an interesting set-up on the R2K index known as an orthodox broadening top. Seeing a chart pattern and knowing how (or if) to trade it are two very different things, however. The technical analysis debate depends very much on what one considers TA to be, and how one plans trades based on that analysis.

  13. hkloon says:

    Dax is now very little points to break ath. Certainly if with little help in snp it will print higher numbers. Not sure who leads who. But certainly bullish. Like soul mentioned b4, 80/20. If 2080 is broken strongly then next is 2120.

  14. pooch77 says:

    That may be Scotty,but lots of post off phone with no edit,old people fat fingeers

  15. hkloon says:

    Tony, if this wave goes up ATH, do you not consider this an irregular B wave? or it’s a lower probability against P3 extending?

  16. You know what I bet will happen here as I stare at that $RUT log chart? There are two weeks left and the next two candles I bet drift up to tag the bottom of that rising lower trendline. That could set the $RUT up to about 1225ish. But if you look closely at the stochastics above, you’ll notice they are getting weak. That’s a weekly chart. Looks to me like it’s setting up a monster Jan selloff?

    I remember last Dec there was no selling into year end because obviously (me too) who wants to sell winners year end and take the cap gain tax hit four months later? Screw that. Make Uncle Sam wait a year! Then that selloff happened into Feb. Now, this year is interesting because you had two pretty good selloffs – Aug and Oct. Did those two selloffs clean out those who otherwise would have held into year end? Does that mean there’s no big selloff in Jan/Feb as usually happens because they have already been forced to move early? Does that then back up all this overly bullish expectation for next year?

    The cycles are pretty clear for next year. Years ending in ‘5’ are the biggest up years in the decade going back the last 100 years. Averaging 29%! Yikes! Go read what they are pounding the table over at Avi’s site! 2400+ by year end next year! That target is basically the top of the channel he has. Now that’s a target that is reasonable only because it’s within a channel. Not some made up BS number that most spout off.

    I’ve learned years ago that fundamentals are completely bogus and are only used by professional managers and Wall Street types to sucker know-nothing ‘investors’ into trusting them with their money because it’s too complex for them unless you got an MBA. But most of them can’t beat the market anyway. So much for all those fancy degrees. If EPS multiples really had any true bearing on a stock price, why is AAPL trading where it is and NFLX or AMZN where they are? Market mechanics, pure and simple. Float size and supply/demand, not multiple PE tangible book bottom line growth rate BS.

    There’s my nightly diatribe. Fingers were wanting to let go.

  17. M1 says:

    Thanks Tony
    Here some observations going forward
    1. The level where this NAZ rally started was abt the 38.2% Fib Retrac of the oct-nov rally and abt its 50dma, (A technical support).
    2. abt 4750 -4800 was the previous wave B, (This level should be a tecnical resistance or should mark the end of this countertrend rally) I expect the second and also expect the correction to continue and a 300 points drop on this index.
    3. A larger correction would be a concern.
    4. I give a 30% probability for this rally being a new wave up and that NAZ bottomed at 4547.
    Have a great evening

  18. Thanks, Tony and Vivek for the 2015 OEW Lessons update! What a treasure trove of knowledge! Proud to be an OEW member. 🙂

  19. Okay, I just accidentally noticed something – potentially very interesting. That last link won’t work. I mistakenly saved over it. But look at this… (remember, I focus on the $rut). As I showed a few weeks ago when the SPX made that 1820 low if you were following it on both LOG scale and standard, you saw that 1820 target just sitting out there. Ewave didn’t tell you that.

    But now look at both LOG and Standard $RUT charts – SAME chart, but on two different scales…

    Standard scale first:


    Based on that it looks very bullish and setting up a run to the high end of that channel around 1375 next year. That puts TNA around 120.

    BUT! Hold the phone!

    Now look at the exact same chart in LOG scale…


    WoW! What a difference! This chart looks like a monster ‘kiss of death’ setup. Not so bullish anymore! Actually, that’s a short setup of a lifetime. Even the stochastics are setup to rollover.

    What to do???
    Hmmm…Maybe a long TNA call spread with a put?

  20. My 2cents…

    Here’s the chart that will make you rick if you’re patient and wait for the obvious inflection points. This chart alone has made me over 40% this year using TNA on the breakouts/support hits using the stochastics on that setting for bottom timing.


    I think I speak for many on this board that what we don’t want to hear is everyone’s opinion about where they think the market is going . If you notice Tony doesn’t give opinions. Those of us that make money doing this let the market tell us what it’s going to do and not show everyone reading here how smart we are. I’m so sick of all the price target predictions based on nothing. You’re wasting our reading time by posting this nonsense. Stop it.

    There should be a firewall to post here using everyone’s schedule d’s. If you’re not making at least 10% a year, you are banned from posting.

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