weekend update


The week started at SPX 2071. On Monday the market rallied to the previous all time high at SPX 2079. Then on Tuesday, Wednesday and Friday it made higher highs, reaching SPX 2093. For the week the SPX/DOW gained 1.15%, the NDX/NAZ gained 0.85%, and the DJ World index gained 0.80%. Economic reports for the week were mixed. On the uptick: Q3 GDP, personal income/spending, the FHFA index and weekly jobless claims improved. On the downtick: existing/new home sales, consumer sentiment, durable goods, and the WLEI. Next week, another holiday shortened week, there are only two reports scheduled: ISM manufacturing and Construction spending, both on Friday.

LONG TERM: bull market

With three trading days left in 2014, it appears this bull market will soon enter its sixth year. The long term trend is up, the medium term trend is up, and the short term trend is impulsing higher. The market is up 13% for the year, and may even hit 14% before close of business on Wednesday. All in all a fairly solid gain considering the alternatives.


We continue to label this market as Cycle wave [1], the first bull market of the multi-generational Super cycle wave 3. Cycle wave [1] should unfold in five primary waves. Primary waves I and II completed in 2011. Primary wave III has been underway since then. Primary wave I divided into five Major waves: with a subdividing Major wave 1 and simple Major waves 3 and 5. Primary wave III appears to be alternating with that pattern: a simple Major wave 1 and thus far a subdividing Major wave 3. Since Major wave 3 has yet to complete, it recently extended again, we still have Major waves 4 and 5 ahead before even Primary III completes. Then after a Primary IV correction, Primary V should then take the market even higher. After 69 months of generally rising prices, the market has more than tripled. It appears this bull market has many months to go, if not, a few years.

MEDIUM TERM: uptrend

Nearing the SPX 2079 early December uptrend high, we expected a correction ranging anywhere from 5% to 15% to unfold. The reason for the range is that we have been monitoring three potential counts for this bull market. The preferred count, which has been posted in these reports, suggested a 5% to 10% correction. Ten percent if Major wave 3 completed at SPX 2079, or 5% if Intermediate wave v of Major 3 was subdividing.


After the uptrend topped and the correction was underway, we tracked the wave pattern to observe how it was unfolding. We counted a simple zigzag down to SPX 2024 for an A wave, then a simple rally to 2056 for wave B. After that the wave C that followed became complex. Nevertheless, we identified a potential low at SPX 1973 a week ago Tuesday. At that low the market had corrected 5.1%, and all of the technical parameters we track suggested a potential downtrend low. The following day the market rallied in five waves to SPX 2012, pulled back to 1992, then rallied to 2017 before ending the day at 2013. A new uptrend appeared underway.

This week OEW confirmed the uptrend. With only a 5% downtrend correction, an Intermediate wave v extension is probably underway. This suggests the uptrend high at SPX 2079 was only Minor 1 of Int. v, and the low at 1973 Minor 2. This uptrend should be Minor 3. Our initial target for this uptrend is the OEW pivot at 2214. Medium term support is at the 2085 and 2070 pivots, with resistance at the 2131 and 2214 pivots.


As noted above, from the downtrend low at SPX 1973 the market rallied five waves to 2012. We are counting that as wave 1 of Minute i of this Minor 3 uptrend. Then after a pullback to SPX 1992, wave 2, the market rallied in wave 3 of Minute i. Thus far, we can count seven waves up from that low into Friday’s high at SPX 2093. This suggests a pullback, and then one more rally to end this third wave.


The internal structure of this rally suggests a maximum high, for this third wave, at SPX 2100. Should that level be exceeded before we observe about a 20 point pullback, then the count would have to be updated. The updated count would suggest Minute i and ii ended at SPX 2012 and 1992, with Minute iii underway. And not, as previously noted. Short term support is at the 2085 and 2070 pivots, with resistance at SPX 2100 and the 2131 pivot. Short term momentum is displaying a negative divergence.


The Asian markets were mostly higher on the week for a net gain of 1.0%.

The European markets were mostly higher on the week for a net gain of 0.9%.

The Commodity equity group were all higher for a net gain of 3.4%.

The DJ World index gained 0.8%.


Bonds continue to downtrend and lost 0.5% on the week.

Crude also continues to downtrend and lost 4.6% on the week.

Gold is still in an uptrend, had a choppy week, and gained 0.1%.

The seven month uptrend continues as the USD gained 0.5% on the week.


Thursday: holiday. Friday: ISM manufacturing and Construction spending at 10am. Nothing noted on the FED’s agenda. Best to your weekend and New Year week!

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


About tony caldaro

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128 Responses to weekend update

  1. CB says:

    thanks Tony.
    Case-Shiller and consumer confidence data coming out tomorrow, btw.. Gl all.


  2. gasman88 says:

    I looked at few utility stocks: DTE, ED, EIX, NU, SCG
    Boy, these charts look like 1999 tech stocks, is the market trying to tell us something?


  3. Hi Tony,

    With oil down as far and as fast as it is, is there any possible turn in sight? Where do you see oil at from an OEW perspective?


  4. NG (Natgas futures) confirming a very bullish trend reversal Morning Star candle while UNG is confirming a very bullish trend reversal Morning Doji Star…at minimum we should close the gap.


  5. Soodi says:

    Markets will continue to move higher till 2nd/3rd of Jan 2015 (SPX 2150) then look for nice healthy correction (5-10%).


  6. Wow. So everyone – and I mean EVERYONE – now knows that next year, the year ending in ‘5’, is typically a biggie to the upside. All the wave guys are now pounding the table about SPX 2400+ and how it’s sunny days are here again. Bla bla bla.

    What if, just what if.?

    The market has a funny way of punishing those who sit on the same side of the boat all at the same time. One thing I’ve learned over the years is how many ‘truisms’ in the market are actually very dead wrong when you look at the facts and numbers. Hulbert is great at pointing that stuff out. But I think everyone should read this article from Marketwatch over the weekend. It’s pure quantitative analysis about the possibility of next year.



    • shark says:

      On a secular basis, the only sentiment that matters is amongst the governors of the Federal Reserve. In recent years, successful traders have adapted traditional technical/Elliott/sentiment measures to accommodate the new reality of active governmental stock market intervention. Until proven otherwise, the name of the game remains buying the hard pullbacks to intermediate support and limiting yourself to going short on those occasions when you are overwhelmed by the compulsion to lose money..


    • gasman88 says:

      In this ‘post 2008 market’, contrarian analysis only work if they predict that the market will grind higher. So if you’re trying to be contrarian because everybody thinks 2015 will be a bang bang year, most likely you will be wrong and 2015 will be up big.
      Just like betting against the belief that we will have a year-end-rally. We are grinding higher every day despite collapsing energy stocks, Greece and overbought conditions.
      CBs have re-written most of the trading rules


  7. mjtplayer says:

    I’ve been talking about Greece for weeks, warning what could happen. Today, Greece failed for a third time to elect a president and now voting goes to the people in a general “snap” election sometime very early next year – this is what the market didn’t want. This isn’t panic, but could really cause a mess in global markets if the general elections go against the EU.

    Currently, the far-left “Syriza” party leads in the polls. This is the party supported by the unions and gov’t workers in Greece to end the austerity and bailout packages – basically giving the EU & IMF the middle finger. That would trigger 2010 all over again.

    Keep an eye on this, I’m telling you. No date has been set for general elections yet, but they are proposing Jan 25th.


    • llerias7 says:

      meanwhile minute i yet to finish. ..


    • Mjt couldnt agree more..was saying last night if the vote goes poor we spike down but in this schizoid market we likely come right back..its all business as usual till news is in ur face..so lets forget till we must ….


    • fotis2 says:

      Could be but the probability its already priced in is higher I really doubt the big players are still watching the Greek comedy err… tragedy??


      • priced in? only the greek market priced it in..this market ignores everything till it cant…party on till the midnite hour,…..if the new govt comes in they will likely cause havok with greece… perhaps greece is not as relevant as iin 2010 but certainly no markets here or euro priced it in


    • torehund says:

      Not only Greece, in Sweden the reelection was cancelled, fits With further currency depreciation vs USD.


  8. M1 says:

    “I have directed secretary calmly to suspend temporarely the convertibility the dollar in the gold or other reserve assets”…
    R Nixon 1971


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