weekend update


The US market had another down week to extend the streak to three. The market started the week at SPX 2045, dropped to 2023 on Monday, rallied to 2057 on Tuesday, then hit 1988 on Wednesday and again on Friday, before ending the week at 2019. For the week the SPX/DOW lost 1.25%, the NDX/NAZ lost 1.60%, and the DJ World index lost 0.45%. On the economic front, negative reports outpaced positive reports by a wide margin for the first time in many months. On the uptick: business inventories, the NY FED and consumer sentiment. On the downtick: retail sales, export/import prices, the CPI/PPI, the Philly FED, industrial production, capacity utilization, the WLEI, and the monetary base; plus the treasury surplus declined and weekly jobless claims rose. Next week, a holiday shortened one, we have Leading indicators, several reports on housing, and the much awaited ECB meeting.

LONG TERM: bull market

While every steep pullback/correction appears to bring out the perennial bears, we still see no signs of a bull market top. While the wave patterns in this 68 month bull market are quite extended. Our long term indicators do not yet suggest a Primary III high, let alone a bull market high. There was, however, a currency event this week when the Swiss National Bank removed their EURCHF 1.20 peg – which they have had since 2011. This resulted in an 18% surge in the Swiss Franc, and a 13% decline in the SMI. Putting that market into Primary wave IV. Normally the SMI tops, in its wave structure, months ahead of the US. Its Primary I occurred in 2010, four quarters ahead of the US Primary I high. Its 2007 bull market ended two quarters ahead of the US, and its 2000 bull market ended six quarters ahead of the US. This price/time relationship suggests the US Primary III should occur some time this year, or next.


In the US, we continue to label this long term uptrend from 2009 as a five Primary wave bull market. Primary waves I and II ended in 2011, and Primary wave III has been  underway since then. Primary I naturally divided into five major waves, but had a subdividing Major 1 and simple Major waves 3 and 5. Primary III, however, has had a simple Major wave 1, and an ever extending Major wave 3. It is possible that Major wave 3 ended in early December and we are currently in an irregular Major wave 4 correction. This count is carried on the SPX daily chart. Or, Intermediate wave v of Major wave 3 is still extending. This count is carried on the SPX hourly chart. Either way we should see new all time highs before Primary wave III ends. Then after a Primary IV correction, new highs for Primary V to end the bull market.


MEDIUM TERM: uptrend in jeopardy

The current uptrend began in mid-December at SPX 1973. The market then quickly rallied to new all time highs at SPX 2094 by late-December. After that the market started to pullback as 2015 began. And, the pullback became quite steep for an ongoing uptrend. i.e. 2094-1988 (5.1%). When one considers the recent early December correction was only 5.1%. Nevertheless, the uptrend has not broken down, nor has a new downtrend been confirmed as of today.


If we do get a downtrend confirmation then the count posted above would be the preferred count. The early December high would be counted as Major wave 3. Then the downtrend – uptrend – downtrend that followed would be counted as an irregular Major wave 4. Should this occur there are two levels of support to observe. The first is the 1973 and 1956 pivots, and the second the 1901 and 1869 pivots. Our indicators suggest the first levels of support should hold since this is an irregular correction. Normally we would be expecting about a 10% correction which suggests the second levels of support.

On Friday, however, the market displayed a positive hourly/daily divergence at the 1988 low. Then rallied quite strongly. Also at the low we had the typical MACD oversold condition for a correction, and a more oversold condition on the daily MACD than we had during the last correction. So it is possible this pullback has seen its low and the market moves higher from here. Medium term support is at the 1973 and 1956 pivots, with resistance at the 2019 and 2070 pivots.


After the SPX 2094 high in late-December the market sold off in what looks like an abc pattern into the early January 1992 low. Then after a rally to SPX 2064 the market became wildly volatile as it headed lower again. On a very short term scale it was quite choppy with many reversals. On our short term charts it appeared as a small abc down which formed a flat at SPX 2023. Then after a rally to 2057, another flat was formed at 1988 on Friday. Quite a complex pattern. Nevertheless the market rallied from that low, but ran into resistance at the 2019 pivot just before the close.


If this was the pullback low to end Minute wave ii, as displayed on the above hourly chart. Then the market should now be rising in Minute wave iii. Should the market roll over and drop below SPX 1988, then the count posted above in the medium term section is probably underway. Short term support is at SPX 1988 and the 1973 pivot, with resistance at the 2019 pivot and SPX 2057. Short term momentum ended the week overbought.


Asian markets were mixed on the week and lost 0.4%.

European markets were nearly all higher and gained 1.7%, despite the 13.3% loss in the SMI.

The Commodity equity group were mixed losing 0.7%.

The DJ World index lost 0.45%.


Bonds continued their uptrend gaining 0.9%.

Crude continues to downtrend, but gained 1.5%.

Gold is still in an uptrend and gained 4.7%.

The USD is in an eigth month uptrend and gained 0.9%.


Monday: markets are closed. Tuesday: the NAHB index and a speech from FED governor Powell at 10am. Wednesday: Housing starts and Building permits. Thursday: the ECB meets, weekly Jobless claims and the FHFA housing index. Friday: Existing home sales and Leading indicators. Best to your extended weekend and week!

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


About tony caldaro

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272 Responses to weekend update

  1. Simple, you must have had 20 posts, few of which had any substance, kindly respect Tony’s guidelines and quit cluttering his otherwise great blog, it wastes precious time for the rest of us. Thank you!

  2. simpleiam says:

    Here’s a gift for the Bears…

  3. lunker1 says:

    daily big up still intact for SPX until it isn’t. Not expecting big beefy bullishness tomorrow. Just playing price. Cautious on a firm break of 2012

  4. rc1269 says:

    anybody out there other than CN, newbie and rabbit not expecting big beefy bullishness tomorrow?

    seems like such a sure thing

  5. rc1269 says:

    here you go CN – mkt giving you that chance right now. 🙂

  6. lunker1 says:

    Today looks similar to August 15. Gap and go tomorrow?

  7. simpleiam says:

    Yep, up and running!

  8. NKD (Nikkei futures) leading the charge again…I’m expecting US futures indices to follow NKD as they have been doing since the being of Dec.

  9. jobjas says:

    B wave tops with a truncated w5 ?

  10. bhuggs52 says:

    Re: Draghi coming with QE announcement on Thursday—I see no serious reason to doubt the EU is coming with QE, and more reason to believe those across the pond will follow what’s been done over here. What other alternative measure do they imagine they have. And what’s good for one side of the pond is good for the other side. Meanwhile, the frogs are keeping me awake at night. No lie. We have terrorist frogs on our ranch.

  11. fotis2 says:

    $/yen looking strong ready for another leg up looks like Bullish Tuesday. 21 bulls against 11 bearTuesdays out of last 32 according to Mr. Top Step.One never knows of course so dont forget the stops and GL for tmrw.

  12. I knew I wasn’t the only one who recognized this pattern as distinct from a typical flag. Here is Linda Raschke using the term in her Street Smarts book from the 90’s. I can’t say I came up with it, because I may very well have picked the term up from her during one her seminars from ’95 or ’97, don’t recall the exact year; regardless the term describes the price behavior perfectly, imo, and it is clearly distinguishable from a flag. If you are waiting for a flag, and all the market wants to do is briefly drift, you’ll miss the move. It is a set up piece.


    • I mean to say “came up with it for my self on my own,” as she obviously used the term independently of me lol, I would say, “but you all know what I meant,” but that obviously is not a safe assumption when dealing with the internet. In fact, I’m pretty sure that I got it from Raschke, which means I had no hand in it, which should make it ok and legitimate, right 😉

  13. Was wondering if there is something I don’t know, which is known to ROTW (rest of the world). EURO took out lot of traders STOP in the morning at 1.1606
    Here is the news and that is likely;


  14. blackjak100 says:

    Tony, if market has never made new highs in the last 15 yrs with WLEI this low, why go with min 3 count? Is this time different?

    • tony caldaro says:

      It’s just one fundamental indicator, which has not worked too well recently.

    • stormchaser80 says:

      This is a great point. Tony has shown a refusal to show any bearish counts – no matter how low the probability in his mind. He blew me off too. Oh well, its his site and his right. But in doing so, he has built a collalition of bullish posters who fail to converse with a fair and balanced viewpoint. This is not the site to expect equal discussion from both perspectives. I read to get bullish views, go elsewhere for bearish views or balanced views.

  15. ashram says:

    SPX achieved a new all time high just thirteen trading sessions ago, yet already the hysterics are hyperventilating about a NEW BEAR MARKET!!! RUT has been cited as an example of weakness, but it has merely retraced thirty eight percent of the October advance, double bottomed, and on Friday printed a bullish piercing line formation. Naz pulled back into the 81-82 cycle that has predominated since 2007 and which produced significant lows on 11/23/11 and 6/24/13. SPX now has the technical combination on Daily RSI/MACD Histogram/Williams %R/Bollinger Bands that has coincided with each hundred point SPX rally of the last eighteen months. There is no rational interpretation of Elliott Wave Theory that allows for the December 2014 top to be a bull market high.

    While life guarantees little, stocks are in a major bull market/at support/oversold/due for a cycle low. Is this just the umpteenth bullish consolidation since 2009? Or is it the beginning of an excruciating descent into the Financial Apocalypse? You make the call.

    In doing so, beware the Pompous Malefactors Of Misinformation, for with their appalling ignorance (combined with their infinite arrogance) they shall impoverish you.

    • afarsid says:

      Ashram, leave us with your market prediction so we can credit or discredit your long winded rant

    • CB says:

      Agree with that market assessment (sans all the drama and opinionated language, so I am only going to comment on the TA aspects & charts here. (If you want to discuss anything else FREELY & rationally, you’ll need to holler at me on Twitter as I and Tony have some fundamental differences about censorship. So, here we go:
      1. “There is no rational interpretation… that allows for the December 2014 top to be a bull market high.” Agreed. (not commenting on any EW aspects, just some TA basics). The proof is in the charts. Take a look at the $NYAD charts, for instance, there should be no doubts … (It doesn’t mean that the ST correction is done yet , btw.)
      2. “life guarantees little” Agreed. 🙂
      3. “You make the call.” Agreed. 🙂

      Happy Monday, all.

    • What, in particular, to do you see in the piercing candle pattern that is bullish rather than a continuation of the prior trend? I am simply asking because ,from my experience, candle patterns should never be relied on based on their sheer intend behavior. Statistically doji candles have poor reliability and always require a follow-through confirmation candle(s). Without the confirmation candle(s) they are “garbage” indicators. I personally only assign credibility to a doji candle pattern if my other TA indicators are “flashing” a potential reversal.

    • robnaardin says:

      +1, because I think a flat from 2079 completed Friday.

      • blackjak100 says:

        Flat? Impossible and you need to review Your EW, but I think you meant ZZ (5-3-5) from 2093. A flat must retrace at least 90% of A wave and counts 3-3-5. B wave retraced 72%

      • CB says:

        maybe it was the famous “Black Swan Bullish Drift” aka BS Bullish Drift… OK, this one is gonna get deleted fast…enjoy while it lasts .. 🙂

      • robnaardin says:

        I meant running flat BJ

        In a running flat, wave B stops beyond the start of wave A, and wave C falls short of stopping near the end of wave A. The difference between an expanded flat and a running flat is where wave C ends. In an expanded flat, wave C terminates beyond the end of wave A. The appearance of a running flat is considered rare.

    • tommyboys says:

      Ashram you nailed it! Almost exclusively noise out there. My favorite is all the media calling 135% gain since ’09 “enough” and the bear market is nigh. This line of thinking is flawed in that its just numerology – meaningless imho. Go back just two more years to ’07 and we ‘re only 25% higher in 7 1/2 years – about a 3% return per annum- whoopee! Choose any random year you’d like and so what – in just gives you the return since that year. At the end of the day its just meaningless data & statistic.

    • bhupal777 says:

      Based on the major indices price action I would have to agree with your comments. Doesn’t mean I am not shorting individual names. I am short $TFM for a quick short term trade (expecting 5th wave or C wave down on a daily chart) and also I own Feb’15 $GILD PUTs. So trading what charts says. Don’t dare to short $SPX yet. Time will come but not there yet.

  16. afarsid says:

    Thank you Tony! I wish there was a polling function on WordPress, would be interested to see where everyone stands at such inflection points!
    I’m sensing most people are expecting a continued drop after perhaps a rise to 2050 area or even from where spx is now?
    To those same people, regardless of what ECB announces you think it won’t have an effect on US markets? Curious how you guys’ believe that will play into your predictions.
    Thanks all

    • 16golfer says:

      Afarsid….I think it’s already baked In the cake.

      • afarsid says:

        thanks golf, I’m reading reports of $500bln -$1tln, as well as a possible $1.8 trillion with different debt structure that Makiori posted… “which one” is baked in is what I’m hoping to conclude and what the net effect will be when announced. Makiori elluded to the latter of these scenarios, but also that in large part the debt structure would be different.

        Curious how everyone is playing the Thursday morning announcement, bearish or bullish?

    • scottycj1 says:

      There is a poll function

    • buddyglove says:

      Afarsid…Trying to forcast mkt action based on what Central banks do, or don’t do, is for Rookies.
      Sorry if this sounds harsh , but I’m trying to save you money GL.

      • afarsid says:

        BG, you are entitled to your opinion (even if it is lacking in depth). It really depends on the type of trader you are and whether you are trading short or long term. We are all thinking about the market action surrounding the ECB announcement, whether consciously or not. It doesn’t hurt to do your research and be informed, especially in light of all the effects that such decisions have had on the markets in the past couple of years. No one is basing their trading solely on such announcements, but to not be ready to monitor and react to changes in the market is foolish.
        Here’s some research about recent Fed interest rate announcements for example:
        The same type of data and research could be applied to QE announcements, although it’s a bit more difficult to reliably predict outcomes from foreign CB’s.

      • buddyglove says:

        Afarsid…point taken, thnx for reply.

  17. Ben’s QE presentation to ECB

  18. For anyone interested in reading and studying the original Edwards and Magee, here is a neat find from Amazon. It is a reprint of the 1958 4th edition, which is the edition. I’ll post the actuakl link to my twitter. From the publisher:

    “2011 Reprint of 1958 Fourth Edition. Full facsimile of the original edition, not reproduced with Optical Recognition Software. In 1948 Robert D. Edwards and John Magee published “Technical Analysis of Stock Trends” which is widely considered to be one of the seminal works of the discipline. It is exclusively concerned with trend analysis and chart patterns and remains in use to the present … “Technical analysis” is a financial term used to denote a security analysis discipline for forecasting the direction of prices through the study of past market data, primarily price and volume.”

    In my opinion, the earlier editions are best, before modern editors and “authors” attempted to “update” and rewrite some of the material. I have an old beat up 4th edition that, much to my wife’s chagrin, has had a permanent place on my nightstand for the past 20 years. Not a day goes by that I don’t crack it open and re-read just a few pages. Keep’s me sharp 😉

  19. hkloon says:

    Tony, ecb’s qe (should it materialise) will be equal to 1% rise in spx vs every 30b similar to qe 2 3?

  20. ABchart says:

    Tony, thank you for this brilliant weekly update. Thank you all for your interesting comments.
    My update CAC, DAX and SPX: http://abchart.org/2015/01/19/mise-a-jour-cac-spx/

  21. Model likely generate STRONG SELL by Thursday evening (I am saying Thursday due to Draghi (my model does not know draghi, but I am taking in to account). SPX likely crash. anytime after Thursday.

    If you covered longs at 2020, no point in going long at 2010.

    SHRIHAS (@SHRIHAS1) says:
    January 16, 2015 at 2:49 pm
    You are taking losses because you did not believe in my model.
    Please don’t blame me if you don’t take profits NOW. You will get one more opportunity to buy at 2010 SPX.

  22. hucky2 says:

    What on earth id the SSE in a panic about – down 7%

  23. hkloon says:

    Hi Tony, just doing some studies in crude and dry bulk sector. Noticed the 2 charts previously posted – one being crude and another being BDI. They seem to track along each other, meaning low in crude during 1986 preceded by cycle low in BDI in 1986. Similarly in 1998. Cycle high in 2008 in crude also shows cycle high in BDI. Maybe crude is seen as world GDP, when crude is down, perceived economics is bad and bad for BDI… although crude’s drop is actually good for the shippers….
    so i guess the only way for BDI to rise is for a rise in crude. Since we know crude is in bear market, the rise in crude will only happen in B-wave (rebound) maybe to 70 to 90USD… ? during the rise in crude, not sure how high BDI index can rise in a short span of time… does not seem a lot of time is left. So maybe we will not see BDI index as high as 2008 again? But elliott wave counting maybe seeing it differently… i don’t know how to count.

    • tony caldaro says:

      Very nice observation: the bottoms aligned perfectly, until 2012. But the tops are off a bit.
      There are similar supply/demand dynamics at work in this relationship as well.
      For example, the current decline in Crude is due to oversupply, and dry shipping tonnage is also in an oversupply situation.

      • hkloon says:

        Ok. So its two different dynamics at different timezones. So i guess the next cycle low both may bottom again with crude maybe trading less than 40 usd by then. 2017 maybe? So bdi really need to rally fast btw now and 2017. Been hearing lots of bankruptcies past few years. But dsx is probably one giant in the making

      • tony caldaro says:

        Crude will probably remain in a $35 to $100 range until the bear ends around the middle of the next decade. Shipping rates will not see 2008 levels again until maybe the 2030’s. Worldwide economic growth should improve dramatically near the end of this decade into the next. India may likely be the main driving force in the emerging markets.

  24. ariez5 says:

    I think the Shanghai $SSEC has made a significant top.

  25. H D says:

    You want some detailed analysis? S is the (19)th letter in the alphabet,, as is SEAHAWKS and 20(19) pivot,,,, coincidence? I think not. :mrgreen:

  26. After further reviewing my TA, EW and candlestick patterns, I highly doubt that the downtrend is over and below are a few reasons;
    1. The location of the engulfing candle happens to be side-by-side with a black hammer candle that is questioning/challenging the trend reversal strength of the engulfing candle pattern. This three candlestick pattern tell me that the downtrend is highly like to resume it’s downtrend.
    2. The double bottom pattern that occurred between Wednesday’s black hammer and Friday’s Engulfing candle, IMO, should be viewed as a tweezer bottom candle pattern which very often tend to act as continuation patterns lieu of trend reversal patterns.
    3. I no longer share the view that we had witness a C wave subdividing into 5 non-overlapping waves (from 2064 to 1988). Based on the wave structures I have come to the conclusion that rather Wednesday’s low 1988 is Minute a of Minor c and we are now witnessing an inverted flat (regular/irregular) Minute b of Minor c.
    Minute c of Minor c still targeting the 1929-1901 pivots.

    SPX chart: http://tos.mx/QboaDB
    ES chart: http://tos.mx/73eh6w

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