Wednesday update

SHORT TERM: gap down opening, then rebound DOW +39

Overnight the Asian markets gained 0.5%. Europe opened lower but gained 1.0%. US index futures were lower overnight. At 8:30 Building permits were reported lower: 1032k v 1035k, and Housing starts were reported higher: 1089k v 1028k. The market gapped down at the open to SPX 2014, hit 2012 in the first few minutes, then started to rebound. The SPX had closed at 2023 yesterday. Still within the first half hour the market spiked to SPX 2029, declined to 2019, and then started to rally. Around 11am the SPX 2038, and then went into pullback mode again. At 2pm the SPX hit 2023, rallied to 2034 by 3:30, and then closed at 2032.

For the day the SPX/DOW were +0.35%, and the NDX/NAZ were +0.40%. Bonds lost 14 ticks, Crude gained $1.05, Gold ended flat, and the USD was lower. Medium term support remains at the 2019 and 1973 pivots, with resistance at the 2070 and 2085 pivots. Tomorrow: the ECB reports, weekly Jobless claims at 8:30, and FHFA prices at 9am.

The market gapped down at the open today, hit SPX 2012, and then started to rally as some potential details of the ECB’s QE program were disclosed. The action after the low was quite choppy SPX: 2029-2019-2038-2023-2034. Nevertheless the SPX cleared yesterday’s 2029 high and we posted a Minute wave ii label at the recent 1988 low. As long as SPX 2004 holds we believe this is the right count. Short term support is at SPX 2004 and SPX 1988, with resistance at SPX 2038 and SPX 2057. Short term momentum declined from overbought to about neutral. Best to your ECB trading tomorrow!

MEDIUM TERM: uptrend trying to resume

LONG TERM: bull market


About tony caldaro

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236 Responses to Wednesday update

  1. Gary Lewis says:

    Back from a long absence “south of the border” but geez, S&P is right where it was over a month ago when I left. The headlines are the same, some central bank doing more QE. I didn’t miss anything. Guess I’ll head back down. Perhaps in another month, something will change? Doubt it. Perhaps in two months? hasta luego

  2. iamwhoiis says:

    .764 at ±2065. Providing a bounce. Sure has been a popular fib lately…

  3. pooch77 says:

    2150 next stop high on the 30th

  4. oh well I think I have said this 200 times. nothing matters but central banks and the fed. they will not let the market fall.

  5. Tony – I have a EW/OEW question for you. Who do you define (or what’s your definition) of and elongated flat? Thx

    • tony caldaro says:

      An elongated flat occurs when the A wave is quite long, the B wave retraces only a portion of the A, then the C wave bottoms around the A wave low.
      Recent examples, the 1987 crash and the 2011 Primary II.

  6. uncle10 says:

    BBRY. one day there is a deal the next no deal then maybe a deal again… even if no deal, I think buying in the 10’s will turn out to be a very good place to allocate some money. or you can fret about QE or whether the market is too high . good luck and good day🙂

  7. robnaardin says:

    You Bulls enjoying Beastmode?

  8. alexhartley1 says:

    Well done Tony on your primary SPX count. Fantastic work.

    • blackjak100 says:

      yes, I concede it was that easy! What was I thinking? Just need to take out ATH for confirmation.

      • simpleiam says:

        bj, I always consider your posts, right or wrong, they give me an additional perspective. You’re a good guy and you know I love ya more than my luggage!

  9. thecustomer14 says:

    Anyone remember this little tidbit from 1/13? Does a better contrarian indicator exist?

    “A stock market correction is approaching the level of near certainty as Wall Street faces a major paradigm shift in how to achieve price gains, according to a Goldman Sachs analysis. In a market outlook that garnered significant attention from traders Monday, the firm’s strategists called the S&P 500 valuation “lofty by almost any measure” and attached a 67 percent probability to the chance that the market would fall by 10 percent or more, which is the technical yardstick for a correction.”

  10. GYN LAB says:

    With the drop this morning overlapping, this could be an LD playing out 1988-2029-2004-2045-2026-???? (probably around 2070 pivot) also each of the waves look more like 3 waves, the 3-3-3-3-3 structure. from 2026-2051 then triangle for 2.5hrs and from 2044 it broke out upwards, with a target of 2070 for possible end of Micro 1 of Minute iii

  11. simpleiam says:

    Taking a little off the table here and letting the rest ride.
    If we get another nice pullback, I’ll buy, Buy BUY!

  12. All the bulls are LONG again, all the Bears have hit the exits. You know what happens next.

  13. SPX: Currently still on standard, expected incline (as with recent uptrends). Currently making a beeline for rectangle mid-point 2070.

  14. ABchart says:

    The ECB’s purchases program in detail.

    See you tomorrow🙂

  15. tommyboys says:

    RUT leading higher and at HOD here on the 50. This may provide resistance intraday as its already stretched but not necessary. Once she breaks we have a down trend line above near 1185. Once that goes it’s likely to new highs and IHS plays out. Could be a nice couple months upcoming🙂

  16. lunker1 says:

    Might test support at 2036 and then resume move up.

  17. spindoc73 says:

    From a psychological point of view, what more could be asked to create buying pressure among shorts and give bulls a chance to hold/add? Nonetheless the market is still chopping back and forth like it’s been washed ashore.

    That’s enough information for me to exit longs. Now gathering a case for looking in the other direction.

  18. zedozpipozzz says:

    Hi Tony
    What you think about eurusd / $xeu ? There are a positive divergence in daily chart, rsi5.

  19. gasman88 says:

    There are so many stocks that gapped down after big earning miss that are now challenging new all time highs. Just because Europe is printing money? I know markets are irrational, but we’re dealing with totally new beast.

    • In my opinion… we are in bubble territory and it could pop at any moment.

      • uncle10 says:

        love it newbie!!

      • fotis2 says:

        Franlkly since I started trading 5 years ago been reading of ‘The Crash’ on a daily basis on trading blogs and elsewhere resulting in a loss of a huge chunk of my account following said advice. I have come to the conclusion there is a conspiracy behind all the conspiracies of doomsday to take honest hardworking traders money by shorting the Market everytime it sneezes the wrong way…

          • fotis2 says:

            That it does.Funny thing happened the other day I have the basic ElliotWave pattern hanging on the wall of my ofice and was trying to explain to my 10 year old daughter how it all works where to buy and sell and and so on so she turns around and says ‘So you get 2 chances to buy and only 1 to sell!’ Well it took a 10 year old to point out that most basic of facts….🙂

          • tony caldaro says:

            Unless you are a bear, then you can sell every day =)

        • JD C. says:

          Fotis2, That is an funny story about your daughter. You better hand over your assets to her!
          I say it goes against human nature to trade. Not that it can’t be done, but it’s not easy. I’d rather trade a daily chart and manage from there instead of trading a 15 min chart. And manage a bigger chunk of change longer term. I would think day traders have been whipsawed to death lately.

          • simpleiam says:

            You’re kidding, right?! This whipsaw has been a huge day traders market.

          • fotis2 says:

            JD Its been tricky but strangely enough the time tested old standby basic day trading systems like 3bar reversals and OR breakouts continued to deliver the goods amazing in this day and age of a hundred indicators and multitude of fancy systems.

          • JD C. says:

            No, not kidding. A few more successful long term and swing traders out there than day traders I’d bet. My opinion if one wants to build wealth it would be hard to do over and over again day trading. But good luck to them.

          • simpleiam says:

            JD, I get it and agree, but there are some excellent day traders on this board. My point was that “whipsaw” is what day traders live for.

        Whatever else you might say about today’s stock market, it is nowhere near as overheated as it was 14 years ago. And that’s not a subjective view. My conclusion is derived from a data-driven focus on objective measures that were identified by the leading academic study of investor sentiment. That study, by Jeffrey Wurgler and Malcolm Baker, who are finance professors at New York University and Harvard Business School, respectively, was titled “Investor Sentiment in the Stock Market.”

        The professors identified five indicators of investor sentiment that, over the past half century, were highly correlated with investors’ mood swings between the extremes of pessimism and exuberance.

        Not surprisingly, the indicators showed a record level of investor optimism in March 2000. The picture they’re painting today is far different.

        1. Volume of IPOs. There were 123 new issues in the first three months of 2000, according to University of Florida finance professor Jay Ritter. There were 58 in the same period this year, according to Ritter.

        2. IPO returns. In 2000’s first quarter, the first-day return of the average initial public offering was an incredible 96%. During the first three months of 2014, it was 22%.

        3. Dividend premium. The professors, in a study, focused on the relative valuations of two groups of stocks: those of established, dividend-paying companies versus those of more speculative firms. They theorized that, as exuberance reaches extreme levels, investors become bored by established, dividend-paying companies. In March 2000, speculative companies on average had a 43% higher valuation than the dividend-paying stocks. The comparable premium today for stocks in the S&P 1500 index is 26%, according to data from FactSet.

        4. Share turnover. Over the first three months of 2000, NYSE-listed stocks’ turnover rate was an annualized 89%. For the first quarter of this year, it was 58%.

        5. Share of corporate cash derived from equity issuance. Corporations increasingly turn to the equity markets to raise money during periods of speculative excess. The equity share stood at 20% for the first three months of 2000. The most recent data from Wurgler, covering three months in late 2013, showed the equity share was 11%.

        The bottom line? None of the five sentiment indicators shows the market today to be as overheated as it was in March 2000.

  20. scottycj1 says:

    The Algo program is giving a sell signal on Bonds (TLT). It looks as though a bit more sideways to lower and the precious metals could give a sell as well.

  21. ABchart says:

    Don’t forget that next Sunday there are elections in Greece. Can disrupt the uptrend if Syriza win.

  22. The financially homicidal monetary policy continues. The much desired effect of increasing money velocity has been unwittingly depressed over and over again. Businessmen who can attain credit today will back off if they know credit will be even cheaper tomorrow. Even consumers refrain from buying a washing machine today if they think it will be cheaper tomorrow. If central planners really wished to put a rocket under money velocity they needed to threaten to raise rates a long time ago. Unfortunately the optimum time for this has passed. The socialistically inspired debt bubble is now without precedent and beyond saving. It has to crash and burn.

    • fishonhook says:

      It is crazy. Unfettered lunacy. To think how much greenspan and Rubin lectured the Japanese for not taking their medicine after their bust..keeping rates low, helping banks, buying their assets, suspending mark to market and now the greenspan/Bernanke/yellen mafia are doing the very same thing and other CBs ape them

  23. uncle10 says:

    with trillions and trillions of dollars/euros/yen/cad/aud, etc………. floating around and needs to be put some where and rates around the world near zero in some cases negative. Where is the money going to go??

  24. GYN LAB says:

    Sorry but I retract my earlier post after the V-shaped whipsaw… that probably was a quick wave 4 of Micro 1 of Minute iii, Counting so far:
    SPX 1988-2029-2004-2045-2026-???
    Probably the 2070 pivot area will stop this Micro 1 of Minute iii and I will eye the .618 & .764 retracement for a long trade

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