weekend update


Another month completed and the choppy activity continues. The market started the week at SPX 2118, gapped up on Monday and hit an all time high of 2126. Then it went into its recent choppy activity again until Thursday: 2095-2116-2097-2114-2091-2103-2079. Then gapped up hitting SPX 2108 on Friday. For the week the SPX/DOW lost 0.35%, the NDX/NAZ lost 1.50%, and the DJ World lost 0.90%. On the economic front reports came in just as mixed. On the uptick: Case-Shiller, personal spending, PCE prices, the Chicago PMI, the WLEI and weekly jobless claims improved. On the downtick: consumer confidence, Q1 GDP, pending home sales, personal income, construction spending and the monetary base. Next week is highlighted by the monthly Payrolls report and ISM services.

LONG TERM: bull market

We continue to track and label this six year bull market, from the March 2009 SPX 667 low to the recent April 2015 SPX 2126 high. Quite an advance from the depths of the great recession. We are counting this bull market as Cycle wave [1]: the first bull market of a multi-generational Super cycle wave 3 bull market. Historically, super cycle bull markets last about 70 – 80 years, with several bull/bear markets along the way. Super cycle wave 1 lasted from the years 1932-2007.


Cycle wave [1] bull markets unfold in five Primary waves. Primary waves I and II completed in 2011, and Primary wave III has been underway since then. During Primary I five Major waves unfolded: with a subdividing Major wave 1 and simple Major waves 3 and 5. During Primary III five Major waves are also unfolding. However this time Major wave 1 was simple, Major wave 3 was quite extended, and Major wave 5 is now underway. When Major 5 concludes, this will also end Primary III. Then after a Primary IV correction, probably the steepest since 2011’s Primary II correction, Primary V will take the market to new all time highs. We still expect a bull market peak in the year 2017.

MEDIUM TERM: uptrend

While Major wave 4 was getting ready to end back in January. The ECB announced the plans for their own quantitative easing program, which has been termed EQE. On the day of the announcement the SPX closed at 2063, and the DAX closed at 10,436. We then made some calculations, using the FED’s QE programs as a guide, and anticipated strong upward moves in the SPX and DAX into 2016. The DAX continued its uptrend, which had started in October, and the SPX started an uptrend on the first trading day of February.

Since the day of the ECB’s announcement, January 22nd, the DAX has risen nearly 19%, recently hitting 12,391 before the April decline. Yet, the SPX has only risen 3%, hitting 2126 this past Monday. In fact, since the late February SPX 2120 high the SPX has remained in a choppy sideways 75 point trading range. Much to the chagrin of bulls and bears alike, as we have all struggled to sort out the short term wave structure.

After making an all time high on Monday, then watching the market fail again to build on those highs, and observing some market leaders lose more than 20% seemingly in hours, we decided to take a look at our long term indicators. We review these indicators when there is a potential completed five wave structure in the market. When we look at the four major indices, the SPX, DOW, NDX and NAZ, we can count a potential five wave structure completed from late 2011. If Major wave 5 is a simple, non-subdividing, uptrend. Thus far it qualifies with recent uptrend highs in the SPX/NAZ/NDX and a downtrend confirmation in the DOW.

Our long term indicators are a combination of six important indices and indicators. At bull market highs, historically, they have all displayed negative divergences as the general market has made new highs. Suggesting extreme caution. At the 2011 Primary I high, 4 of the 6 displayed negative divergences, suggesting caution. The market then had a steep decline in Primary II. In 2013 negative divergences started to build, but the SPX/NAZ/NDX continued to uptrend and they cleared. Currently four of our six indicators have not made new highs since 2014. So negative divergences are building again.

As we reviewed the charts we noticed the weekly RSI/MACD have negative divergences as well (see chart above). The monthly RSI has been in a negative divergence since 2013, and we have just had the first negative MACD crossover since 2011 (see chart below). The last observation is this. During the 2011 Primary I topping out phase the SPX remained in a 120 point trading range for seven months before Primary II kicked in to the downside. Currently the SPX has just entered the seven month of a 150 point trading range, even though the market is 50% higher in value.


What all this analysis suggests, is that it is time to get somewhat defensive until this market starts impulsing again. Primary III may be in the process of topping out. The key level to watch going forward is the 1973 pivot range. Should the market break that range to the downside Primary IV would probably be underway. Then a revisit to the October 2014 low at SPX 1821 would be quite normal, and expected. For now, until the SPX breaks 2040 to the downside it could remain in the same choppy pattern it has for the past two months. Medium term support remains at the 2085 and 2070 pivots, with resistance at the 2131 and 2198 pivots.



It has been a tough couple of months for those trying to count the short term wave patterns. All potential impulse waves since March ending up looking just as corrective as the pullbacks. There has been a lot of choppy activity with little upside progress. We have tried a few potential impulse patterns, but each time they have broken down. Until we see a clear five wave pattern to the upside, we will view the month long activity from SPX 2046 as some sort of B wave of either Minor 2 or Intermediate ii (see chart below)


Worse case scenario, as noted above with the many building negative technicals, we can view the entire uptrend from the Major wave 4 SPX 1981 low as an unfolding diagonal triangle Major wave 5 (see daily chart).

The B wave scenario suggests the market tops out soon, and then corrects down to the 2040’s to complete a complex irregular flat. The diagonal scenario suggests the market tops out soon, then drops through the SPX 2040’s area, the Major wave 4 low at SPX 1981, and down to the October 2014 low at SPX 1821. Either way this uptrend should be topping soon, and then we will see what unfolds. Short term support is at the 2085 and 2070 pivots, with resistance at SPX 2115/2120 and the 2131 pivot. Short term momentum ended the week overbought.


The Asian markets were mostly lower losing 1.9%.

The European markets were also mostly lower losing 0.8%.

The Commodity equity group were all lower losing 0.5%.

The DJ World index is still uptrending but lost 0.9%.


Bonds are now downtrending and lost 1.3% on the week.

Crude is still uptrending and gained 3.0% on the week.

Gold is also downtrending and lost 0.5% on the week.

The USD is downtrending as well and lost 1.9% on the week.


Monday: a speech from FED governor Tarullo at 9am, then Factory orders at 10am. Tuesday: the Trade deficit and ISM services. Wednesday: the ADP index and a speech from FED chair Yellen. Thursday: weekly Jobless claims and Consumer credit. Friday: monthly Payrolls (est. +234k) and Wholesale inventories. Best to your weekend and week!

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

About tony caldaro

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201 Responses to weekend update

  1. GYN LAB says:

    1 wave up to 2121 from 2077… a of the last leg of ED? or start of wave 3?

  2. ABchart says:

    ES 30 minutes: http://hpics.li/ab78849

    Thank you all and see you tomorrow!

  3. berniebaruch says:

    Vix battling back after making a low around 12 is a new twist in this upward choppy market. Breakout above today’s high would be interesting.,

    • mjtplayer says:

      I think today’s intra-day low print in the VIX at 12.10 is a “bad tick” – can anyone confirm? When you look at the 1 minute chart, something isn’t right.

  4. zepfan123 says:

    Market still a tough read here unable to officially break out to a new ATH’s on the Dow,but I won’t be surprised if they close this in the red today. To get me excited about the downside possibilities..we’ve still got to start closing below SPX 2070..which would be a great short trade in itself just getting back down there from SPX 2114. Hard to get real confident about making a call more than 10 OR 15 SPX points either direction. Back to SPX 2000 by tomorrow ? I’ll put the odds at 65/35.

  5. Mr C, the market looks unbelieveably resilient again today…I m not a believer but just entertaining the possibility–what would be the odds of an S&P breakout above 2140 causing huge shortcovering and then a wipeout of all negative divergences?To the point, what level on S&P would do just that? Thank you in advance.

    • tony caldaro says:

      what level would cause short covering? unknown to me
      maybe if we clear the 2131 pivot
      it would take quite a rally to wipe out all divergences
      but that is not required
      just one would do it

  6. ABchart says:

    Hello Tony!

    Did you read this article? if so, what is your impression please?


    • tony caldaro says:

      agree regarding Bonds
      who in their right mind would lend any government money at these rates?

      • ABchart says:

        I am personally of the opinion of Bill Gross for all European rates close to 0, while some of them were 6 or 7% (Spain, Italy …) is against nature, and reflects a quickly constructed bubble. I fear that the ECB can not lead his QE to completion or it must change it and buy something else that the obligations of states.
        But Warren Buffet has said this morning that if rates remain close to 0, the shares are not expensive.

      • Who are these lenders? Well, IMO, I think that the vast majority of these lenders are the CB’s themselves and those institutions (e.g. banksters, bond funds, sovereign funds, etc) mandated by law and/or their govts to buy bonds. Maybe RC can provide us with some insight on this topic.

        • rc1269 says:

          you rang?
          yes El Mat, you are essentially correct. Generally I’d say the bulk is driven by insurance companies, pensions (public and private), and then to a lesser extent other funds such as sov wealth and other CBs. I’m not sure what a “bankster” is, though I read that name often.
          Insurance companies and pensions will always have to buy sovereign bonds (US treasuries for US-based). There is no way around it. Regulatory risk-based capital rules will always require fairly substantial sovereign/treasury investments by insurance companies. Pensions, due to their fiduciary responsibilities to conservatism/capital preservation, will also do require the same. On the corporate side of things (banks…banksters…?), you will always have the sov/tsy market be a large component of the collateral market, required to be posted against all sorts of lending types.
          The problem with their sov markets is they’re just not deep enough for the ECB and all the above mentioned parties to get the bonds they need. There are substantial liquidiy issues building over there because of it.

  7. Still in chop mode. Friday and today were good days for the Bulls, but its the beginning of the month new inflows of money/ Nothing has changed. A close of 2120 will be Bullish for sure a close under 2107 leans bearish in my opinion. Still a fight between free money and weakening growth. who wins the short term battle, we shall see. I had thought 2131 before heading lower. But anything can happen at this point. Good luck all and be nice.

  8. Tony, I noticed you deleted my response to sloop. With all due respect, Its your site but I do not understand why would you delete my post and leave his? His post is undoubtedly inflammatory and disrespectful towards me. I may post bearish views but I do not provoke or go out of my way to belittle anyone.

  9. fotis2 says:

    No offence to anyone but hey guys if we all just stuck to posting a view,moving on and giving the next guy a chance maybe we’d all learn something.This thing of who said what, when,and who is the cleverest of all… is taking us nowhere we are after all just guests on a free site thanks to Mr. Caldaro lets show some respect.

  10. buddyglove says:

    Just wanted to say I’m gonna lie-low for a while on this blog. I have been under a great strain lately as my wife is fighting breast cancer and this has caused me to flare up sometimes at others. This is unacceptable and I appoligise to Fish, and to others for causing the forum to clog with unnecessary posts. I am planning to attend restorative yoga classes run by my niece to counter this tension… hopefully before someone punches me in the face.
    As for mkts I am stll bullish global equity for now. Also i believe most commodities are far too cheap considering inflation is quietly creeping back. I like NG,Cotton and Oats, as lows look in, or very close for medium term/multimonth rallys. Basing/ divergent structure, sentiment and accumulation technicals appear to confirm this.
    Aimho and good luck/health to all.

    • sloop says:

      all the best BG

    • JeffMilano says:

      Thanks BuddyGlove!

    • johnnymagicmoney says:

      hey glove sorry to hear. The big C is tough. I have clients though that are developing breast cancer drugs and things look promising. Lots of help out there. Wish you luck

    • tony caldaro says:

      sorry to hear that Buddy
      prayers out to your wife

    • BG, sorry to hear, wishing you and your wife a speedy and health recovery.

    • ABchart says:

      Thanks Buddyglove! good luck to you and your family.

    • mjtplayer says:

      Well wishes to you and your wife buddy

    • chrisk44342 says:

      Very sorry to hear that.

    • firedance says:

      Buddy I am so sorry to hear about your wife. I wish both of you all the best and you have to be very strong now. I will make special prayer for you both.

    • rc1269 says:

      sorry to hear BG. will miss your color. best of wishes to your wife and your own health as well. cheers. -rc

    • 7dayyss says:

      Sorry to hear Buddy, best to the Mrs and you. Might be cathartic still still drop a comment or two occasionally!

    • 1313jitu says:

      Very good reading on how to conquer cancer at http://www.drmercola.com
      Take time to make up your mind by reading research not poking in the headlines. Good luck!

    • reddragonleo says:

      I had skin cancer once Buddy. Cured it myself. It was like about the size of a large marble just below my left ear. It also had roots inside that the doctor said looks like a crystallized Christmas tree, so they would have had to go deep into my neck to get the roots if I’d had done surgery.

      But I knew I could cure it myself, so I decided NOT to get my neck cut on. The cure was simple and only cost me about .50 cents. I was done with an eggplant and vinegar. I already had the vinegar around (that I’d use for salads and stuff) so I just had to buy one eggplant.

      Take the eggplant and the vinegar and put then in a blender. Mix them up and you’ll get a substance that looks like a dark apple sauce. I just pasted a dab of it on my neck several times a day in the beginning and then once a day later on. It took about one month to eat out all the cancer cells and leave the healthy cells alone.

      At first it looked ugly as it widened the spot on my neck to about the size of a quarter and turned it a crusty black after it dried from being on my neck for several hours before I re-added more.

      This was the cancer that was being eaten and dying as a nasty black scab I guess. But after about one month I started to see fresh pink skin starting to show up. Naturally I never pulled the black scab off as I just let it fall off naturally when it was done.

      I stopped using the stuff after one month and let my skin heal up. It took several months for the deep indention to fill in, and I still have a scar… but NO cancer. Of course this was used for skin cancer but I see no logical reason the same combination can’t be made into an eggplant salad with vinegar dressing that can be eaten a few times per day to get the substance inside the body so it can attack internal cancer.

      I can’t say for sure it will work but it certainly won’t hurt. Plus you (your wife) will get the added benefit of eating some healthy foods as well. Anyway, just sharing my story…

    • torehund says:

      Don’t feel bad about anything Buddy. Give your wife your fullest of support, and scale down all matters that are of much lesser importance. And don’t blame yourself.
      Good recovery for your wife.

    • hkloon says:

      Sorry to hear that buddy, good health and luck to you both

    • lunker1 says:

      get well soon Mrs BGL

    • uncle10 says:

      Buddy, Sorry to hear this my friend.
      I highly recommend the yoga and would include also meditation in helping with the stress.
      Take care, good luck, and good health

  11. tony caldaro says:

    Enough with the bantering back and forth
    This kind of noise will just be deleted

  12. VIX is screaming at the top of it lungs, silver is yelling at the top of its lungs.

  13. All sorts of whipping going on; but you can’t go against current strength no matter how suspect the feel is (market could care less about my feelings). I am neutral as of now taking minor loss on short position. Here is what I see…

    Buy above 2121.61 with Stop 2099.85
    Sell below 2086.87 with Stop 2108.58

  14. At this level it s probably wise to take money off the table.At best we re in a trading range and at worst a 5-10% correction.I take that back-at worst is the s&p goes up 10% this week and I m in cash lol…but as Harry Caray used to say,”That s baseball!!”.

  15. mjtplayer says:

    Tony – do you have any comment on the VIX BB, now just a 280bps range? That’s very tight.

    Tight BB suggest a sizable move in the near future, but given the VIX is already in the 12’s, it’s hard to imagine a sizable move lower. I guess it could spike down to 11 or in the 10’s, but that seems like a much lower probability than a spike higher into the 16’s or 17’s.

    I will say, if the markets don’t head lower this week and/or next, then it probably won’t happen till June; we’re just 2 1/2 weeks from Memorial Day Weekend meaning volume and trading are going to dry-up dramatically starting about 2 weeks from today.

  16. gasman88 says:

    You can always count on Mr Market throwing you a curveball. It looked like the market was breaking down on Thursday with more downside likely, but today we are 44 S&P points higher on no news. So is the bull trap the next surprise?

  17. stephenk1980 says:

    Whatever correction was brewing has most definitely been postponed. Only hope of a decent entry point now is for the SPX to retest the wedge around 2107/8.

    • Page says:

      Swift move to downside may happen as early as this week Friday or next week Monday and yes correction will start next week.

      • stephenk1980 says:

        Personally I think the market has had plenty of chance to nose dive and hasn’t. Bearish sentiment has built and now the decks are going to be cleared in preparation for the real move downwards, but this isn’t imminently IMO; however, if the Dow doesn’t breach 18190 then it leaves the door open for your scenario, but if it does, I’m highly doubtful and will probably go long to scalp a little of the impulsive move I believe would be taking place.

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