Monday update

SHORT TERM: gap down opening, DOW -350

Over the weekend the likelihood of a Greece default increased dramatically. As a result the SPX futures gapped down nearly 30 points in overnight trading. After trading as low as 40 points down it started to recover. Overnight the Asian markets lost 2.1%. Europe opened lower and lost 3.1%. US index futures recovered some overnight, but were still down about 20 points when the market opened with a gap down at SPX 2083. After a tick down to SPX 2082 the market tried to rally. Just before 10am the SPX hit 2091 then started to pullback again. At 10am Pending home sales were reported higher: +0.9% v +3.4%. Around 11am the SPX dropped below the opening 2082 and headed even lower. At 2:30 the SPX hit 2064, bounced to 2070 just past 2:30, then hit 2057 just before a 2058 close.

For the day the SPX/DOW were -2.0%, and the NDX/NAZ were -2.4%. Bonds gained 41 ticks, Crude lost $1.45, Gold rose $5, and the USD was lower. Medium term support drops to the 2019 and 1972 pivots, with resistance at the 2070 and 2085 pivots. Tomorrow: Case-Shiller at 9am, then the Chicago PMI and Consumer confidence at 10am.

With the big gap down last night we knew the potential uptrend scenario – growth sector driving cyclicals higher – was in jeopardy. When the market opened below SPX 2089 that possibility became more of a reality. The sloppy potential uptrend activity, we noted on Thursday, has turned into a resumption of the downtrend today. Instead of growth leading the cyclicals higher, it appears the cyclicals are leading growth lower. This morning we updated the SPX charts to display this scenario. We would now expect the NDX/NAX to confirm downtrends, while the SPX looks for support in the lower 2040’s or 2019 pivot range. No change to the longer term count, as we are still expecting this correction to be Intermediate wave ii with an Intermediate wave iii uptrend to follow. Short term support is at SPX 2040 and the 2019, with resistance at the 2070 and 2085 pivots. Short term momentum ended extremely oversold. Best to your trading, and kudos to those that anticipated the cyclicals leading lower!

MEDIUM TERM: downtrend resumes

LONG TERM: bull market


About tony caldaro

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215 Responses to Monday update

  1. zepfan123 says:

    Well all we know is that SPX 2070 looks like it may now already be a resistance level instead of of a very strong support level, as it’s been for many months. I think that May ATH close of SPX 2131.82 will hold for a good while. i’ll give the market a few days into next week to see if it can push back up through 2070 with any velocity…but if it doesn’t,then I think we can talk seriously about going below that next big number of SPX 2040.

  2. stmro says:

    2070 held, but damn, this is moving quickly. At this rate i’ll be buying the close if we close negative.

  3. Is Pretzel and myself the only EW guys who like calling for inverted flats? IMO, we are witnessing a potential inverted flat wave 4 hence the LOD should be retested and taken out

  4. torehund says:

    Reverse bank run on the horizon: Well folks are stuffing Euros in their mattress and concomitantly homeowners in Europe that once bought Swiss currency are now getting antsy converting back to their native fiats…
    Whats needed to finalize the “fiat in the Mattress bubble” is a pan- run for euros in Europe (not just Greece, then the run may totally reverse itself with folks running TOWARDS the banks with their fiats -euros in plastic bags, in a futile attempt to buy the Greenback.
    Lesson: Mattress isn’t always the safest place to keep fiats, that is if you need to convert them in a hurry. Get ready for the wild times.

    • torehund says:

      It may be the Governments attempt to correct the gross currency abnormalities that will ultimately force rate hikes and inflation with a “stag” in it, and not healthy growth driven demand….well we already know this is a Goaty bull…

  5. blackjak100 says:

    from 2130 – I count 13 waves (impulsive) down to 2056….which could imply we are in some type of 2nd wave correction targeting 2085 pivot. It looks like we may have completed ‘wave a’ of the 2nd wave correction already and now in ‘wave b’.

  6. GYN LAB says:

    Today could be a w4 flat between 2056 & 2074, I am hoping for a final flush down to 2040 area tomorrow (bang on the 1st July Bradley turn date) for some swing longs!

  7. Hi sibyn, today’s market is going to close in only one hour. It seems 2076 is strong resistance. Do you still think 2090 for today or any alternate? Thanks.

  8. anyone recognize the current wave pattern off of todays low?

  9. This is the rally I was hoping for to lighten up…unless it gives it all back by closing.2074 and counting.Good luck all.

  10. stmro says:

    EU official: Greece to send new letter with fresh proposals

  11. fotis2 says:

    Of interest to mechanical traders 3bar reversal on 30min target met followed by 3bar reversal on hourly validated potential target 2083 in turn validates DB target the gap 2098.Unless of course a piece of bad news throws a spanner in the works but thats trading I often wonder if it is the market that dictates the news and not the other way round.

  12. rc1269 says:

    don’t get teed up y’all

  13. stmro says:

    Ok forget 2053, it’s bouncing already. 2070 should be resistance as it was major support on the way down. Short there with a few pts of risk would be good risk/reward.

  14. wavediver says:

    As long as volatility rises no further today, I’d like to a 37-46 bounce next before more decline. I’m looking for at least Tony’s 2019 pivot now.

  15. 56rambler says:

    Thanks, Mr. Caldaro,

    Is there enough of a positive divergence (on the hourly SPX chart) to call a bottom? Or are you looking for similar on a longer time-frame?


  16. stmro says:

    We’re short term oversold, so thinking we bounce off 2053 (i.e. make a lower low with +ve divergence) for a number of reasons:
    – 2053 is the 200 dma
    – 4 down days in a row is rare (assuming today ends down)
    – The market has priced in a technical Greek default – could be a buy on news event

    Bounce or no bounce, i believe we’re going to get a minimum 10% correction over the next few months to the low 1900s. Given the sustained range compression we’ve had this year, i can’t believe that a break of that range would only result in a move of a few pct.

  17. Okay, last one, and this is just too good to pass up; and with Newbies success, he just might want to spread the wealth around a bit. You know, help a brother from another mother…

    Greek Bailout Crowdfunding


  18. lunker1 says:

    +D similar to mid March 2039 low

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