weekend update


The week started off at SPX 2102, then dropped to 2057 on a gap down Monday. After that the market gapped up three days in a row, but only managed to get back to SPX 2085 by Thursday. Then ended the holiday shortened week at SPX 2077. For the week the SPX/DOW lost 1.20%, the NDX/NAZ lost 1.25%, and the DJ World lost 1.6%. On the economic front positive reports continued to outpace negative ones. On the uptick: pending home sales, the Chicago PMI, consumer confidence, the ADP, ISM manufacturing, construction spending, the WLEI, plus the unemployment rate declined. On the downtick: Case-Shiller, auto sales, factory orders, plus weekly jobless claims rose and payrolls declined. Next week’s reports will be highlighted by the FOMC minutes, ISM services and Consumer credit.

LONG TERM: bull market

For the past eight months the market has remained in a 162 point trading range with the mid-point around SPX 2054. Which was nearly hit on Monday (2056). During this period some market pundits have declared: the market is now extremely overvalued, the EW pattern suggests a bull market top, equities are in a bubble, etc. Our analysis suggests none of these claims can be confirmed. The claims that equities are in a bubble and ‘now’ extremely overvalued does not match basic valuations.

The last time equities were in a bubble was the late 1990’s. Then the PE multiple on the SPX was 37 while the 10YR bond rate was over 6.5%. The earnings yield (1/37) 2.7% was less than half the bond yield. That’s a bubble! Currently the SPX PE is 20, for an earnings yield (1/20) of 5% while the 10YR rate is 2.4%. No bubble here. As for the market is ‘now’ overvalued. We do not see that either. In late 2013, more than 18 months ago, the SPX reached the same PE multiple it has today: 20. During that entire 18 month period the PE multiple has ranged from 18 to 21. The reason the market is now higher is simple because earnings are now higher. There has not been a multiple expansion to suggest an overvaluation.

Lastly, each bull market in EW/OEW terms unfolds in five waves. What creates the five waves are two significant selloffs during the long term trend. These two selloffs are the second and fourth waves of the bull market. Generally they are the two biggest corrections in the bull market. You can go back in history and they are easily identified. During this bull market we have only witnessed one significant correction in 2011: -21.6%. Every correction since then has been less than half that value. And since mid-2012, there has not been one correction of even 10%. Clearly the fourth wave of this bull market has yet to occur. Until it does we can not have a fifth wave to end the bull market. No market top yet.


We continue to label this bull market as Cycle wave [1] of the next multi-decade Super cycle bull market. Cycle wave bull markets unfold in five Primary waves. Primary waves I and II completed in 2011, and Primary wave III has been underway since then. When it concludes there will likely be the largest correction since 2011 for Primary IV. Then when it concludes a rising Primary V will end the bull market. We continue to expect a P3 top in the year 2016, followed by a quick P4 correction, then a P5 rise into the year 2017. Targets for Primary III remain on the weekly chart above.

MEDIUM TERM: downtrend

After a new all time high at SPX 2135 in mid-May the market entered a downtrend. We have counted the uptrend from early-February to mid-May as a leading diagonal triangle, and Intermediate wave i of a subdividing Major wave 5. This downtrend is Intermediate wave ii. Major waves 1 and 2 had occurred in late-2011, and Major waves 3 and 4 just ended in late-2014 to early-2015.


Thus far the downtrend appears to have completed Minor wave A, with a double bottom at SPX 2072; and Minor wave B, with a sharp rally to SPX 2130. Minor wave C is currently underway. When we apply Fibonacci retracement levels to the recent uptrend we arrive with the following SPX levels. At SPX 2076 (38.2%), SPX 2058 (50.0%), and SPX 2040 (61.8%). Notice Minor A stopped just 4 points under the first level. And this week, the ongoing Minor C stopped just two points under the second level. The market is respecting these retracement levels.

We continue to look for downtrend support around the low SPX 2040’s and, worse case, the 2019 pivot range. We would also like to see the NDX/NAZ confirm a downtrend while this is unfolding. They have yet to do so. Medium term support is at the 2070 and 2019 pivots, with resistance at the 2085 and 2131 pivots.


The short term pattern has been quite choppy, which is no surprise considering the choppiness of the previous uptrend. After the complex three for Minor A, we had a sharp, almost impulse looking Minor B. Minor C has thus far declined in seven corrective small waves to SPX 2056 on Monday. We labeled that Minute A. Over the next three days Minute B rallied to exactly the 2085 pivot. That was the minimum expected for Minute B, suggesting it can still continue to chop its way higher. When it does conclude Minute wave C should take the market to its downtrend low.


Short term support is at the 2070 pivot and SPX 2056, with resistance at the 2085 and 2131 pivots. Short term momentum ended the week just above neutral. Best to your trading the post-Greek referendum results on Monday.


The Asian markets were mixed on the week for a net loss of 0.7%.

The European markets gave back most of last week’s big gains and lost 3.3%.

The Commodity equity group were all lower for a net loss of 1.1%.

The DJ World index is in a downtrend and lost 1.6%.


Bonds remain in a downtrend and lost 0.7% on the week.

Crude is now in a downtrend and lost 5.3% on the week.

Gold remains in a downtrend and lost 0.7% on the week.

The USD confirmed an uptrend and gained 0.7% on the week.


Monday: ISM services at 10am. Tuesday: Trade deficit and Consumer credit. Wednesday: the FOMC minutes. Thursday: weekly Jobless claims, and a speech from FED governor Brainard. Friday: Wholesale inventories and a speech from FED chair Yellen. Best to  your weekend and week!

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

About tony caldaro

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191 Responses to weekend update

  1. reddragonleo says:

    I could be totally wrong on this as we know how manipulated the market is… but the short term charts “suggest” a big up day tomorrow (Tuesday).

    • NEWBIE says:

      so does the afterhours movement

      • reddragonleo says:

        No… it means 2100 SPX probably, if not more? Lots of resistance in that zone from a falling trendline that should be in the 2090-2100 area by Friday. Also, there’s the 20EMA on the Daily SPX at 2092 and the 50EMA at 2096 to add more resistance with the various trendlines and finally a gap fill from 6/26 at 2100.49… so I see plenty of reasons for the market to stall out in that zone later this week.

        But tomorrow should but up nicely from the alignment I see of the 4hr, 2hr, and 60min charts all pointing up from very oversold conditions on both the ES Futures and the SPX cash. I use both for forecasting as if one wants to go down while the other wants to go up I find it is usually a choppy day. But if both align together it’s usually a strong wave 3 or C of some kind.

  2. llerias7 says:

    The 200 dma was hit these days near SPX2056…I sense that is as low we can get this month…If I was compelled to get in I would do it in the long side…but sometimes Cash is a good position, too.

  3. NEWBIE says:

    Any Crude Oil Trader on here? If so, thoughts on todays big move over 5% down.

  4. mjtplayer says:

    tony caldaro says:
    July 6, 2015 at 1:37 pm
    European banks hold very little Greek debt
    It is mostly owned by European governements

    Exactly. Greece needs to default and wipe the slate clean in order to move forward. Banks, bailout funds, etc need to account for the losses. Most of the Greek debt is owned by various European governments, which means the politicians of those countries need to go back to their people and tell them/explain the hundreds of billions of Euros worth of loans they made to Greece will be defaulted upon – i.e. their hard earned tax money, which was loaned to Greece, will go down the drain.

    That won’t go over well and will make it very hard to convince taxpayers of these countries to pony-up the next time a country needs help.

  5. Tony: Thank you very much for posting your weekend report on a major national holiday. Your dedication and generosity in wanting to help others is far above and beyond the call of duty.

  6. Greeks are so optimistic, here is how Greece see the debt talks,

  7. lunker1 says:

    2.1 SPY cash pts up from low = 21 SPX

  8. ABchart says:

    SPX 60′ chart is bloqued😉

  9. Too much bullish complacency, how do we know, well you can always tell when you’re speaking to one,

  10. mjtplayer says:

    Clearly, the next date to watch in 7/20, when Greece’s debt payment is due the ECB. A missed payment on 7/20 would put Greece in outright default.

    With Greece’s bailout package having expired on 6/30, the prospects of any kind of official deal or bailout package in the next 2 weeks are slim to none.

    This isn’t over yet, not by a long-shot…

    • tony caldaro says:

      S&P states Greece is only in arrears, not default, because these are loan payments.

      • Just Troika’s way of grant Greece a “grace period” without actually calling it that for fear Greek will further extend it as long as they can just like our Fed is in arrears with the interest rate hike…..LOL

      • mjtplayer says:

        Greece is in arrears now to the IMF. To my knowledge, they will be in default if the ECB payment is missed.

        Greek 2yr notes blew-out 1,200bps today, now trading at a yield of 49.55%. That’s pricing-in default, period.

        • uncle10 says:

          well there you have it MJ. its priced in as default already. whats next?

          • mjtplayer says:

            Actual default.

            The bonds may be pricing-in default in the markets, but the European banks, EU bailout funds, etc have not – no “mark to market” mandate – unless they’re non-performing (default). They’re still holding Greek debt and accounting for it at “par”, which is a complete joke.

          • Bulls are complacent, they don’t know how to price in a Greek default…Period!….Oh yea! they sure did a fine job of pricing in each and every crisis prior to this one. Most of the time market undergoes a latent response to pricing in economic realities because the vast major of players are too optimistic of the future. Just like in the clips I posted earlier today.

          • tony caldaro says:

            European banks hold very little Greek debt
            It is mostly owned by European governements

          • uncle10 says:

            el mat, bulls are complacent? what are you basing that statement on? it appears to me that most people are expecting a correction ( including me). certainly most all the surveys of investors and advisors show bearishness/cautious. and of course our trusty cnn fear greed index shows extreme fear.

    • ABchart says:

      I think that a deal with Iran will signal the end of the consolidation (07/15?). Lots of people think we are on the eve of a crash, but the structure is bullish. My update SPX, DAX and CAC tomorrow.

      • ABchart says:

        Probably 2% to 3% decline from the current level, before the resumption of the uptrend.

        • I would love to see that; my shorts will be quite profitable then, and I’ll be ready to join you on the upside move.

          • same here. My UVXY is now (finally) positive. Another 40pt drop in the S&P near term and I’ll book profits and rotate back into UPRO for the next uptrend. Backyard Pool install and landscaping completed this summer (thanks TC and UPRO!). 2 week vacation to PVR last month (will pay for with UVXY proceeds, thanks Newbie!)…now to start planning for next year’s endeavors, hmmm maybe a trip to Greece (Bucket List). GLTA!

          • Market Daddy, have you considered trading UWTI? I guess this might be good for another 10% down move to 1.90-2 then back up again…

  11. Thought I saw a maintenance notice end of last week about Stockcharts. Guess it didn’t go so well. 😉

    All this talk about the EU and possible dissolution is amusing and pure sideshow. They are on the right track, have established an appropriate currency (divorced from the Nation state), and will be around long after the dust settles. For the most part, all debt is internal debt. The socialistic nature of many (most?) European countries has been found wanting. A return to such policies is no longer possible. Next up, USA. Plan accordingly…

    Seems rather hard to believe we won’t be hitting the 2040 area, or lower, of the SPX.
    Numbers… Short signal from 29 JUN… Still wanting to continue down, though tentatively…
    Trend change above 2093.13
    Sell below 2058.92 with Stop 2083.64/2080.27 Target 1998.24

  12. manunidhi21 says:

    Namaste Tony!
    charts not updating ?

  13. cicelyalaska says:

    Chinese and Euro wealth fleeing to US Market. Musical chairs?

    • kjb0 says:

      Why would the Chinese buy here when they will have reserve currency status in October? All backed by gold.

    • out of all the indexes US has the most to lose, to catch-up with European and Asian indexes…JMHO…I would not advise here…

  14. llerias7 says:

    Tony, we are aproaching your projected bottom on DAX (10800 today)…
    Can we assume the bottom for wave 4 is around the corner?

  15. Maybe we go UP a couple hundred on Greek no vote…lol.Mr C what is your reaction to the muted(so far) market reaction this morning.Just bouncing off trendlines and pivot points?

    • tony caldaro says:

      what Greece does is only important to Greece
      markets have been over reacting

      • What if Italy steps up after Greece does whatever it does and says “we might exit the EU if OUR austerity isn t lessened”.Could be a domino effect.

        • tommyboys says:

          Eurozone will not exist in its current form in five years. Will be devastating Europe and of course affect most of globe. We have a couple of years of continued bull prior however.

      • tommyboys says:

        Concur – EMPHATICALLY! Really tired of the media inducing fear over Greek economics. It HAS provided some good entries however. H2 gonna ROCK in US 🚀

  16. alexhartley1 says:

    Hi Tony. I am interested in the BABA chart. What is expected to come after the X wave you have marked on the chart? Thanks in advance.

  17. fishonhook says:

    Is stockcharts down or is it just me?

  18. mjtplayer says:

    So far, identical pattern to last week. A huge drop in futures Sunday night, an improvement into Monday morning halving the losses, market gaps down but initially bounces on the “buy the dippers”. If the pattern continues, we should turn around and bleed-out the rest of the day, testing the overnight lows of SPX 2,043

  19. Hi Tony,

    As Nifty index in 5th wave , so how much tgt for that??

    Is it 1=5 , 1st wave have points 1700 approx. so can we say tha now tgt for 5th wave @9600in coming days




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