weekend update

REVIEW

The market started the week at SPX 2077. After a gap up opening on Monday the SPX hit 2101. On Tuesday it hit SPX 2112, and SPX 2114 on Wednesday. Then after a gap up opening on Thursday the SPX hit 2124, and SPX 2129 with another gap up on Friday. For the week the SPX/DOW rose 2.1%, the NDX/NAZ rose 4.9%, and the DJ World rose 1.9%. Economic reports for the week, which were plentiful, also came in mostly positive. On the uptick: business inventories, the CPI/PPI, housing starts, building permits, the NAHB, industrial production, capacity utilization, the NY FED; plus weekly jobless claims and the treasury surplus both improved. On the downtick: retail sales, export/import prices, the Philly FED, the WLEI and consumer sentiment. Next week, a quiet one economically, will be highlighted by Leading indicators and more reports on Housing.

LONG TERM: bull market

Two months ago, when we were doing annual updates on many of the markets worldwide, as well as, the various asset classes, we wrote a report on the stock market. We did not publish the report, because we were waiting to see of the SPX downtrend would bottom in the low 2040’s and then kick off a new uptrend. With those two event now in the books we will publish the report on Sunday. We will warn you though, the report is likely to shock both bears and bulls alike.

SPXweekly

The long term count remains on track. We continue to label this bull market as Cycle wave [1] of the new Super cycle 3 multi-generational 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 the low. Primary I divided into five Major waves, with a subdividing Major 1 and simple Major waves 3 and 5. Primary III is also dividing into five Major waves, but is alternating with that structure. Major wave 1 was simple, Major wave 3 was quite subdivided, and Major wave 5 is subdividing as well. When Primary III concludes, probably next year in the SPX 2500+ area, the largest correction since 2011 should unfold for Primary IV. Then when it concludes Primary V should take the market to new all time highs.

MEDIUM TERM: uptrend

Since the beginning of the year, and even the last two months of 2014, the market traded in a narrow 160 point range with a rising bias. We had counted a Major wave 3 high in December at SPX 2079, then an irregular (usually bullish) Major 4 flat bottoming in February at SPX 1981. After that low the market uptrended to a new high at SPX 2120 by late February, and then, oddly enough, entered a 90 point trading range for nearly five months.

SPXdaily

We continued to see a rising uptrend from the early February low to the actual current all time high at SPX 2135 in mid-May. This wave pattern could best be described as a leading diagonal triangle (abcde). When the SPX finally completed this pattern and confirmed a downtrend, the downtrend was just as choppy as the previous several months. We considered this entire process as a high level consolidation. Our target for the downtrend was the SPX low 2040’s, since 2040 represented a 61.8% retracement of the entire February-May uptrend. A week ago Tuesday the SPX hit 2044, rallied to 2084, then retested that low at 2045. This retest fit quite nicely with what we were observing in the NDX/NAZ, and the short term patterns of the SPX.

From that SPX 2045 low the market has risen for seven consecutive days with higher highs and higher lows. Recapturing all but 6 points of the entire 90 point, multi-month, downtrend in just seven days. This certainly looks like a kickoff to the Intermediate wave iii uptrend. After the uptrend confirmation occurred this week we did some Fibonacci analysis in an attempt to project a possible Intermediate iii high. We arrived at several levels, which will get posted as they are approached. The first level, which we found quite interesting, is SPX 2198: Int. iii equals Int. i. The exact level of our OEW pivot above 2131. This suggests there is absolutely no meaningful resistance between the 2131 and 2198 pivots. Once the 2131 pivot range (2124-2138) is cleared, the market should rally right to the 2198 pivot. Medium term support is at the 2085 and 2070 pivots, with resistance at the 2131 and 2198 pivots.

SHORT TERM

At first glance the hourly chart looks like a bunch of a’s, b’s and c’s with a single i and ii. This is kind of choppy activity is very unusual for a bull market, as most of you know. It, unfortunately, allows for a myriad of potential counts both bullish and bearish. Unless one has a good view of the long term picture, this kind of activity can easily sway good market technicians in either direction. Since OEW quantitatively tracks the waves we rely on it 100%. Despite the sloppy pattern we know the uptrend ended in May, (Int. i label), and the recent downtrend ended in early July (Int. ii label). Now an Intermediate wave iii higher is underway.

SPXhourly

From the downtrend low at SPX 2045 we have counted three waves up: 2074-2051-2129. Within the third wave there have been five smaller waves: 2076-2067-2114-2102-2129. These five smaller waves suggest, unless the third wave extends, that SPX 2129 could have been the high for the third wave. Should this be correct the market should pullback about 20 points early next week to around the SPX 2110 area to complete the larger fourth wave. Then we would expect another rally to a higher high than SPX 2129, before an even larger pullback. So unless this third wave extends, early next week could be somewhat choppy as the market yet again deals with the OEW 2131 pivot. Short term support is currently at SPX 2120 and SPX 2102, with resistance at the 2131 and 2198 pivots. Short term momentum ended the week quite overbought.

FOREIGN MARKETS

Asian markets were all higher on the week for a net gain of 2.4%.

European markets were also all higher gaining 3.5%.

The Commodity equity group was mixed gaining 0.6%.

The DJ World index gained 1.9%.

COMMODITIES

Bonds look like they are trying to reverse the downtrend and gained 0.2%.

Crude remains in a downtrend losing 3.7%.

Gold hit its lowest level since the 2011 high and lost 2.7%.

The USD continues its uptrend and gained 1.9%.

NEXT WEEK

A quiet economic week begins on Wednesday with: the FHFA index and Existing home sales. Thursday: weekly Jobless claims and Leading indicators. Friday: New home sales. Best to your weekend and week!

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

About tony caldaro

Investor
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141 Responses to weekend update

  1. fotis2 says:

    Could be lining up for a short will wait for a 3bar reversal dissapointing no new high so close ad yet so far away.GL

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  2. john b says:

    not quite 33 on my chart it seems

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  3. stephenk1980 says:

    For once I agree with the bears. Correction coming soon. I’m not absolutely certain of it, but definitely leaning short now. It could literally be peaking now, or alternatively the SPX will make new highs tomorrow / Wednesday but the DOW won’t; if both make new highs then Tony’s forecast is the more likely.

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  4. stmro says:

    Everyone’s looking for a pullback, from 20 pts to something larger. To be honest, based on weakening market internals alone, i’m looking for one as well back to around 2100.

    However just a word of caution. If you look back to 2012, 2013, 2014, how many times have we have monster v-shaped melt ups out from a low, that ignored all divergences and tradtional technical indicators. Just look at October 2014 – 250 pts straight up. Yes – it would defy logic, but we’ve seen plenty of examples of these already.

    It’s okay to be short (i am), but don’t bet the farm on an imminent correction is what i’m saying.

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    • How many have failed to be melt ups since that last one from Oct 2014? lots of these lately

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      • stmro says:

        Of all of the rallies we’ve had since the start of the year, this is the only one that has the characteristics of a melt-up. So none.

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        • Disagree, and that not what every bull claimed during each attempt. Every time it was it’s impulsive here comes the 3rd of a 3rd blah blah blah. then they drop hard and every bull said oh it not that wave. This is the strongest YTD, I give you that but it not the first attempt that bull tried to execute a V-shape rally.

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          • stmro says:

            You appear to be associating me with someone else. Since when did I give the impression I was a rabid bull?

            Also a meltup isn’t characterized by violent up moves. It’s more about the consistency of the move. That’s why this one qualifies in my book and not the others. Up 8 days in a row. There’s no easy way to predict when it stops. The previous high is one of the more obvious points.

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    • Dex T says:

      The difference is that during those years the Federal Reserve was continuously pumping in money to a handful of banks who used it to purchase equities. Hence the steady upwards climb.

      QE has been over for several months and growth has been sluggish. The S&P is only slightly higher than where it began the year in January.

      In addition, the Fed is planning on raising interests rates in 2 months time. The majority of the board including Yellen have already been publically announcing it.

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      • stmro says:

        If that is true, why has the market not reacted? Either it doesn’t care about an interest rate rise, or it doesn’t believe in one.

        I wouldn’t use readily available macro information to form an opinion of short term market moves.

        If you’re a fund and your trading timescale is measured in quarters, then fair enough.

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        • Dex T says:

          The market hasn’t made significant new highs either -mostly back and forth.

          The way I read it is indecision. There is no additional funds coming in so only nominal new highs have been achieved.

          Also there have not been substantial reasons yet to sell off- they have been in the background (Greece, Fed) but not enough to force the institutional investors to get out just yet.

          I think the majority of them don’t really believe in a rate hike because it’s been so long and they feel that the economic data won’t support it so the Fed will keep delaying it.

          It’s massive complacency and eventually when the rug gets pulled may very well be the catalyst that leads to a rush to the exits.

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        • stephenk1980 says:

          The market is only going to react very close to the event. P2/4 down trends last 2 to 3 months, so leaving a bit of that time after the hike announcement to finish the trend and get everyone short before the market reverses, the initial downturn isn’t going to come until just a month or two before

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        • stmro says:

          The point is you’re trying to use long-term indicators as reasons for taking a short term bias. Not a wise move IMO, but its your money! I AM short as well fyi, but that decision wasn’t based on interest rate expectations.

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  5. kvilia says:

    2 problems for bulls.
    Potential head and shoulders on RUT and
    How in the world SPX can get to 2200 without a correction that is larger than 20 points when VIX is at 12?

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  6. blubrd67 says:

    Anyone has reasoned opinion if gold and GDX are finally oversold enough to get in for a decent bounce?

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    • fotis2 says:

      Been waiting forever for a long entry daily CCI -260 this level has held on 2 previous occasions(2014/10/31 and 2015/03/06) and closed back inside -100 a few days later to deliver decent bounces it looks like possibly retest of lows next support level 1050 a daily close inside -100 for me would be a buy trigger with target daily CCI close above 100 for a swing trade.

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  7. NEWBIE says:

    Here comes the down move, you had your chance to sell

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  8. H D says:

    SPX had familiar 10 AM Monday BTD, coming in 2134fib/10 handles R, 2131P, R has not been major issue for this wave. 2104P notable OPEX PB. Only new ATH’s left to confirm.

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  9. 20 point pull back, or simply extend. Everyone must have read Tony’s update and decided there is no need for a pull back. Straight melt up to 2198. Hopping today and tomorrow is lower. bulls have to be tired after that monster run up and after apple reports Tuesday PM there going to run it up again on Wednesday

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