Wednesday update

SHORT TERM: rally continues, DOW +121

Overnight the Asian markets gained 0.3%. Europe opened higher and gained 0.8%. US index futures were higher overnight, and the market opened three points above yesterday’s SPX 2093 close. After a dip to SPX 2094, in the opening minutes, the market started to move higher. At 10am Pending home sales were reported lower: -1.8% v +0.9%. The market continued to rally until it hit SPX 2106 by 11:30. Then it drifted down to SPX 2102 just before the FED released their FOMC statement at 2pm: Right after the statement the market popped to SPX 2108, dropped to 2099, and then resumed its rally. At 3pm the SPX hit 2111, then bounced around to close at 2109.

For the day the SPX/DOW were +0.70%, and the NDX/NAZ were +0.45%. Bonds lost 8 ticks, Crude gained 85 cents, Gold added $2, and the USD was higher. Medium term support remains at the 2085 and 2070 pivots, with resistance at the 2131 and 2198 pivots. Tomorrow: Q2 GDP (est. +1.9%) and weekly Jobless claims at 8:30.

The market opened three points higher today, dipped, rallied to SPX 2108, dropped to 2099, and then hit 2111. Nice rally off the recent SPX 2064 low, for day traders, as the market has now retraced a bit more than 61.8% of that decline. While the recent decline was clearly three waves, and that rally before that, this rally has not displayed any quant reversals. On a real small scale, which is not dependable, it looks like five waves: 2078-2069-2108-2099-2111. Since there have not been any quant subdivisions we will assume, for now, that it’s just another corrective rally. Short term support remains at the 2085 and 2070 pivots, with resistance at the 2131 and 2198 pivots. Short term momentum displays a potential negative divergence at today’s high. Best to your Q2 GDP trading!

MEDIUM TERM: uptrend back over SPX 2100

LONG TERM: bull market


About tony caldaro

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129 Responses to Wednesday update

  1. rc1269 says:

    cost of protection is a gift right here, IMO (vix 12.24). i’d consider taking advantage of that, if that’s something you’re in to

  2. sweinv says:

    Looks like 5 waves from the bottom 2064.

    • fishonhook says:

      took a small short in the RUT.
      Bears beware!

    • gtoptions says:

      Don’t bother the Bulls. We’re concentrating on making money. LOL

      • LOL…nice one GTO…..

        FYI – Here is a little more 2011 vs 2015 factuals

        LS-to-RS 139 calendar days (2/18/2011 to 7/7/2011)
        LS-to-Last Chance rebound High 153 calendar days (2/18/2011 to 7/21/2011)

        Outter LS-to-RS 145 calendar days (2/25/2015 to 7/20/2015)
        Outter LS-to-Last Chance rebound High 154 calendar days (2/25/2015 to 7/29/2015)

        Candle of Thursday July 22, 2011 vs Thursday July 30, 2015
        a hammer that failed to take out prior days candle high.

        Very interesting stuff, no?

        • gtoptions says:

          Nice work.
          Agree, possible tweezer reversal candlestick pattern. Let’s see how it works out. I’m ready to ride it either direction. GL

  3. zepfan123 says:

    Talk about your dead in the water-bait & switch day.

  4. camper1888 says:

    I got this all figure out… Yep..

  5. Page says:

    What is the extreme oversold RSI(5) number please?

  6. gtoptions says:

    Thanks Tony
    SPY ~ Bounced @ WPP ~ Next? WR1 @ 211.72
    No -/div, yet, but should produce one at the next high.

    SPX ~ H&S Busted IMO. Right shoulder has moved above the two left swing highs.
    Observe the weekly long tailed doji’s (plural), May & July. They rule as bullish until they are broken. Just an observation. GL All

  7. FWIW. Since the (below 1300) bottom in May/June, the market has travelled an up-incline in a range that can be divided into four quadrants. Since October 2013 it has travelled primarily in the uppermost quadrant, with brief excursions into the quadrant below. It last hit the top of the entire range toward the end of last year and since then seems to have been doing a correction (sideways) in time, bringing into the quadrant below, with two exact hits (bounces) off the bottom of this second quadrant. This is also the increasing line defining the midpoint of the range.

    If you take a simple picture at face value, and the bounces and sideways correction are meaningful, it seems the market has said that the previous trajectory up was too taxing, and it had to take a rest before starting on the less taxing trajectory. If this is true then it seems to want to go up more. Time will tell.


  8. mjtplayer says:

    VIX, DOW & Nasdaq have closed their respective open gaps from this a.m., but not the SPX. Would like to see that happen before reversing lower…

  9. torehund says:

    heavy quake activity, where the turmoil is the greatest.

  10. Interesting Juncture. End of month. Could be up big today, with short covering. Always a bull path rarely a bear path.

  11. Can t keep this market down…or up.

  12. ABchart says:

    Last Saturday french economic news paper “Les Echos” wrote that the Fed inadvertently released on its website Friday night, it will rise rates by 0.25% in September before deleting the message. I have not read that in the American press.

    French article:

  13. Market definitely flirted with trying to make 5 waves. Can they bust up?

  14. Page says:

    Same sentiment, on every pullback Bears talk Armageddon. I think this is just another healthy pullback before it makes next leg higher.

    • Page you still haven’t answered my question about how you arrived at your,

      Page says:
      July 29, 2015 at 2:49 pm
      August is very bullish month so 2200 is possible.

      Are you going to fill us in or are you going to remain tight lip about it? I’m of the understanding that August is historically one of the top bearish months.

      • rc1269 says:

        that’s because you’re correct El Mat

        • NEWBIE says:

          Market will go up forever, Janet swears its not overpriced and it will never go down again.

        • Thx RC. Question for you; what is your opinion on China’s handling of its credit crush debt public/private? We know that due to china’s recent flash crash that investment outflows are going to be eye popping once it’s reported. I’m of the opinion that China is a time bomb waiting to implode and there is no doubt that their govt policies is making matters worst.

          • rc1269 says:

            agree with you completely. Shanghai stocks had gained roughly 150% over the prior 12 months despite slowing economic growth and weaker corporate profits. So all the institutional investors are asking, why act so aggressively to stop a correction in a market that had become so divorced from economic reality? This calls into question whether Beijing will ever allow a bigger role for markets. and that’s a problem for foreign investment and confidence in their markets all together.
            the Govt’s reaction to the selloff was really appalling, and in my view showed their true colors. they might act like it was to save the retail investor, but without a doubt the largest holders of equity wealth in that country are the [corrupt] party officials. so who are they trying to bailout, i wonder? it’s not inconceivable that after all this is said and done the govt will be far and away the largest holder of all their country’s shares. retail investors there are now merely waiting for that govt bid to sell into.
            at the end of the day, i think they now get worse before they get better. we can see it in commodity prices. their real estate market is a disaster right now too. i have several acquaintances who left the US a decade ago to go buy up condos and invest in RE over there. every single one of them has cashed out and is fleeing that market. not good. i think our markets here domestically are totally under-appreciating the actual impact to the real economy from their market crash, the wealth loss from it, and also their real estate burst which is pretty epic. have we forgotten that more than half of all global growth since the crisis has come from China. seems like it. but perhaps that’s just because our “market” is really just driven by about 5 stocks now. but i digress…
            long story short El Mat, it’s a concern. i wouldn’t touch anything China for quite some time at this point. just my view

        • “August — historically one of the top bearish months”. I have no reason to doubt the statement is true.

          Because of how we have been trained since childhood, we find it easiest to look at data in isolation, under conditions of independence. That is, without looking at anything else, August behaves in this way (which is a univariate, independent measure). If you start to look at two months at a time, or three, or six, the joint measure may look quite different as
          “context” comes into play. This is rarely measured, because it requires more work. This is even more rarely reported because it requires expert interpretation.

          The reporting of (simple) statistics has escalated because of ease of access. And easy reporting/ publication. But it does stop there. The difficulty in learning, using, interpreting has remained, I think. And may become harder as people acquire more distracting gadgets and have less time for learning the kinds of things people learned when they had few toys.

          Just thoughts, with no implication. No more rambling from me. 🙂

      • Page says:

        Just look at historical chart and see how month of August performs. The downhill starts in Sept and Oct (expecting correction in Oct).

      • hkloon says:

        My thought is August 2200 maybe the start of minor 1, then Sept rate hike, minor 2, where pple sell off, then october starts minor 3…. that’s when pple realised rate hike (small hike) is actually good… an indication of strong economy relative to the world…. just thinking here…

  15. Buy below the 50d sell above the 50d…until it crashes or breaks out.That is unless 2040 breaks or 2140 gets blown away.No charge again…lol.As far as gold, would love to see some good move over 1100…looks less and less likely today.

  16. mjtplayer says:

    Will SPX 2,042 hold? That’s the question.

    Falling in minute c of minor A of int C

    The rare “Blue Moon” tomorrow and EOM window dressing could continue holding us up today and possibly tomorrow, but by next week we should be dropping rather sharply.

    Minute c = a @ 2,042
    Minute c = 1.618 of a @ 2,000

    A side note, watch the H&S pattern on AAPL. If $119/$120 breaks, the downside target is $104/$105 – nobody is expecting AAPL to drop another 15% from here. If AAPL can drop 15%, any stock can drop 15%, and the market as a whole can drop 15% (P4).

  17. camper1888 says:

    But we love newbie! He’s the best indicator for reversal (long or short)

  18. zepfan123 says:

    Well I don’t see any reason for Newbie to post another dancing bear gif with a flush below SPX 2040 in the next few trading days…but I also don’t think we’ll see a new all time closing high over SPX 2130.82 in August either.- I think we stay in the tiny range between 2070 and 2130 for a while longer.

  19. blackjak100 says:

    One thing is clear so far? Still not 5 waves from 2063.5, but could still happen. Wave 4 declining to 2095ish lasting 5-9 hrs should do it.

  20. argento1 says:

    Breadth…that is the answer to all the Primary IV or extension of Major 5 speculation…fewer stocks are participating in the uplegs and more breaking down below their 200 moving day averages!IMO the zig zag action should continue into August and September setting herself up for a huge drop into October…bringing about Primary IV!

  21. iamwhoiis says:

    Long term forecast for the DAX…

  22. GYN LAB says:

    Just like SPX and DOW int ii maybe still continuing, maybe DAX Major 4 has not ended yet… 10650 support and if it breaks, replace int a,b with Minor a,b and int c=a at 10050 area

  23. M1 says:

    Thanks Tony !!

  24. blackjak100 says:

    Big change to Mr Kautz squiggles. ED ended at 2133? I guess the biggest take away from his squiggles is he sees the move from 2044-2133 as corrective just like TC even though he starts it from 2051. Let’s face it, squiggle counting is extremely difficult and even a guy like Nate Kautz hasn’t been good of late. The problem with the ED ending at 2133 is it did not even reach the 1-3 trendline which is unusual and while there was a sharp reversal, the retrace has been too deep IMO. If it’s an ED, it must reach 2150ish at the minimum followed by a bigger initial reversal than just 4%. It looks very clear now that if 2135 is taken out, there will be a huge NYAD divergence assuming a sharp reversal occurs and the divergence isn’t cleared.

    Lots of talk of the 2011 analog which I don’t completely see at all. 2011 had one of the best proportional & symmetrical H&S on the daily chart I’ve ever seen. Today looks nothing like it IMO.

    • I don t think the algos mind a trading range this year for now.They almost are setting it up this way to be bought and sold with + and – divergences and easily read patterns…plus the HOs …and not too much time spent above or below the 50d.Thats my analysis…no charge.

    • Bj…Agree, anyone who see’s a H&S in that mess has been looking at charts too long.

  25. kvilia says:

    RedDragon – it does not!
    2011 – clear H&S pattern, if anything goes on right now, it would be a work in progress on the RH&S. It appears SPX is in a trading range, which is bullish IMO. There maybe anotther pullback before the run up high. That’s what I see in my chart.

    • blackjak100 says:

      AMEN to 2011…just posted above about same thing.

    • Page says:

      This market has lots of surprises for Nay Sayers.

      • blackjak100 says:

        confused by your comment? How are we Nay Sayers when it’s a fact and there’s visual evidence to prove it? It doesn’t mean we can’t drop immediately tomorrow, but it won’t be due to a H&S pattern I can assure you of that.

        • Page says:

          Sorry BJ. You are right my comment was not clear. Nay Sayers means Bears are in denial. I agree with kvilia and your comments.

        • What fact are those BJ?
          The 2011 HS pattern is a simple HS pattern while the ongoing 2015 HS pattern is a Multi-HS (aka complex formations) pattern and both meet all of the tendency toward symmetry as discussed by Robert Edwards and John Magee – Technical Analysis of Stock Trends.
          Not only are the peaks and valleys strikingly similar on a monthly occurrence but also in time duration and nearly in points.

          Furthermore, as I’ve mention before, the expected measure move of these multi-HS (aka rounding top complex formation) typically tend to show less powering then simple HS patterns which is one big reason why I have repeatedly mention that I expect P4 to be approx. 10-13% and not match P2 in percentage.

          I would like to close this off with a nice little excerpt from Edwards and Magee’s book, “There is something about Multiple Head-and-Shoulders patterns especially
          pleasing to technical chart followers. Because of their symmetrical
          tendencies, it is fascinating to watch them evolve to completion. Once completed,
          however, they may try your patience by their seeming reluctance to
          “get going” with a new trend. On that account, it becomes easy at times to
          jump to the conclusion that they have “blown out,” i.e., produced a false
          signal. Actually, except in the matter of extent of move which we have
          already discussed, they are fully as reliable as the plain Head-and-Shoulders.
          False moves are relatively rare with both. And in those extraordinary cases
          when a Complex Formation does go wrong, it still stands, like the plain
          Head-and-Shoulders, as a warning that the final Reversal is near. “

        • FYI – Even Peter Ghostine has taken notice of this HS

          • blackjak100 says:

            Sorry still don’t see it! When the shoulder is the same height as the head, it’s a double top more than anything not H&S.

            Ghostine is one of the worst out there IMO. His analysis seems good, but I’ve never seen a guy wrong more times than him. This is why he sees something that’s not there.

          • fotis2 says:

            Have to agree with BJ that looks like DT.

          • Edward and Magee address the shoulder to head height as well here is one of the excerpts”……Either shoulder may, in fact, go higher or take more time than the other. Either or both may come up nearly to the level of the head (but not equal it, else no Head-and-Shoulders) or both may fall considerably short of it.”

            Yes, I am aware that some traders would interpret this to be a double top as a possibly. From EW perspective, IMO, DT does not fit unless you are keen on using truncation way too often within this complex formation. Through out this complex formation how many time did traders call for that truncated DT/DB, way too many time. all EW’ers know that truncation is suppose to be rare but i’m noticing that way too many EW’ers use truncation a lot in their charting. Why, well I have no idea.

  26. Tony not sure if you knew already about Ray Dalio’s hedge fund getting rained on by the China casino and now he turning a lot of heads with his reassessment of China’s economy. Oouch!!!

    • torehund says:

      China would benefit from 10 USD crude and cheap German cars during an Euro collapse. Either the Euro goes, or Germany falters….Unless Merkel shrinks her own bureaucracy, which isn’t likely.
      Chinese are smart they wait for it….:)

      • tony caldaro says:

        China would benefit greatly by halting their competition with the world, and actually joining the it. Think the only reason they opened up to capitalism was to use their huge population to over power the west economically.

    • tony caldaro says:

      had heard this
      “There are now no safe places to invest.”

      • torehund says:

        maybe the Chinese will convert to consumerism if lured in by “too cheap to let go deals”, a more elevated currency, and then they could easily afford some healthy reduction in working hours. Yes, there are no safe places to invest, but then no currency are healthy either. Its all about who will falter first, and where the money will flee.
        Here in Norway we are neglecting the signs of ongoing stagflation caused by an ever declining Crown. However unlike Greece (which is deprived of their currency tool), a falling currency will eventually bring investments towards the country.

  27. mikey2594 says:

    I employ EWT as one of my tools, Tony is the best EWT man out there, 2nd isn’t close. S&P bounces off 200 day on Monday, plows up through both the 20 day and the fifty day sma…should test recent high of 2,132.82…good luck and smart trading…

  28. Hi everyone,

    I haven’t posted here in awhile but have been reading regularly. The last two days were quite a rally in SPX, but I still see waves up in NDX and RUT that look corrective. RUT particularly looks like it’s had a 3 wave corrective move higher, and it hasn’t gone far. Again we are in a situation where the market is being led by a limited number of large cap stocks, though the advancing percentage was higher today than it’s been in awhile. Transports (IYT) could have found a bottom this week, maybe.

    Overall this market reminds me strongly of the market in the second half of 2012. The small caps rolled first and the big caps followed later. If NDX can break support then we’ll see some fireworks. Most likely scenario I see is that happening next week. The last two days feel like a squeeze more than a real move up on strength. We need to see a pullback because this move up has had no real B wave that I can see. if it’s just a squeeze then the C wave should be weak and barely make a new high. If that doesn’t happen then might be a wave III but breaking the range to the downside looks like it’s the eventual path of least resistance to me.

    Best of luck to all here. Feedback is always welcome.

  29. Page says:

    Thanks Tony.

  30. stmro says:

    Breadth still terrible and divergent. I don’t believe this rally will last long, maybe another day or so.

  31. Tony, what do u think about S&P drawing a running traingle since february in major 4 with 3 possibilities: d wave underway (ascending), e wave underway (contracting) or a monday e failure and major 5 underway already…

  32. Thanks Tony, interesting to see how much downward revision WS has done to that 2Qtr GDP estimate since back in 2014 which I believe, if I recall correctly, was originally estimated upward of 4%

  33. kvilia says:

    Grazie, Tony. Not rushing to sell my longs.

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