weekend update


The market started the week at SPX 2104. It ticked up to SPX 2106 to start the week, then traded down to 2087 on Monday. A rally started Monday afternoon carrying the SPX to 2113 by Wednesday. Then the market pulled back to end the week at SPX 2078. For the week the SPX/DOW were -1.55%, the NDX/NAZ were -1.60%, and the DJ World was down 0.9%. On the economic front positive reports outpaced negative ones. On the uptick: personal income/spending, the PCE, construction spending, factory orders, ISM services, and consumer credit. On the downtick: ISM manufacturing, the ADP, monthly Payrolls, plus the trade deficit and weekly jobless claims rose. Next week will be highlighted by Industrial production, Retail sales and the PPI.

LONG TERM: bull market

The last two weekends we have noted a potential Primary III top in the SPX, DOW, NYSE, and TRAN. Since many follow the Dow Theory, and the Transports have been leading these indices to the downside, we decided to take an historical look at the TRAN. Over the past 35 years the TRAN have had 11 significant declines. The current 14% decline being the latest. Of the 10 that have completed, 1982-2011, seven times the SPX and TRAN topped within three months of each other. Two times the TRAN topped 10 to 11 months earlier, and one time 7 months later. In every case, except one, the SPX followed with a significant correction. Historical relationships would suggest a 90% probably of a significant decline ahead.


Within the last year the TRAN topped in November and the SPX recently put in its high in May: six months later. So for comparison purposes we can disregard the seven, somewhat coincident, three month relationships. And for that matter the 2008 top, which was somewhat of a commodity driven aberration following the three month signal in 2007. That leaves us with the two comparative events. The eleven month leading signal in 1989, and the ten month leading signal in 1999.

After the August 1989 top in the TRAN, the SPX continued to move higher even after the TRAN had dropped 34% in just five months. Then six months later the SPX topped in July 1990. After the May 1999 top in the TRAN, the SPX continued to move higher even while the TRAN continued to decline. This time the SPX topped in March 2000, after the TRAN had already declined 40%. In both instances, when the TRAN/SPX tops were more than three months apart, the TRAN required at least a 34% decline before the SPX topped and headed lower. The current decline in the TRAN, from the November 2014 high, is only 14%. This historical analysis suggests the TRAN would need to drop to 6145 before the SPX would actually take notice and start its decline. The TRAN ended the week at 8251. So what could happen with the SPX if the TRAN does not decline that much, or takes several more months to do so?


To answer that question we need to review what occurred in the SPX the one time it did not follow the TRAN lower. In February 1994 the TRAN topped and started a ten month decline. During that period the TRAN lost 28% of its value. The SPX topped in January, had a three month correction, and then went sideways for the rest of the year while the TRAN continued its decline. Look familiar? It should, this is exactly what the SPX has been doing all year: going sideways.

The wave labeling is somewhat different, and the actual trends are a bit different, but there are other similarities to the current market. The entire yearly range in 1994, bottom to top, was 10.8%. The entire yearly range for 2115, so far, is 10.8%. At the January 1994 high we had counted five waves up from the October 1990 low. That five waves could have ended the third wave of the 1987-2000 bull market. It didn’t. The market only took a sideways pause after a four year run from 1990-1994. The third wave of that bull market did not end until 1998. Similarly, the recent four year run in this bull market, 2011-2015, could have ended its third wave, Primary III. Or maybe it is also taking a pause after a 4 year run. The last comparison is this. After maintaining fed fund rates at a relatively lower level at the time, for an extended period, the FED started increasing rates throughout 1994. The first increase was a surprise, the FED was not so transparent then, the rest were anticipated or surprises as well. Today’s transparent FED has been positioning for a potential rate increase since March.


In summary. It appears the SPX will probably not have made a significant top until the TRAN have declined into the 6400’s. Until it does, the SPX is likely to remain within the 1981-2135 range. If the TRAN are not going to decline that much, find support, and then start to move higher. The SPX is likely to find support soon, and then gradually work its way higher as well. As a result of this analysis we feel the Primary III top and Primary IV underway, has a less than 50% chance of occurring. Let’s put it at 60/40 against.

MEDIUM TERM: choppy uptrend under pressure

After a downtrend low in early-July, which we initially labeled the Intermediate wave ii low, the market rallied from SPX 2045 to 2133. It looked like a good kickoff to Intermediate wave iii, but we observed a problem. The entire advance appeared to be three waves and corrective, not impulsive: 2074-2051-2133. After the SPX 2133 high the market started to pullback. At first the pullback looked small, still allowing room for an impulse wave to develop. But the pullback accelerated to the downside and overlapped SPX 2074 on its way to 2064. The uptrend was indeed corrective.

This suggested the early-July downtrend low was actually only wave A of Intermediate wave ii, the uptrend wave B, and a wave C to complete Intermediate ii would follow. After making a short term low at SPX 2064 the market rallied, again in three waves, to a lower high at 2114. Since that high the market has dropped to SPX 2087, rallied in three waves to 2113, and now has dropped to 2068 on Friday. Clearly all the activity from the early-July low, as well as most of the year, has been corrective.


Our preferred count suggests the SPX will need to revisit the 2045 area in the coming weeks. At SPX 2045 the current decline from 2114, Minute C, will equal the previous decline (2133-2064), Minute A. This would also create a complex flat from the May all time high of SPX 2135. This count is displayed on the hourly chart below. The alternate count, a Primary III high at SPX 2135, is displayed on the daily chart above. As noted in the previous section we believe this is a secondary count. Medium term support is at the 2070 and 2019 pivots, with resistance at the 2085 and 2131 pivots.


We are counting the May all time high at SPX 2135 as Intermediate wave i, and the market activity since then nearly all of Intermediate wave ii. The first downtrend, during this correction period, was to SPX 2044 (91 points), which we labeled Minor A. The uptrend that followed rallied to SPX 2133 for Minor B. Since that high Minor C should be underway. A perfect complex flat would suggest a low of SPX 2044. If Minor C is to equal Minor A the low should be at SPX 2042. If, as noted previously, the two declining waves within Minor C are equal (Minute C and A), then the low should be at SPX 2045. So we have three wave structures all pointing toward the low-mid SPX 2040’s. Also, if you recall, a 61.8% retracement of the Intermediate wave i uptrend is at SPX 2040.


Should the market break below that level the next area of support would be the 2019 pivot range. This would then suggest Intermediate wave ii is taking the form of a complex zigzag. Should the market fall even further, into the 1973 pivot range, then the Primary wave IV scenario would gain credibility. Short term support is at the 2070 pivot and the SPX 2040’s, with resistance at the 2085 pivot and SPX 2114. Short term momentum displayed a positive divergence at Friday’s SPX 2068 low, and ended the week at neutral. Best to your trading this choppy market.


Asian markets for the week were mixed for a net loss of 0.2%.

European markets were mostly higher but Greece dragged the average down: 2.2% loss.

The Commodity equity group were all lower for a 2.9% loss.

The DJ world index is still in a downtrend and lost 0.9%.


Bonds remain in an uptrend but lost 0.1% on the week.

Crude is still in a downtrend and lost 6.2% on the week.

Gold remains in a downtrend as well and lost 0.1% on the week.

The USD is still in an uptrend and gained 0.2% on the week.


Tuesday: Wholesale inventories. Wednesday: the Budget deficit. Thursday: weekly Jobless claims, Retail sales, Export/Import prices and Business inventories. Friday: Industrial production, the PPI and Consumer sentiment. Best to your weekend and week!

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

About tony caldaro

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248 Responses to weekend update

  1. nardobeme says:

    What a mixed bad of comments today… Remain long and strong. Very happy I purchased some $AAPL calls on Friday. Still projecting this uptrend lasts most, if not all of this week. Pointless to seek the answer: “Will we see ATH’s on $SPX”? May, may not. I would not exclude the possibility…

  2. H D says:

    Hey Tony, 230 comments & a plethora of EW critics. Some things never change.

  3. zepfan123 says:

    I see a lot of enthusiasm here about some thinking gold finally hitting a bottom here at the $1100 area. I own a few Krugs so it’s not like i’m dying for gold to keep going lower, but I think it will and will go sub $1000. Since Sept 2011,when gold reached it’s ATH at around $1920…we’ve all seen over the last 4 years gold have little short term bounces once in a while,get the gold groupies super excited about a real bottom every time..only to quickly and seriously resume a down trend. I say gold is still in a longer term down trend..and I don’t think going back to $800 eventually is crazy talk IMO.

  4. Fed Gov Fischer just said no rate hike until inflation picks up.The dxy just dove at 2pm.Lets go gold.

  5. stcoleridge says:

    Thanks Tony. What probability would you now ascribe to the uber-bullish count of int. ii in at 2044 and the action since then as a minute i-ii micro 1-2 ?

  6. manunidhi21 says:

    Isnt this rally quite impulsive than any other from 2040-2070 area ?

  7. john b says:

    if 2104 goes properly it could be heading for the 2118 area next

  8. Dex T says:

    Buffet is in the news again with his potential acquisition of Precision Castparts. The news of course made the stock jump up to his offering price.


    Anybody have any thoughts on this? Another winner or will it turn out poorly for him? It would be Berkshire’s largest acquisition to date.

    • zepfan123 says:

      Yep interesting question. This was the Berkshire headline just 3 days ago-

      Berkshire Hathaway’s Second Quarter Profit Plunges 37 Percent On Insurance and financial services losses.
      By Tyler Genovese – Aug 8, 2015


      I really admire Buffett overall…but $37 Billion..approx $230 a share might have too high a price to pay for PCP at this stage IMO. Just 5 years ago he could have bought Precision Castparts(PCP) for $50 bucks a share…about 20% of what he is offering.- Nobody stays on top of the game forever. Not even Buffett.

    • I heard it was in support of his Govie contracts. And, since they’re the ones doing most of the buying right now, it appears a good purchase, for now.

      • zepfan123 says:

        Time will tell. I I won’t be touching PCP long or short myself..but I know I’ll be taking a look at it once in a while and seeing which side of $230 it’s on.- Of course Buffett usually buys major acquisitions for results 20 or 30 years out…so him being 85 years old now..he may not live to see where this one goes much longer.
        As I said..overall I’m a big Buffett fan…but personally I won’t be jumping into PCP here at $230 just because he did…but will watch it for sport once in a while. Good luck to those joining Buffett here though.

        • Dex T says:

          I agree with you Zepfan and saw Berkshire’s profit numbers so they haven’t been doing well recently.

          I don’t follow the stock but analyst were pointing out weakness was due to energy supplier .

          This is notable because of it’s huge acquisition size but it’s difficult to see the company grow much further.

          • zepfan123 says:

            Yep..I think a lot of future profit and Buffett PR is built into the current price now.-But that said..I won’t be shorting PCP here either…and congrats to folks who have owned it for a while and got a free and instant 37 point windfall this morning. Wish I’d of had a 100 Aug PCP 200 calls going for 1.30 from Fridays close. Nothing like an instant $360,000 profit on Monday to make one’s day. Just needed to be a fly on Buffett’s office wall last week.

  9. Thanks TC! The effort you put forth is incredible; we are fortunate that you share.

    The Buy level comes in at 2104.62 (closing basis) though things are looking extended here; but, it is what it is. As I’ve stated before, get ready for another round of QE (or some other easing mechanism). Should there be a rate increase (unlikely or a pittance to not appear completely incompetent) then we will see how quickly that will be reversed. These are not normal times and they system is rather fragile as will be demonstrated shortly. Here is an interesting article regarding Helo drops:
    Free Lunch: Monetary helicopters hover back into view
    Tick Tock…

    • Past performance (like today) is no indicator of future results (tomorrow)—at least in THIS market.Just hitting the tennis ball back and forth over the 50d.Good luck all.

  10. rc1269 says:

    Fed keeping up its solid track record of producing 110% of market gains 6 years running

      • had to hold my nose and buy UVXY 500@ $24.5 today. last time I bought before the reverse split, weather some huge unrealized losses before finally capturing a modest 10% gain. I hope this time around, I can achieve the same without the wait (and stress).

    • uncle10 says:

      so this up move is not because of any funnymental stuff just the fed?

      • rc1269 says:

        was there a lot of positive fundamental news that all came out the same moment Stanley Fischer opened his mouth and futures ramped 20 points? sure, perhaps. and Hillary Clinton used her private email server just for convenience too. it’s all plausible.

        • uncle10 says:

          haha. remember I think the movement in futures/market is because of mathematics not funnymentals or the fed. Im looking at a short term (10 minute) chart of es. I don’t see a place where it spiked/ramped 20 points as if there was some unexpected news or talk from someone at the fed? as far as hillary is concerned that I have no clue about.

      • tommyboys says:

        Love how an explanation always must be attached to a move. My position for 6 years now has been “who cares”! Don’t care what the reason is and it doesn’t matter to me if Buffett is buying or oil is up or gold is down or the Fed is at the helm or whatever! We’re in a bull market so why pick tops, blame the Fed or consider Buffett’s sanity – who cares. All these criteria are far more informed than any trader on any blog so why not just go with it? Why call tops, rounding tops and wave 3’s DOWN every other day Enjoy the ride.

        • uncle10 says:

          Hey tb, people like to know why. its in our nature. of course it makes no difference why but people still want to feel like they know. I agree, it costs people money and causes people to make bad decisions. Best to accept that anything can and will happen and the reason behind it makes no difference.

        • rc1269 says:

          TB- I am quite confident that when this bull market ends you will lose most if not all of the money you have made during the run. Because you don’t ask why.

          Not meant to be a personal attack. Merely an observation on similar behavior I’ve witnessed repeatedly over the decades. I hope at some point you do start asking questions, and keep what you’ve made. Cheers

    • What s the Fed doing now??? Buying our own equities like China and Japan are?

      • Fed speaks market tweaks. Uncle wish you well with your illness. I myself are dealing with stage 4 kidney disease. No fun is it?

        • uncle10 says:

          hey Jerry. I think you have me confused with someone else? as far as I know I don’t have any serious illness. I have been sick the last 4 days though with a sore throat and fever, but there is no way you would know about that. Sorry to hear about your disease. I hope you get and feel better!

  11. torehund says:

    talking of X-waves, looking at Rut from may 5th the year until Friday; looks like just another large X…and a finished one. Its dangerous to get to attached to counting real motive waves in this Swiss Alps-inspired landscape.

  12. fishonhook says:

    Here is the issue with Elliott wave.

    We have 5 big waves P1, P2, P3 , P4 and P5

    All we ask from EW theory is to help us ID these five waves.
    Then we can make some money.

    I try not to get caught up with the minor waves, which are impossible to count.

    I thought we had done with P5 but I am the worst here.
    Tony is still P3 but maybe P4 too.
    Trader Joe who seems to know what he is talking about says we have ended P5 but then says we could be in P4 too.

    We know that P1 and P2 are done with. So we are left with picking out of three possibilities and cannot even do that!

    So as you can see, if we cannot even ID the principle waves, we cannot use this method to make money. It is what it is. Sad to say, as I would have appreciated a system which gives the small guy some chances with the WS shysters but it doesn’t look possible.

  13. kvilia says:

    Can’t remenber who it was calling a week or two ago for a gold starting to point up and a decent entry – just want to thank you! I am looking at NUGT possibly closing 5.14 gap – that’s a trade if it materializes!

  14. kvilia says:

    Agree with PUG on RUT neckline – just not sure about the target. 1205 almost violated 4 times since March, and RUT chart looks worse and worse. I did not go for a bounce in Friday but considering a short at these levels. Looking at the hourly chart to give some entry clues.
    So how can it not be bearish?

  15. stmro says:

    Short-term long from Friday closed at 2100. Only position that remains is my swing short from 2100, which is once again in the red, if only slightly!

  16. Here s some GDX shortcovering…finally.can we do 10% today? (I m not greedy)

  17. reddragonleo says:

    Hey FRB… glad to see you again. And I agree that systems tend to work less accurately when you tell too many people. It seems you get some kind of 4th dimensional interference when you get too much exposure I think. Would still love to share ideas back and forth with you through email if possible? Can you email me? red (at) reddragonleo (dot) com

  18. Jim Paulsen calling the rally from Friday’s low a dead cat technical bounce off of the 200 dma

  19. Philippe V says:

    So it would take for the SPX to fall into the 1973 pivot range for the P4 to …. “gain credibility” !
    Quite a stunning statement TC !
    So after a fall of 160 pts from its highs or 7.5%, you would still be wondering if P3 had topped in May or not ? And how is that useful exactly ?

  20. john b says:

    kudos to HD for his call on Friday,very few had the guts and savvy to do it

  21. blackjak100 says:

    TC, is this once again a bigger bounce than you were anticipating? It certainly is bigger than I thought and was long until 2095.

  22. GM all, how ’bout that DJI TL!?!? :mrgreen: ES +34, Quite the rally in Wheat too.

  23. nsteve24 says:

    pebblewriter is calling for a tag of 2134 by end of day Thursday/early morning Friday

    • zepfan123 says:

      I don’t know who pebblewriter is…but at least it’s a specific call with a near term price and time frame. Thats what counts as far as trading goes. Of course we “tagged” 2134 a few weeks ago but closed below the current ATH closing high of 2130.82..and went into a small pullback to the 2070 area again. So we’ll see if this mornings run up to the SPX 2100 area can turn into a launch pad to finally make a new ATH closing high this week.-Thanks for posting that person’s prediction.- I’m sticking with my call that the current ATH holds for a while and we end up going back below SPX 2070 soon…which of course probably takes us back to at least SPX 2040. Obviously SPX 2040 is the number we really have to start closing below for the bearish case to make any real headway.- But it’s looking like it’s 99.9% odds we close very green TODAY now.. Al eyes on SPX 2100 I suspect. I know mine are.

  24. zepfan123 says:

    So we had 7 down days in a row and bump back up this morning to the exact middle of the long multi-month tiny trading range between approx SPX 2070 and SPX 2030..right at SPX 2100.- I see a lot of excitement here from the super bullish minded with this rally back to the SPX 2100 area this morning. What I want to know is…”Are any of you calling for a new all time closing high to be made finally this week over the current ATH close of SPX 2130.82 ? Any bulls here predicting that RIGHT HERE AND NOW ..by Fridays close ?

    • stephenk1980 says:

      Not from me because I don’t make predictions. Of course you must make projections, but that is subtlely different. No-one has a crystal ball, so I may as well pluck a number out of thin air if I was going to tell you an SPX price by the end of the week!

  25. EL MATADOR says:

    Just don’t forget to short this mirco c of the inverted flat minute b (using Tony’s count) as soon as price starts showing signs of price exhaustion. Just saying

  26. manunidhi21 says:

    Namaste Tony!
    the way bonds are moving it does not look like Sep. hike is coming. your view ?
    second, isn’t these days crude moving the markets ?

  27. rolandu11 says:

    ok, my sentiment indicator on the ISEE reached similar values to the beginning of August 2014, mid-October 2014 and mid-December 2014 on Friday (But partly it took 1-2 days until it went up)

  28. zepfan123 says:

    So everybody is going to short the SPX in teh 2100 area in a few minutes..right ? Good…just checking.

  29. Gartman..you ve done it again.!!!!

  30. Dex T says:

    I just saw the Chinese Export numbers – Horrendous and far worse than anyone predicted! No wonder the markets have been crashing recently! It seems like the growth engine there has finally stopped.


  31. fishonhook says:

    Well my ill-advised shorts of Friday are close to being stopped out. Guess the CB have targeted the markets and there is no fighting them. Abyssal economic numbers out of China this week-end, which is good news as the CB will open the money spigot so the market rallies up. Good news may have caused a fall ironically.

  32. NEWBIE says:

    Supposedly futures run up is because of Greece. They have nothing positive to say about USA so back to talking about so called bullish Monetary injections for Greece. Lol cnbc what a joke.


  33. stmro says:

    Substantial gap up coming. If breadth is poor, this will be the perfect profile of a corrective move upwards, to be followed by a gap fill and then a lower low.

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