weekend update


The market started the week at SPX 2092. After a gap down opening on Monday the market quickly recovered to hit SPX 2103. It traded at that level again on Tuesday, and then ran into three straight gap down openings for the rest of the week. On Friday the SPX hit 1971 and closed there. For the week the SPX/DOW were -5.8%, the NDX/NAZ were -7.1%, and the DJ World index was -5.3%. On the economic front reports came in slightly to the positive. On the uptick: the NAHB, the CPI, housing starts, existing home sales, the Philly FED and the GDPN. On the downtick: the NY FED, building permits, leading indicators, the WLEI, plus weekly jobless claims rose. Next week’s reports will be highlighted by the next report on Q2 GDP, Durable goods, and PCE prices.

LONG TERM: bull market

Last weekend we introduced a third corrective count: Major wave 4. This new count, along with the Intermediate wave ii and Primary IV counts, all suggested defensive positions as the market would likely be heading lower soon. We gave four levels of support with varying wave degree implications: the low SPX 2040’s, the 2019 pivot, the 1973 pivot, and SPX 1820. Three of these levels were hit as the market moved to the downside this week.

Breaking the first two levels suggested the Intermediate wave ii, subdividing Major wave 5 labeling, could be eliminated. We held this count for most of the year as we had expected the ECB’s EQE to stimulate the US stock market, as well as Europe. After months and months of choppy action it was quite obvious this was not occurring. A little over a month ago we introduced the Primary IV count as four of our long term indicators had turned negative. Soon after one of those indicators reversed higher. Now, this week, a different set of long term indicators turned negative. So this count is still viable and remains posted on the SPX daily chart. A Primary IV correction would suggest a decline back to the October 2014 lows around SPX 1821.


A Major wave 4 correction still fits the wave patterns in all four major indices. It does not display a compressed Major wave 4 and short diagonal Major wave 5, as labeled with the Primary III May top count. It suggests all the price activity from the October Intermediate wave iv low was a diagonal triangle Intermediate wave v, in both the DOW and SPX. While the leading NDX/NAZ impulse from that low in five waves. Either way the market is clearly downtrending again after months and months of choppy activity.

We continue to label this six year bull market as a five primary wave Cycle [1]. Primary waves I and II completed in 2011, and Primary wave III has been underway, or recently completed, since that October 2011 low. If Primary IV is underway it should end with the largest percentage correction since 2011. All corrections in the SPX, since Primary II, have been limited to 10.4% or less. If Major wave 4 is underway it should end with less than a 10.4% correction.

MEDIUM TERM: downtrend

For months on end the market remained in a choppy pattern, even through Wednesday of this week. After the FOMC minutes were released on Wednesday the market rallied to SPX 2096. Then with Thursday’s gap down opening, and losing the six month support level at SPX 2040 at the close, the market tumbled during Friday’s options expiration.


While our long term sector indicators are not aligned with a Primary IV scenario, the technical indicators are getting there. The SPX weekly MACD has now joined the DOW and turned negative for the first time since 2011. The SPX monthly MACD remains on a sell signal with the DOW, and the RSI is also heading toward an oversold level not seen since 2011. The market will need a sharp reversal next week to keep these indicators from collapsing further.

With the drop below the SPX 2040 level at Thursday’s close the subdividing Major wave 5 scenario was eliminated. Especially with the DOW completely retracing its uptrend by Thursday’s close. Since the market has turned weak late-Thursday through Friday we are favoring the Primary IV scenario, and updated the hourly chart with that count. The weekly chart continues to display the Major wave 4 scenario. To keep that count alive the market needs to rally strongly next week, without breaking down too much further. Similar to what it did at the Major wave 2 low. Medium term support is at the 1956 and 1929 pivots, with resistance at the 1973 and 2019 pivots.


With Thursday’s/Friday’s market activity, we not only updated the hourly chart to match the daily chart. But also shifted the first significant wave of the downtrend over to the SPX 2052 level. This would put it more in proportion with the recent selloff. At Friday’s SPX 1971 low Minor C is within one point of a 1.618 relationship (1972) to Minor A. Should the 1973 pivot range hold the market could experience a good rally next week. If not, the 1956, 1929 and even 1901 pivots would be next.


After four years of a rising market, and the loss of the six month support at SPX 2040, it appears many are hedging or simply taking profits. Short term support is at the 1956 and 1929 pivots, with resistance at the 1973 and 2019 pivots. Short term momentum ended the week extremely oversold. Best to your weekend and week!


The Asian markets were all lower for a loss of 5.6%.

The European markets were all lower as well for a loss of 6.3%.

The Commodity equity group also all lower losing 6.0%.

The DJ World index lost 5.3%.


Bonds remain in an uptrend and gained 1.1%.

Crude remains in a downtrend and lost 4.1%.

Gold has nearly confirmed an uptrend and gained 4.2%.

The USD confirmed a downtrend and lost 1.6%.


Tuesday: Case-Shiller, FHFA housing, New home sales and Consumer confidence. Wednesday: Durable goods orders. Thursday: Q2 GDP (est. +3.1%), weekly Jobless claims and Pending home sales. Friday: Personal income/spending, PCE prices, and Consumer sentiment. Saturday: a Jackson Hole speech by FED vice chair Fischer.

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

About tony caldaro

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502 Responses to weekend update

  1. reddragonleo says:

    My comment is simple… I called this move 2 months ago and posted on my blog.

  2. blubrd67 says:

    I had to make a comment, just to make it officially 500!! C’mon :)) Wild day,

  3. zepfan123 says:

    Heck of a crazy day. And tee amazing thing is..some are probably relieved we ONLY closed down 586 points today. But in my book..down 586 points is still down 586 points..which managed to be down even more than Fridays 530 pt decline.
    I say we didn’t bottom today. But we’ll see. Again I’ll be looking forward to seeing the action on all the foreign markets tonight..especially the Nikkei and Hang Seng. Brutal but very interesting times we’re in here for a bit.

    • But that s just because 4pm came along.If we were open another half hour longer who knows where it winds up.It almost seemed like a random number it settled on.The whole day was insanity, wrapped in chaos with an algo cherry on top.

      • zepfan123 says:

        Well sure..with the way todays market whipped around.. the market even open another 5 minutes could have had the market close down only 300 pts or down 800 points.

  4. Look at this comeback…300 points in 5 minutes.Ridiculous.These moves are almost meaningless.

    • EL MATADOR says:

      Learned, my speculation is, and you might agree, that the Asian Powers instructed their funds to outright start buying stocks again, well the best way to encourage them would be by driving the futures market down overnight so that they can buy at cheaper prices once the cash markets open…….just my 2c speculation here.

  5. nardobeme says:

    Holy Heck! I hope everyone’s had a profitable day. I had thought the gap would at least get filled. No fat chance. Ameritrade’s been off an on today; not good. I’m remaining short probably for the remainder of the week. I see a cycle low poss. on the 28th or 31stcharts. Does anyone else see this? This market is definitely a new animal. I’m suprised to not see dancing bears from Newbie?

  6. Dex T says:

    We have gone from crash to a rally that looked like it could turn the markets positive and now back down to the point where we may actually achieve new lows!!!!!!

    With 40 minutes left where do we end up? If the market sells off into the close will it lead to a rally tomorrow?

    • zepfan123 says:

      Kind of like that rally we had last Wednesday when we were down 200 pts in the morning..rallied back up to almost unchanged about 2PM EST,which was a sucker rally…and then ended up closing back way down just above the earlier lows…except with 700 to 800 up and down moves today …instead of just 200 pt moves.- Historically this kind of market action is more near term bearish…so I doubt we had a bottom this morning.

    • Market iis moving so fast it s looking like one of those sped up videos FOX shows when there s a 400 pt selloff.This is all real time speed and its breathtaking.Algos on steroids will one day take it down thousands of points…either by mistake or hacking.
      To answer the question…they call it turnaround Tuesday for a reason.

      • zepfan123 says:

        Pretty crazy. We’re seeing 200 to 300 pt moves,both up and down on the Dow in 5 minutes or less. Lots of manipulative insider central bank fund algo stuff I imagine. Probably not bullish big picture for the semi-near term.-Obviously all eyes will be on this mornings lows the rest of the week.

        • EL MATADOR says:

          Hey Zep, Nikkei futures this morning was down a whopping 1810 pts….it’s going to be crazy when Jap markets open later tonight.

          • zepfan123 says:

            Yep..El Mat..one of the wildest global market futures action mornings I’ve seen in my 20+ years of being involved. Gotta be in the top #2 or #3.

      • Dex T says:

        I agree with both of you- Zepfan and Learned. This market is all over the place and where it ends it a wild guess. All I can do is watch- the last 45 min has been trading normally like the last 5 min before close.

        Less than 10 min of trading and we can close up 40 S&P points or down 40 points.

  7. perversionofthemean says:

    Interesting that SPY effectively got down to the October lows, but the cash SPX didn’t. I imagine there were issues unable to be opened and therefore omitted from SPX, but how did SPY manage to get down to that target? I suspect that’s where buy orders were discovered, and no one could buy SPX. Re-stated, it was hard to see SPX test the 1822 range since it never did — yet, tradables like SPY were legitimately there.
    Would your actions at the open have been different if you saw SPX at the October lows?

    • perversionofthemean says:

      Nearly closed all the big ETF gaps by testing October’s low, but then rebounded to nearly close their gaps down this morning. Must have been on the toilet at the day’s high. (OK, took an important phone call at that time, and was kicking myself by the end!)

  8. 56rambler says:

    Thanks, Mr. Caldaro,

    In terms of Primary IV, what are your thoughts in terms of timing – could it be completed in a matter of a few days, or should it take longer – a few weeks to a few months?


  9. thecustomer14 says:

    Thank you Tony for the updated labeling on the SPX 60 min chart – any thoughts on the degree of the intermediate b retracement for the current Major C wave?

  10. kjb0 says:

    Futures hit circuit breakers just before open, along with the NYSE initiating Rule 48, along with the usual bargain hunters, will pause the market……..temporarily.

  11. H D says:

    Tony, those pivots! Curious if the $DJI 50% retrace today is potential for all of C of PIV, A 17037, C almost 2.618 ext 15370.

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