Friday update

SHORT TERM: gap down opening, DOW -12

Overnight the Asian markets gained 0.9%. Europe opened lower but gained 0.4%. US index futures were lower overnight. At 8:30 Personal income (+0.4% v +0.4%)/spending (+0.3% v +0.2%) were reported higher, and the PCE was reported higher: +0.1% v +0.1%. The market gapped down at the open to SPX 1981, it had closed at 1988 yesterday. In the opening minutes it ticked down to 1979, and then rallied to 1993 by 11:30. At 10am Consumer sentiment was reported lower: 91.9 v 92.9. The market then pulled back to SPX 1975 by 1:30. After that it worked its way higher for the rest of the day closing at SPX 1989.

For the day the SPX/DOW were mixed, and the NDX/NAZ were +0.20%. Bonds lost 5 ticks, Crude rallied $2.85, Gold rose $9, and the USD was higher. Medium term support remains at the 1973 and 1956 pivots, with resistance at the 2019 and 2070 pivots. Today the WLEI was reported lower: 49.1%  v 49.6%, and GDPN was reported lower: +1.2% v +1.3%. Tomorrow FED vice chair Fischer gives a speech at Jackson Hole at 12:25 et.

The market gap down at the open today for the eighth consecutive gap opening. After a pullback to SPX 1979, the market rallied to a new high at 1993 from Tuesday’s 1867 low. As noted yesterday, this now looks like a potential fives waves up from that low: 1915-1880-1990-1948-1993. But we can still only quantify three waves. Signals mixed for the potential uptrend. While support appears to be around the 1956 pivot, the key resistance level moving forward is to recapture SPX 2040. Unfortunately there are now lots of cross-currents both medium and long term. This will be discussed at length in the weekend update. Short term support is at the 1973 and 1956 pivots, with resistance at the 2019 pivot and SPX 2040. Short term momentum displayed a negative divergence at today’s high and ended the week above neutral. Best to your weekend!

MEDIUM TERM: downtrend may have bottomed

LONG TERM: bull market


About tony caldaro

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65 Responses to Friday update

  1. John Bell says:

    If China continues to sell US bonds like they have the last 2 weeks, this could upset the entire US apple cart. Bond yields go up is like implementing a reverse QE as bonds tank in price. If bond yields go up much then the buybacks slow, loans slow a lot, US economy slows more… The entire US economy is very dependent on low interest rates. China could tank the US and completely mess with US FED plans. Is China doing this because of need of money to support their currency needs and other internal cash problems? or a form of bond economic war to go along with the currency wars? I think mostly out of desperate need for cash to keep themselves alive. Probably selling some gold also.

    My 3 possible thought provoking posts for this weekend period are done. Just my current best opinions and something to maybe consider and say OK some merit or NO I do not agree. Fine.
    Thanks if you read any of them,
    Have a nice weekend.

    • You can t rule out any devious intent with China.Cyberattacks and bond selling and currency fluctuations could all be reminders to stay out of their territorial dispute in that area.If they decided to drop the yuan a huge amount, the repercussions would be much worse in the rest of the worlds equity markets.It has already been reported that most Chinese people are unaffected by the drop in Chinas equity prices.They d probably consider it a fair trade to cause such a disruption–and might quickly reverse it if we back off.Actually I was hearing months ago this would all come to a head in August or September.Anyone have updates??

      • It’s true that per capita, the Chinese population own less stock than in the U.S., however their leaders have grossly understated the slow down, GDP is more like 3-4% not 7% as they stated. They are still going over the cliff, and will make life very difficult for the Fed going forward. They hold trillions in U.S. bonds and will sell them to keep their leaders in power…

    • Long rates don’t look like they want to rise much, China or no China.

  2. From reading the posts, I realize that most people are worried about whether this is only Primary 4 and not the beginning of a Cycle wave bear market. So it must seem incongruous for me to be speculating about whether this is really Primary 4 or only Major 4. Maybe before it’s all over I’ll be one of those hoping it’s just Primary 4 and all of the above thoughts will seem delusional.

  3. Blackjack: In response to your comment: “Not that debate! With the DOW and NAZ correcting more than 15%, it’s clearly P4 or cycle wave B IMO. all 3 corrected more than oct 2014 so I don’t hunk it’s even a debate!”
    You ignored the first point of my post which discussed whether we have a V-shaped bottom here or whether there are more extensions still to coming in this decline. Was the past week’s mini-crash leg A of C or was C a simple decline which is now complete? Will a W-shaped basing pattern develop or will the next leg rise straight up out of a V shaped low?

    I was influenced to re-introduce the question of wave degree because my mutual funds only declined by 10.42% and 11.44% respectively. The NASDAQ declined 18%, the Dow declined of 16.2%, and the SPX declined 12.6% (all intraday %’s). The SPX decline is marginal for a P IV designation. But we don’t know if the selling is over yet, so the SPX could go down further.
    But I found the NYSE A-D line performance today quite strong at 993 with the small-cap growth index (IWO) up .92% and the RUT up .81%. I would not expect small cap growth to show that much strength during the transition to a P5. I would expect large-caps to strongly lead as they did in P5 of the 1987-2000 bull market. And it may be that the A-D and small-cap strength is only fleeting and large-caps will emerge dominant again. But we can only be 100% certain in retrospect.

  4. stmro says:

    50 and 200 MA death cross is not bullish IMO. There are 2 questions in my mind.

    1. Where does this bouncer reverse lower. I’m thinking either 2040 where the mid bollinger resides, but everyone seems to be thinking the same thing. Maybe 2070 @ the 50/200 MA. This would surprise more people and give VIX time to cool down to broken resistance at 20.

    2. Where do we know the bearish case is wrong? This one’s a little trickier, but for me, I think it will be if we see higher prices supported by market breadth. I’d be looking for a cumulative NYAD above the June and July peaks.

    • Tom Grainger says:

      I don’t know why people get so hung up about the so called “death cross”. All it means, in reality, is that prices in the last ten weeks have been lower than prices in the last 40 weeks. That’s it. Nothing more.

      • Tom Grainger says:

        I forgot to add that it is a terribly lagging indicator. Back in 1929 it occurred six months after the crash – just when stock prices were beginning to take off.

  5. John Bell says:

    sentiment (AAII, NAAIM) and momentum indicators, MACD, RSI, PMO, etc.) for long term charts – weekly and monthly seem to indicate that if this is P4, then we need either more time or more price down or both to finish P4.

    AAII individual investors and NAAIM investment Mangers are not very bearish at this time. Especially AAII is barely bearish at all.

    Momentum indicators for weekly and monthly are nor enough oversold yet IMO for a P4 completion.
    Need more time or price down or some of both. Still looking at P4 not completing till at least Sept FED meeting and if that is not a bullish push, then P4 goes on till October.

    When P4 ends I would not expect a massive P5 (2250 top?). the central banks are mostly spent and continue to shot bullets at random targets and not long lasting results. CB’s are losing control and they know it. No matter what P4 ends up looking like if that is what we have, I still think we remain essentially flat in a large range to year end.

    Corp stock buybacks are still the only thing holding up the market and all recent rallies I believe have been mostly just the buyback money which is coordinated sort of like QE through the stock agents for the companies (JPM, C, BAC, GS, MS). So these corp stock agents wait for some sort of bottom and buy for 2-3 days stocks in many many companies and then let up till next time. Often they let up on buyback buying once certain comfort targets are reached. For example now AAPL is comfortably above 100.

    The end of the month – start of the month 401k strength period they probably count on that money instead of wasting buyback money. But retailers 401k’s are more and more not putting any new money now into stocks or bonds. They are putting it in their money market type funds. Bonds are not safe now as long as China is selling massive UST’s to raise cash for their currency problems.

    Have a nice weekend. And thanks for the nice blog.
    As always the above is just my best analysis, Logical differences are many and welcome.

    Full disclosure. I was pretty heavy in bonds for the last month making money until China started selling heavily and then dumped it all to cash and just do day trading or short term swing trading now.

    • Interesting comments about the corporate buybacks being periodic. I had heard that corporations tend to buy back their stocks at high prices.

      • John Bell says:

        Sure long term they have been buying back at what are now high prices and tend to buyback more as bull markets get near tops and losing earning fundamental power. Which is now. But short term the day to day buybacks unless they are stupid would buy the dips as long as they can. Corp execs may be stupid as traders, but if they hand over day to day buyback actions to their stock agent say JPM or GS. They will use their computer models to do mass buybacks for a lot of companies at once to get the most bang for the buck. So buy short term dips.

        So you pass the amount of money you have and general guidelines to your stock agent and they execute as good as they can into their programming. If they do not do a good job, your company will switch stock agents. Notice how during the main buyback periods, almost every dip 30 minutes after open is bought. Trickle buyback algo.

        Currently buybacks are at record monthly amounts and are probably topping and while soon start to decrease unless earnings really increase. They can only sell so much debt bonds to fuel the buybacks until their debt loads get too high. If the bond market rolls over as it has for risky high yield oil bonds, their buybacks are already winding down.

        Buybacks have a black out window that runs 2 weeks before an earnings report to a couple days after earnings. This staggers things for individual companies. But if they are aggregated through buying stock agents, you get a general 4 week black out period and then 2 months of backs back which we are in now. The reduced buyback period would start as you get close to earnings reports and then last until near the end when more companies are in the clear. So second week of July to second week of August. Rotating this every 3 months, etc.

        In strong market times you get a lot of supplemental buying to add to stock buybacks and you get a 2 month rally after a 1 month struggle 5% dip. But each of the 3 month cycles seems to be getting weaker with less money in addition to buyback money supporting the market.

        PS. I am a student of money flows and try to make my best guesses where and how much is coming as that sets market trends in general and then the algos run the technicals and swing patterns.

        If you think the above is all BS.I am fine with that. It is my best guess as to what is happening and what I have seen in reports on who or what entities are really still buying.

        The answer I am seeing is that nobody much except corporations and a few central banks. SNB (Swiss) probably is getting out of buying so many US stocks as they took massive losses last quarter in their stock and currency trade portfolio. Central banks mostly try to force carry trades with currency maneuvers to get stocks boosted – US FED, ECB, BOJ, PBOC, SNB, etc.

  6. Mark Barrett says:

    In accordance with my KISS philosophy, on the SPY, I’m looking for the C wave, in a classic zig-zag, down to around SPY 171.56………

  7. Thanks Tony and all other useful contributors. What an incredible week culminating in a net weekly gain of 18 points. I’m still bullish and looking forward to Tonys PV but I find widening credit spreads troubling ( I am hoping RC may offer insight to this). Wish all a pleasant wkend.

    • Spread widening has been caused by high volatility. Option price as become very expensive.

      • Forgot to add. I am not expecting improving for a little wile since if the market will swift in a buy, buy panic or sell, sell, panic and the volatility will increases.
        I only hope to see a retrace of at list 50%, other way the wave B scenario becomes the preferred one.
        Putting all together, managers are seeing a 10% and 2100 target (the top was 213…), and I trust their judgement, a wave that doesn’t retrace will give us only 3 wave completed. I let you foresee the possible outcomes…..
        But if we retrace in a correct fibs way, the 5th way scenario would become more trustworthy.

  8. nardobeme says:

    Man alive! This board is attracting some odd/ rude people as late. Could it be a full moon? 🙂 Monday will be up, up and away… Look forward to your post tomorrow Tony. Thanks, and good weekend.

    • tommyboys says:

      Yep Doom and Gloom so think you need a samurai to cut it. Exactly what is needed to launch the huge euphoria stage bull – love words like “suicidal”, deflationary depression (Prechter) etc…P/C, sentiment etc…all at multi-year bearish levels – and seemingly just stuck there. NT Times had a record three consecutive “Stock Market Plunges, Collapses headlines in a row this week😜!

    • Doesn t full moon reverse if we ve gone up 1000 pts? I m counting on it…lol

      • nardobeme says:

        lol ! I’m thinking gravity will take ahold again on Thursday. 1000 pts.! Back to the drawing board…

    • Hey Nardo – I’m not sure if it’s the full moon or the internet, which always brings out the (thankfully few) nuts like dex and lesson. My heart goes out for people like that.

      What an awesome week this was, my most profitable to date; guess that happens when one’s signal is good for 1,000 points (Dow) in 2 days lol. Have a great weekend!

      • Thanks for your sympathy FRB…your psychiatrist has mine.

      • joecthetruthteller says:

        frb, time to give it up OK – as you could be a nut yourself.

        • Hahahahaha. Reality check joe: you were posting a comment at 4:40 in the morning!

          My posts have made (smart) people a lot of money; you, dex, and lesson et al need to quit clogging up Tony’s otherwise fine blog with your mistruths and nutty drivel. Put it to a vote and you’d be run out of town. I’m sure there’s help available for people like you, please seek it while there’s still hope and leave the posting to those of us who know what we’re doing and helping others. Best wishes to you!

  9. MR C…monday may be the key day in the whole scheme of things as I ve theorized a couple times.Now with a -div for Monday, if we close 200+ down on the Dow, I m betting on an “interesting” monthof September.Nothing else to add except I bought a little GDX.Good luck all.

  10. Chris C says:

    Hi Tony, read your posts everyday and love the weekend updates! I was wondering if you could comment on this chart if you have some free time. If not all good.

    Supercycle wave III ended in 2000. (ABC), A from 2000-2002, B from 2002-2007, C 2007-2009 (A)** , (B)** from 2009-2015 and now (C)** down to end Supercycle wave IV . Below 6500.

    Thank you,


    • tony caldaro says:

      A perma-bears dream =)
      No B wave in the 130 year history of the US stock market has ever made an all time high.

      • budfox9450 says:

        It works both ways Mr. C.
        NYSE New Daily Highs, moved from 350 NH
        in January to 171 in June. then 2 late Aug.
        So, the number of NYSE daily price highs were
        failing into May 2015. Not a Bull market signature.
        Last week, New Daily Lows reached 1,335.
        Your Bull market claim, is not look to strong of late.
        But, that is the nature of a Bull, in a Bear market…Bud.

    • budfox9450 says:

      This qualifies you to me on my email list…

  11. Gary Lewis says:

    Thanks Tony, I was looking at the monthly close data on SPY for the past 15 years or so. There were only two times in the period when we had the type of monthly test of the high failures that I look at as a signal. In the first instance, the market continued to drop for 11-12 months straight. In the second instance, the market dropped for 17 months. It seems that in my experience, in the index or individual stocks, this monthly test of the high failure almost always results in major drops.

    Also I was looking some at how SPY reacts at the 20 month moving average, right were we are at now. It normally breaks through and bounces around between the 40 month and 20 month averages. I’ll try to take more time to look at this stuff over the weekend but I’ve been very lazy this summer. Still, in my work, looks like more downside.

    In all fairmess to FNB who was getting battered today, I did buy some calls, based on his can’t miss recommendation, and got out yesterday with nice profits. I haven’t followed him historically, but I caught some short time $$$$ on his call. Thanks.

    • Gary, glad you made $$$$ on my Signal, pretty easy when one knows what the market is about to do, isn’t it.

      I think it’s obvious to everyone that dex & lesson are not well mentally, hard to take them seriously much less be “battered” by their crazy drivel lol.

      Enjoy the profits and have a nice weekend.

  12. fotis2 says:

    Thanks Tony so far so good looks right on target @BudFox got the second chance as you said and looks fine till now.GL and trade safe.

  13. ariez5 says:

    Tony, Thanks. Could you explain (maybe in weekend analysis) what you mean by “But we can still only quantify three waves”?

  14. epgre says:

    I normally do not lurk here, but I can’t help but wonder why you guys aren’t seeing the big picture. If you are using EW in isolation you are missing out on some crucial bits of info. I’ve noted since early this year, in my blog, about the major divergence between the Dow Transports and Industrials. I’ve noted the stair-step decline in breadth in the face of rising markets and the steadily declining volume since the bull market began in 2009. Commodity, oil, and gold prices have been collapsing. Interest rates have been stuck at zero percent. Folks, we are approaching a deflationary collapse. It is suicidal to be in these markets.

    • I don’t know….? GS has send letter to clients to re-enter the market, they expect at list 2100 to end the season. They are rarely that wrong. Hope you guys don’t get all waves in rear geare. Why so scared? We will see what the future will takes to us, better step by step. Cheers

      • kvilia says:

        Frankly, 2100 and possibilities of truncated V vs next bear market? Short swing trade with tight stops, however one morning opening 3% down RUT translates 9% TNA, how you deal with that? It’s not cool and pleasant PIII ride any more. Unfortunately.

    • Those points have been discussed repeatedly by posters on this blog.

    • john b says:

      epgre its always suicidal .. if you don’t know what you are doing, it sounds like you missed most of the bull since 09?

  15. torehund says:

    Its getting emotional, so just let the adrenaline calm you down.
    Sometimes you paddle out on a bigger day than what you originally planned for. Thats when we learn the most.
    Thanks to Tony and the gang.

  16. Page says:

    Thanks Tony. Looking forward to Weekend Update.
    Have a nice weekend.

  17. By cross currents you mean that pesky little Shemitah date coming up in September, the 13/34 cross on weekly charts, the rounding top, the 3 peaks and a domed house, and 6 plus year long in tooth bull, and perhaps the MACD monthly sell signal triggered in May. The same one that got everyone out in Dec 2007 from 1500-666. Those are some cross currents I see, plus various geocosmic nightmare signatures and the debt ceiling.

    Yes folks, the rally to 2006, 2054 pivots is a gift to short and or raise cash and sit out the next 4-6 weeks…

    Hey we will see…

    • kvilia says:

      Defninitely wise to at least exit out of longs at 2054.

      • in the 2008 september initial decline it was 12.8%, the retracement was 78%. Then we know it dropped 37% or so the next several weeks.

        2015… 12.4% initial decline, retracement so far is shallow at not even 61%, and it has not even captured the 13 day EMA line on daily charts… yet…

        We could drift up into 9/6/15 at best

        We had 2006-2030 as our likely upside targets from the lows.

        Looking to go short via TZA at some point next week more than likely

    • Page says:

      Sound very reasonable. I think SPX will try to test 2040.

    • dsoble2014 says:

      Nice list. What you forgot was the blowing out of credit spreads that no one on this board ever follows. See the 30 year Treasury due to China selling. Just look at the breakdown of JNK or the failure of Apple to regain its 50 DMA.
      Or how about the Chinese banks that just reported tiny earnings because of rising bad debts. Monday was fun. S&P retracement level is 2002. 2134-1867 equals 267. 267x.618 equals 165. 1867 plus 165 equals 2002. 2040 would be a gift.
      Tony, how is that “we don’t have to worry about a correction until the transports fall 34% working out for you”?

  18. kvilia says:

    Mixed signals – cross currents – so true. Waiting for another 2 waves to bring it closer to 200MA but then it will quantify 5 waves. Unless markets start tanking early next week, I think, Tony, you are on the right track with PV. Have a good weekend, sir!

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