weekend update


The week started off at SPX 1971. On Monday, due to overnight selling, there was a huge gap down at the open to SPX 1875. Then after hitting SPX 1867 in the opening minutes the market rallied to 1954 into the early afternoon, and then headed lower again. Tuesday was quite volatile and ended at Monday’s low. Then the market gapped up on Wednesday and Thursday, closing the week’s 100 point opening gap and hitting SPX 1990. On Friday the SPX hit 1993, then ended the week at 1989. For the week the SPX/DOW were +1.00%, the NDX/NAZ were +2.85%, and the DJ World index was +0.30%. On the economic front positive reports outnumbered negative ones 11 to 3. On the uptick: Case-Shiller, the FHFA, new/pending home sales, consumer confidence, durable goods, Q2 GDP, personal income/spending, the PCE, plus weekly jobless claims were lower. On the downtick: the WLEI, the GDPN and consumer sentiment. Next week will be highlighted by the FED’s beige book, Payrolls and the ISMs. Best to your week!


This has been quite an eventful week, with long term implications. In an attempt to remain objective we will present our findings and you can decide how to best deal with them. Monday’s flash crash at the open and retest on Tuesday was an international event. Many of the emerging markets, and commodity driven, foreign indices, which had been rising in corrective patterns for the past number of years, appear to have completed those patterns and are now back in bear markets. Our list includes: Australia, Canada, Hong Kong, Indonesia, Singapore and S. Korea. These indices join Brazil, Greece and Russia, which had already been in bear markets. These nine indices represent half of the foreign indices we track. Obviously the rest of the indices, plus the US, are now facing some headwinds.

After the SPX hit an all time high in May at 2135, it had a modest correction into early July to 2044. We had anticipated that low, and then expected the bull market to resume. The SPX then started to uptrend, but the advance looked corrective, as the NDX/NAZ were making new highs. We then suggested defensive positions were warranted. Over the following weeks, while the market went sideways, we determined there were three possible counts. Lengthy bull markets, like this six year rise, make it difficult to track due to the abundance of waves. The three counts suggested a range from a minimum decline of SPX 2040 to the largest correction since 2011. A week ago Thursday the market closed below SPX 2040, which had provided six months of support, then a three day selling wave took the market down to 1867. Creating the largest corrections since 2011: SPX -12.6%, DOW -16.2%, NAZ -18.0% and the NDX -19.3%. The worse case scenario had unfolded.

Our worse case scenario, for the bull market, was that the SPX 2135 high ended Primary wave III and a three wave Primary wave IV was underway. This count was carried on the daily SPX and some other major index charts. The selloff, after breaking SPX 2040 support, was so rapid that it nearly triggered a long term downtrend. Long term downtrends are confirmed only during bear markets. They never, ever occur during bull markets. This was quite unexpected, and suggests additional caution should be maintained until this bull market reasserts itself. Should the market break Monday’s/Tuesday’s SPX 1867 low, any time in the future, a long term downtrend is likely to be triggered, and we too will be in a bear market. Naturally we will post this information in the daily update when/if it occurs. Using this information as an objective foundation we move ahead to the regular report.

LONG TERM: bull market

Our preferred count remains that this is a Cycle wave [1] bull market following the Super cycle bear market low in 2009. Cycle wave bull markets unfold in five primary waves. Primary waves I and II completed in 2011. Primary III completed in May, and Primary IV may have completed at this week’s SPX 1867 low. Over the past three months the SPX has had three corrective trends: 2044-2133-1867. This would satisfy three Major waves down into a Primary IV low.


With Primary III topping in 2015 much of the historical references we have used this entire year no longer apply. We had thought, since this was the third longest bull market in history, that its three rising waves would unfold in Fibonacci years, like the other five. It has not. We also thought that the bull market would last for a Fibonacci number of years. We can no longer count on this relationship either. We are in unchartered historical territory.

At the beginning of 2015 we projected an upside target of SPX 2500+ by 2016. We had used the Fibonacci years relationship and the ECB’s EQE to determine this target. Unfortunately EQE did nothing for the SPX, as we have noted for the past several months. And with the Fibonacci years relationship now discounted, this target now becomes the optimal target rather than the expected one. When considering everything noted thus far, we are forced to shift from an aggressive posture to a more conservative one.

Fifth waves, during this bull market, have been notoriously weak. A simple glance at the Major wave 5’s during Primary waves I and III illustrate this quite well. Nothing more than marginal new highs before those primary waves ended. If Primary wave IV ended at SPX 1867, as expected, we can make some projections for Primary wave V. Since we use Fibonacci price clusters to determine these types of targets, we will offer them now as guidance going forward. There is a cluster between SPX 2214 and SPX 2219. Then single hits at SPX 2302, SPX 2397, and then a cluster between SPX 2522 and SPX 2571. The two clusters suggests the minimum and the maximum upside targets for the rest of the bull market.

MEDIUM TERM: downtrend may have bottomed

After the Primary III high at SPX 2135, the market did a Major A down to 2044, a Major B up to 2133, and now a Major C down to 1867 thus far. This would appear sufficient, barring a retest of the lows, to complete a Primary IV correction. At the low we had the most dramatic negative readings in the MACD in quite a while. The hourly MACD hit a negative 43.4, far below the -31.0 of Primary II, but above the -50.8 during 2008. The daily MACD hit negative 42.0, in line with the -42.4 of Primary II, and the -41.8 at the 2009 low, but well above the -77.2 during 2008. This weeks activity was a very significant event.

The Major wave C downtrend, while swift, can be counted as three Intermediate waves: 2052-2103-1867. With each of the Intermediate waves dividing into three Minor waves. Intermediate wave C, which is most important right now, displays these three Minor waves: 1867-1956-1867. At the low there were positive divergences on the hourly RSI/MACD, and the above noted extreme oversold levels on the daily chart. Normally these are more than sufficient to indicate a downtrend low.


Last weekend we had noted an expected downtrend low this week. Only we were not quite sure at what level it would occur. On Monday we posted that the downtrend should bottom during a retest of Monday’s lows between the 1828, 1841 and 1869 pivots. We had no idea it would occur as soon as Tuesday. After hitting the extreme oversold levels we posted a tentative green Primary IV label on the hourly/daily charts Wednesday morning. Thus far that low has held. Medium term support is at the 1973 and 1956 pivots, with resistance at the 2019 and 2070 pivots.


Due to the volatility we have expanded our short term algorithm range a bit and can see five waves up from the SPX 1867 low: 1915-1880-1990-1948-1993. The third wave divided into five waves as well. Quantitatively, however due to the volatility, we only see three waves up at this time. The algorithm count would suggest support around the 1956 pivot. We will track both for the time being until the market provides additional data.


If we take the minimum Primary V target of SPX 2214-2219 it is possible this bull market could complete during one uptrend and this year. If so, the five wave advance of such an uptrend would be labeled with five Major waves. Since this is a possibility, and the simplest count, we will start off labeling it this way once the uptrend is confirmed and/or looks impulsive.

Short term support is at the 1973 and 1956 pivots, with resistance at the 2019 pivot and SPX 2040. Short term momentum is displaying a negative divergence at Friday’s highs. Best to your trading this volatile market!


The Asian markets were mixed for a net loss of 1.1% on the week.

The European markets were mostly higher gaining 0.8%.

The Commodity equity group rose 5.0% on the week.

The DJ World index gained 0.3%.


Bonds are in an uptrend but lost 0.7% on the week.

Crude had it largest weekly rise since just after the 2009 low: +12.2%.

Gold is still trying to uptrend but lost 2.2% on the week.

The USD is still in a downtrend but gained 1.2% on the week.


Monday: the Chicago PMI at 9:45. Tuesday: ISM services, Construction spending and Auto sales. Wednesday: the ADP, Factory orders and the FED’s beige book. Thursday: weekly Jobless claims, the Trade deficit, and ISM manufacturing. Friday: Payrolls and the Unemployment rate. Best to your weekend and week!

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


About tony caldaro

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247 Responses to weekend update

  1. Caldaro does p5 have to be symmetrical to p1 or P3?

  2. Greg Polites says:

    Hi Tony; From several monthly and weekly SPY indicators I follow, the probability that we’ve completed Primary wave V appears to have increased to 75% or more. From the on-going test of the SP1867 low we need a rapid rally to avoid a major bear market set of indicators. Also, oil and commodities have started to develop a second set of sell signals so it appears new lows are coming. A lot of bearishness to go around. Details at: https://hgpolites3.wordpress.com/
    Cheers, Greg

  3. tommyboys says:

    Call me nuts been buying strong companies unreasonably beaten down all day 😉

  4. EL MATADOR says:

    Remember folks, Market historical stats has been winning at every inflection point since Thx-giving rally 2014.

  5. No one’s posting? It s getting r e a l interesting.Naz looks like an anchor today…and not in a good way.But we ll see if 16400 can hold.Good luck all.

  6. Is China PMI to be released tonight?

  7. lots of movement the 1st hour. No Chop chop to the close. should be interesting. Leaning to lower into the close and tomorrow. But end of month we shall see

  8. USD recently broke out above a multi-decade bullish falling wedge and has come back down to test the breakout. Implications are numerous. 1985 high in the USD was 165. See bottom chart at the link below.

  9. spindoc73 says:

    EW has always seemed to me to provide insight into conditional movements, with a proportionality that depends on the magnitude of the subsequent move. Whether this is more a function of my skill at deciphering movement or is inherent to the fluid nature of markets is an interesting question that I will continue to revisit in hopes of one day being able to codify as some here may already be able to achieve.

    Having said that, in the market at present and some of the stocks I trade, the most straightforward interpretation seems to be that a move lower is necessary to flush the downward action in a wave 5 type of scenario. On the other hand though, I see no reason why the waves could no grow up into moves higher. This (personal) information asymmetry leads me to hold some hope that lower prices materialize, while recognizing that to the extent this view is shared by many, the opposite may be more likely. Hence a neutral stance awaiting more information is necessary for me to commit. The slight edge seems to be that in the charts, a downward move would need to materialize very soon (eod, early tom) for proportion. gl

  10. llerias7 says:

    WTI – CRUE OIL charges higher again! $50 in sight!

  11. rc1269 says:

    In my totally non-EW opinion I’m starting to think we’re at >50% chance the bull market ended this year already. Just looking at a (typically) leading index such as the RTY, it looks to me to have already put in a cycle peak type pattern.

    The RTY spent all of 2014 churning, making no progress. Then breaks out finally at the beginning of this year out of a nice inverted H&S. After that long of a basing pattern this setup should normally provide for a nice long ride up. however, it already broke down below the prior neckline.

    From a behavioral standpoint I see it like this: everyone exchanged a lot of shares all 2014 at that fairly narrow value band. Once all sellers in the range were cleaned up, the remaining buyers above that range stepped up and took it higher. But after less than 6 months those buyers were exhausted and we’re back to the range where we previously cleared a lot of trades. “back to the scene of the crime” as Lee would like to say. Who steps up again right now to push us back into that higher range, after we spent so long clearing trades right here? will it be the people who spent all of 2014 selling it right here at this level? Not likely. Or will it be the people who just spent the first half of this year buying and are now underwater? Both of those seem like tough scenarios to swallow. So i’m banking on the alternative, for now.


  12. blackjak100 says:

    Watch 1959 +/- 2pts or 1.618 * wave 1…this is where small degree wave iii may end.

  13. uncle10 says:

    Thanks Tony. Great weekend update!
    just covered my short from friday but not going long right now. good luck all

  14. Read the market, it’s telling you in advance what it’s going to do. As posted here over the past few days, terminated 25% of my bullish position from last Tuesday’s close on the first 75-point (Dow) on Thursday and another 25% on Friday; also as posted, will re-up today or tomorrow for next leg up. Buy low, sell high, then buy back low, sell high again, and so on. Free money. GL

  15. blackjak100 says:

    Futures currently down 13-14 handles which gives the wave iv triangle scenario some merit pending the futures remain down. Wave ‘a’ of triangle would be complete at 1993 so next would be another a-b-c. Unfortunately, targets for triangles are vague. However, I would expect ‘a of b’ in the triangle to complete at the 1929 or 1956 pivot. Hopefully, TraderJoe can squiggle for us to determine where the first 5 wave sequence (wave ‘a of b’) will terminate. GL and Cheers!

  16. argento1 says:

    Hi Tony,
    Thanks very much for the great weekend update!
    I’m going to throw a spicey view that could be totally wrong but please let me know if there is a outside change this could be a possible wave count in motion!
    I have been mapping your wave counts back to our market (SA TOP40 Emerging markets) and it fits in perfectly with the SPX count since 2009, but we had a much more severe correction last October that could place it in the Primary category!We then had a very impulsive upmove with 5 major waves to conclude a new high in April. So basically we have a major top formation in place that calls for much lower prices into the coming months (could confirm the 7 year cycle too), if compared it is actually the same formation we had in 2008 but just smaller!

    If the SPX breaks that 1867 and as you mentioned we could start a bear cycle could this correction not morph into Cycle 2, with Cycle 1 that kicked off in 2009?

    Further more our whole structure (topformation looks like a 2nd wave pattern) but too big for a Primary wave thus thinking it could fit the Cycle count.

    Just some food for thought, appreciate your view.

  17. vannic99 says:


    Just curious. I see tonight about 105000 ES contracts have traded and we are down big. But at the same time, I don’t know the number but based off of the graph on the CME’s site, far more contracts traded in the last 30 minutes on Friday and we went straight up. If we are crashing, why aren’t the big guys in there and the volume exploding? It just seems strange to me that for such a relatively small an amount of “money” the mood can be set for tomorrow. What the explanation?

  18. market will crash again this week.

    Have a look at the VIX, major panic is about to set in to the market, with VIX showing a BULLISH FLAG, that is what bulls do not want to see. OUCH! Time to push the panic button???

    See chart here ==> http://www.bit.ly/1fMcakI

  19. Nader Arafa says:

    Hi Tony,

    There are some strong talks now that the Fed will actually announce another (Probably final round) of QE instead of raising interest rates. Just speculation, however, if this turns out to be true, this can mean that markets will be taken by absolute surprise which might lead to a strong rally.

    Any weight for such a scenario?


    • tony caldaro says:

      The FED has been talking about raising rates for a year.
      What makes anyone think market volatility would move them in the complete opposite direction.

    • rc1269 says:

      not sure what “strong talks” are, but Ray Dalio fielded the idea a few weeks ago that the Fed could hike rates and then either simultaneously – or shortly thereafter – initiate QE4.

      certainly anything is possible. i don’t know that i buy the idea that they would purposefully do them in concert with one another. however, if (anybody) recalls my post from the beginning of the year, i do think there’s a scenario where they could raise rates then regret it and try to re-ease in some manner within a few months. that would not be too far off from what Ray suggests.

      • tony caldaro says:

        After the reading that transcript I came away with a different take than most are suggesting. Dalio said the FED will likely to do QE before it raises rates “significantly”.
        In other words, the FED can raise rates 25bps to 50bps, that’s not significant. After the FED raises rates a little, their next course of action will most likely be another QE program in the future.

  20. 7dayyss says:

    Thanks Tony. Kind of a bummer, was hoping to stretch it out one more year. Oh well, I’ll count my blessings, time to play “small ball!” Thanks to all the regulars also.

  21. rc1269 says:

    Thanks Tony. Great update this weekend.

  22. Futures down big. Going to be a fun Monday

  23. mjtplayer says:

    SPX futures down 26 handles. I thought the bulls would be able to hold-up the market on Monday for month-end, and they still could, but the SPX is not off to a good start.

  24. Thanks for the insightful and exhaustive update. I have some difficulty understanding why this sentence should be true for an unlimited time period:
    “Should the market break Monday’s/Tuesday’s SPX 1867 low, any time in the future, a long term downtrend is likely to be triggered, and we too will be in a bear market.”
    The long-term downtrend was almost triggered because of the great speed of the decline as expressed in this sentence:
    “The selloff, after breaking SPX 2040 support, was so rapid that it nearly triggered a long term downtrend.”
    Since time was involved in the near generation of the long term downtrend (speed=points declined/time period of decline), it would seem to me that passing of time would mitigate the validity of that “signal” and that there would be a point in time past which a decline below 1867 would no longer signify a long term downtrend.

    • tomasso60 says:

      Hi Bouraq:
      thoughts on the euro
      is it possible that this is forming a bear flag with a 121 – 122 target area based weekly?
      thanks – enjoy your charts

      • tomasso60 says:

        lets change that to 118 area.
        my eye sight is getting a bit tired lately
        thanks for your thoughts

      • bouraq says:

        Yes it is definitely a possibility if the blue channel breaks down. Glad you enjoy them

  25. Lee X says:

    Thanks Tony

  26. budfox9450 says:

    My Free, BoYu charts time, has expired…

  27. soulsurfer says:

    thanks for a great update tony!

    since each and every chart and wave count has imho been presented and analyzed already I wanted to focus on something else: market breadth, as we need to monitor for a zweig breadth thrust event, which IF it happens will have important implications.


    GL out there folks!

  28. M1 says:

    Good day
    This past week the market confirmed the end of the wave that started back in oct 2011. I don’t see anymore than that.
    Yet It has to be seen whether NAZ 5231 top was Primary wave III or something also
    At this point these two counts are possible. Here are the charts

  29. J.Wenger says:

    Thanks Tony. Quite a wild ride to close out the “summer” session!

  30. locanbbs says:

    New Blog with Headlines:

    – Stockmarket Winners: Strongest stocks in “V-Formations” = Buy Signals for new Uptrend? Or for Downtrend (weak Elliott Wave V?) => Selling short??

    – Only 14% of Nasdaq 100 over 50% BB and Stocks already oversold = Downtrend for Stocks ??

    – WTI / Brent Crude Oil gives strong Buy Signal! (Now 14 standard indicators.)
    Details/Charts: http:blog.100-percent-Stockmarket-Winners.com

  31. M1 says:

    Does OEW accept first waves 3-3-3-3-3 diagonals or leading diagonals ?

  32. JeffMilano says:

    Thanks Tony for the update and the blog. jeff

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