Wednesday update

SHORT TERM: eleventh straight gap opening, DOW +293

Overnight the Asian markets lost 0.8%. Europe opened higher and gained 0.4%. US index futures were higher overnight, and at 8:15 the ADP was reported higher: 190k v 185k. The market gapped up at the open to SPX 1935, ticked up to 1938, then started to pullback. The SPX had closed at 1914 yesterday. At 10am Factory orders were reported higher: +0.4% v +1.8%. By 10:30 the SPX had pulled back to 1920. Then after a rally to SPX 1932 by 11:30 the market pulled back to 1920 again by 12:30. After that the market rose into the: at 2pm. After hitting SPX 1940 just after the report the market pulled back to 1929 just past 3pm. Then a rally into the close ended the day at SPX 1949.

For the day the SPX/DOW were +1.80%, and the NDX/NAZ were +2.60%. Bonds lost 5 ticks, Crude gained 60 cents, Gold slid $6, and the USD was higher. Medium term support rises to the 1929 and 1901 pivots, with resistance at the 1956 and 1973 pivots. Tomorrow: weekly Jobless claims and the Trade deficit at 8:30, then ISM services at 10am.

The market gapped up at the open today, breaking the three consecutive gap down opening streak. Initially the SPX rallied to 1938. Then it pulled back to SPX 1920, rallied, then hit 1920 again. After that it rallied, post Beige book, to SPX 1949. After yesterday’s gap down opening the SPX rallied into the lower 1940’s three times before heading lower in the afternoon. Today it found resistance there again, and then ralled beyond it in the last hour of trading. Overall it was a constructive day. Short term support is at the 1929 and 1901 pivots, with resistance at the 1956 and 1973 pivots. Short term momentum rose to overbought during today’s rally. Best to your trading!

MEDIUM TERM: downtrend

LONG TERM: bull market


About tony caldaro

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155 Responses to Wednesday update

  1. Bullish divergence today for C of minor B… likley double bottom here

    SMall caps are up relative to large caps. IWM showing classic ABC pullback from this weeks highs here, should rally up next week.

    Mercury goes direct on the 6th…

    Mud clears til around the 13th… IWM maybe to 118 area from 113.60 here

    Will then be a great B wave high and then a shot to short the market nicely…

  2. pbnj123 says:

    Taking a stab at it here – so if yesterday low was minor b and today’s action is an a – b of lesser degree then 1975 minus 1914 = 61 so 61 from here = @ 2010 ish if tomorrow is to be c to complete major B – does that sound about right?
    Not quiet 2040 – sorry

  3. Page says:

    I am counting on goldilocks payroll numbers tomorrow, market will like the numbers, markets will shoot higher. No rates increase this year or even next year.

    • tommyboys says:

      We’ll have a good jobs number, the Fed WILL increase rate as planned and the market after – maybe – a day of weakness – will rally strong on the increase. It’ll be a bullish sign for the economy…

      • Page says:

        Possible because uncertainty will be over.

      • rc1269 says:

        so what does the market do if the Fed doesn’t raise rates this month?

        • Page says:

          No way they will raise rates this month or even this year but if they do markets will shoot higher, much higher (see Q4 rally). Some of the countries are in recession or will be going into recession, Europe is a mess. I won’t be surprised people in US will be talking recession next year, the markets around the world will be crashing next year.

          • Page says:

            I meant if they don’t raise rates then markets will shoot higher.

          • rc1269 says:

            so if they raise rates = mkt shoots higher. if they don’t raise rates = mkt shoots higher. sounds to me like it doesn’t matter what they do with rates, so why even bring it up?

            perhaps more likely – and i’m just guessing here so pls correct me if i’m wrong – that the main reason that the market is going to take off is because… you’re long…?

          • Dex T says:

            If you think that the markets will go up regardless of a hike then a rate hike make no difference.

          • Sandra Dons says:

            I think no increase under 200k

        • tommyboys says:

          Market rallies whether rates are raised or not. Fundies are improving in the economy regardless of the fear mongering. Cheap oil, improving employment, booming housing etc…Doom and gloom at will…

          • rc1269 says:

            gotcha. certainly a higher probability call from down here, 150 points below where you were last calling for the big rally in recent weeks/months. eventually we’ll definitely be higher, i do agree with that

    • EL MATADOR says:

      Today’s daily hammer indicates a very high probability that any bounce tomorrow will be a fake-out. historically the LL peak successive hammers (meaning one at each lower peak) lead to a lower low than the prior trough low. Just something to chew on.

      • Leonardo says:

        Thank you for writing about today’s candle ElMat. I wondered about it… Called a topping tail candle (?) , and usually bearish price action follows?

  4. Caldaro does p5 have to be symmetrical to p1 or P3? can you elaborate if no?

  5. Caution Will Robinson. Inability to surpass 1960 on the bounce warns of potential 5th wave down to new lows for the day.

  6. Sandra Dons says:

    Damn …going red….

  7. As expected the rally from 1903 appears to be complete at the 1973 pivot area. Most importantly we seem to have enough waves. More interestingly still is the CAC and Daffy DAX have gone back to form double tops with their rallies of last week … a potential double top 4. Thank you Super Mario. Although I’m not sure if I have enough waves to complete the move on these European indices the fact they stopped where they did is telling. Overall very real potential now exists that today’s highs will not be exceeded again until after PIV has concluded.

  8. I just wonder watching all the experts saying “buy right now”, whether they lose their jobs if the market goes down to 1500 from here.Mark Matson was just on smiling about stocks.Really? Just because of EL MATADORS post Labor day chart alone, I d shut up–and you know these guys know this stuff-yet they act like there s NO CHANCE of a more serious drop.A lot of variables here that warrant caution at the least and 100% cash or put buying at the worst.If we plow through 2040 or 17100 (dow) I ll say this is over.Right now, lots of problems staying above 16500, which is another more bearish level to stay under by tomorrows close.That s all from me today.Good luck all.

    • Dex T says:

      It depends on the firms hiring them and their investors. If they make bad calls – then sure people will withdraw funds. Most of them are simply working off the ignorance of the average person.

      Many of these experts will rarely or never be seen again on TV so you have to question what your watching.

    • rc1269 says:

      the best experts i know in this business you’ve never heard of, and certainly would never be caught dead on cnbc

  9. rc1269 says:


    I’ve been thinking more about your comment regarding a few of the market leaders still needing to post another higher high before they can enter a bear mkt. I’ll share with you my one concern on that front:

    I’d classify last Monday as another flash crash. Thinking back to the last flash crash in 2010, most (if not all?) of the stocks that hit extreme intraday lows later went on to retouch those lows in just a few weeks’ time.

    Fast forward to today and every one of those leader stocks you posted printed lows last Monday well below where we are now. I just wonder how the broader market reacts if those leaders drop back down another 15-25% over the coming weeks. It could be that the bots work differently these days and they won’t hunt people back down to those levels. But it sure seems possible.

    That’s not to say that all this couldn’t still result in a deeper P IV, which surely it could. But I would imagine there will be a lot of further damage to the broader market charts if that scenario plays out. cheers

    • tony caldaro says:

      That flash crash and this one are a bit different in one respect.
      The May10 flash crash occurred during trading hours. Yes, some stocks got caught in the panic but the extreme trades were basically cancelled.
      This flash crash occurred before the market opened. When cash trading got underway the ES contracts were locked limit down. So the funds that were selling overnight had to use individual stocks to continue hedging. Those trades were not even questioned.
      Also, the May10 flash crash started a correction. This one occurred while the DOW was already in a three month downtrend.
      Overall, do not see all of those stocks retesting their lows.

  10. perversionofthemean says:

    OK, the measured-move *up* on SPY was likely fulfilled at the high today. This was sufficient to fill the massive SPY gap down from last week.

    Micro-caps have failed a long-term (since ’08) TL up, and this rally has been a snap-back to the underside.

    An average of all of the EEM-type funds (my index) shows that the last four years was broken last week, and this was a snap-back rally in momentum to the underside of the shelf. However, a TL from the ’03 low to the ’08 and ’09 lows was hit perfectly last week for the sizable bounce. That remains bullish, but I would expect a re-test is required (like ’09 was for ’08).

    • perversionofthemean says:

      For the bulls, they’ve got an opportunity with the island reversal to ignore today’s gap up. I would think that a re-trace and fill today would be bearish and usher further weakness, but island reversals haven’t really signaled enduring reversals of late. I got lucky and sold my ES near the high, simply because I had to leave and couldn’t keep an eye on it. As usual, the bulk of today’s initial move occurred when I wasn’t available, and I missed buying it yesterday.

  11. blackjak100 says:

    Market will not move much lower today with NYAD +1700…probably moves higher into end of day IMO

    • blackjak100 says:

      Very surprised things moved down a lot right after I posted. TraderJoe’s 4th wave triangle still looks OK.

  12. Market put many in same situation to make them miss a good 3rd wave. 1st, a big scaring down, 2nd, starting a recovery and an other fast down, 3rd when finally get up and buy everyone saying “now we are going down, sell-sell” And look what: just higher and higher taking off all bear stops…

    • Needs bear stops to get over all resistances

    • spindoc73 says:

      i lean bearish and that this is not 3rd wave higher but rather a sucker’s rally. no position though, and will adapt either way.

      • If you really think that the chines market can go to zero… good for you to be bear. It just lost 60%, how much more do you consider could go? Their company could very well have being overvalued, but 100% never nor either 80%.

        • spindoc73 says:

          To be bearish, it is not necessary to assume Chinese market can go to zero anymore than it is necessary to assume the US market can go to infinity when bullish.

          As to whether 60% is enough to predict the bottom in US indices, what is the observation that gives credence to a linear correlation between the two? I would assume that a sideways Chinese bottom could co-exist with a SPX grinding lower to a cycle low of some degree.

        • jeffbalin says:

          I’m like, what the heck is a “Chines”

          • spindoc73 says:

            Right – I like the way Francesca words things – just takes a while to figure out exactly what is being said! When you think about a 60% drop in the Chinese market, it is perhaps not a great sign that this occurred while the government was buying shares and threatening sellers though. Where is the bottom in such a market no one knows. Maybe 78.6%?

    • Fran, agree, also energy and other selected commod’s also gearing up for the last big push, which is typical during late stages of equity bull mkt.

    • EL MATADOR says:

      Fran, I’m I understanding you correctly, you think this is a 1-2, 1-2 and we are in a 3rd of 3rd? If so, I don’t see anything that supports such, not momentum, strength, thrust, etc. No Friggin way!

      • perversionofthemean says:

        Mat – could you please help me out? I’m still reconciling my methods with EW. Can you please provide me two dates/times that bracket what you believe to be five clean waves up? I can pull up any date range or bar type/size. Thank you!

        • Matador, sorry delay on answer but where out. Market went from 193 spy strait up to 198, has mean 50 points rally in a single streak. Understand we have been spoiled with 100 point down and 100 up in a single session for a while, but never the less I couldn’t you be satiate with the last move considering the huge down days had recently?

        • EL MATADOR says:

          Perversion, the best way for me to help you would be if you can tell me how familiar/knowledgeable you are with EW thus far and with which time frames you are struggling with the most (I’m going to assume it the little squiggles, they are brutal). Also let me know which EW books/material you have read thus far. Email me at and we’ll take it from there.

  13. mjtplayer says:

    Just took a cheap short on oil here via SCO, small position.

    If this pre-holiday weekend rally in stocks continues into tomorrow’s close, the VIX should continue to drop. If spot VIX trades down to the 20-22 area, that would be a gift to go long.

    Bulls doing a good job with price, but still 20pts away from SPX 1,993 and volume continues to suck; today is even lighter volume than yesterday.

    • EL MATADOR says:

      Bulls suck it’s not their turf right now….LOL

    • Dex T says:

      Agreed and tomorrow will be even lighter. Most of the humans checked out and the algos are in control based on the slow steady buying.

      In the 1973-1993 range it pays to be cautious. If this is a B wave then there is high chance of a triangle forming.

  14. This rally so far is weak, but its a C of ABC from 1867 lows. 1867 is the 34 month MA line.
    1914 was a .618 retrace of the first 126 point A wave…. B was .618 of A i.e.

    now we are trying to climb to 1980-2040 ranges in C when China is closed and its a light volume pre holiday week of trade

    Its hardly bullish action

    The drop and trap door come around 9/11 or just prior will be ugly…

    1730 on tap after this B of ABC is over…

  15. kvilia says:

    Not all gaps are filled but if this one is, this will take RUT through the upper trendline and possibly to parabolic run to new highs – in this case the downtrend will be obviously over. Does not have to happen, just throwing the scenario to keep in mind.

  16. rc1269 says:

    since i took the rare liberty of making a trade call two days ago (ST buy at 1907), i feel obliged to state my trade close. i’ll take my 60 points here and exit stage left on this one. the mkt can have the rest. cheers.

  17. Draghi announces “downside risks”have developed to EU.Inflation estimates cut to .1% and GDP cut as well.No extra QE yet, but threatening more (because it s working so well).Dollar explodes up…see where it settles.These guys are clueless.Thanks to China holiday…no worries right?

  18. The nasty numbers mentioned on Aug 25 are “digested”….Time is the dominant factor….Imho…The 15 min play in full gear….

  19. stmro says:

    Draghi sounding very dovish in his press conference. Sounds like he’s prepping for more QE. Markets responding in the usual way – this might give us the excuse needed to get up to 2040 before at LEAST a retest of the lows and probably more.

  20. budfox9450 says:

    I am a LONG TERM investor. Several
    people, have expressed an interest in the
    long term analysis only, for investment purposes.
    I have created an email list, for Long Term investors
    only – if this interest you, contact me
    No cost to you, and you can be removed, upon your request.
    Understand, the long term Buy/Sell signals are not
    created very often, 2007, 2009, 2015, etc…Bud

    • JeffMilano says:

      Is boyu long term or short tem. TX

    • kvilia says:

      Public board, right? So I will share my experience. Signed up, next thing the gentleman replied to all revealing all email addresses, some where from major investment banking firms – laughed for a while, just a proof these guys are clueless. Then I’m getting lectured or my posts on this same board of how inmature (as an investor/trader) I am, finally getting removed from the mail list. Just my experience and no opinion expressed. Hope it helps.

      • fishonhook says:

        It does help. Thanks

        I used to sign up for a lot of TA sites when I thought they worked (none did and they were most;t scams) and occasionally they slipped up and included e-mails in mail out and it I was shocked how many many were at the big brokerage houses.

      • john b says:

        good to inform people of such experiences

  21. Gary Lewis says:

    The SPY market pattern is still following my expectations. Looking at my weekly charts, I had expected some rally to the 204, neckline level with a three-week test of the low to come next week. In the past, with all of the V-shaped recoveries, we’ve seldom come down to test the lows and that happened right from the start in 2009. In the absence of the V-shape recovery thus far, I’m still expecting the normal test of the low. As all of my weekly and monthly momentum indicators suggest continued weakness, I look for any bounce above 200 (SPY) for sell opportunities.

  22. ufa123 says:

    If you believe in Dow theory; DJ utilities were flat yesterday, but DT transports were up 2.45% on the highest volume in 2 years. But is enough to get over Tony’s pivot?

  23. torehund says:

    Bovespa looks good and Greece (GREK) should do no worse…Its building into a commodity rally.

  24. kvilia says:
    I believe this is pretty clear – the support/resistance line looks damn close to 200MA, so if it gets rejected the coming days – we are in the bear market.

  25. vannic99 says:

    Well, I have no triangles or other charts to offer but felt like putting a target on this rally. It’s my guess(it’s a little more than a guess) that we don’t get to Tony’s 2019 pivot. I actually think 2013 but heck, let’s go with the year and say 2015.

  26. After opening 1.4% higher thanks to a positive lead from New York AORD promptly dropped 2% in the first 70 minutes. Having said that I am starting to accumulate another long SPX position around the cash equivalent price of 1950 after the index had reached 1960 AH. Banking on this pullback being 4 of 3, or possibly the larger 4. Target 1973 pivot.

  27. fishonhook says:

    Joe-the-traders triangle is still very much in play

  28. NEWBIE says:

    In Silver last week there was confirmed volume of 122,482 contracts traded in a single day which represents 612 MILLION ounces of physical silver … or over 87% of annual global silver production. Meanwhile China has sold $100 billion worth of Treasury bonds over the last two weeks.

    • Yep max fear…Quick everyone grab your gold and guns and run for the hills……

      • NEWBIE says:

        My post stated facts!

        • Noob, Facts? yes maybe (I have not checked) but you are also trying to find linkage between dealings in certain asset classes where there may be none, and and alluding to some kind of zerohedge conspiracy. GL

      • rc1269 says:

        why oh why do people continue to post the silly fear greed chart? yes, it’s low when the market is at bottoms. it also said to buy on 7/7, and 8/12 and 8/20. how did that work out for everyone? please, for your own sanity and your own wallet, un-bookmark that garbage and focus on one of the countless other indicators that don’t give you the same signal over and over no matter where the market is in its cycle.

        i pity the fool who was relying on the fear greed index in the summer of 2008, because it was saying buy buy buy

    • Gary Lewis says:

      Trading volume may not be as important as changes in Open Interest. Increases in Open Interest indicate more shorts coming in to the market as all contracts are initiated by shorts.

    • tommyboys says:

      Whether true or not its meaningless. China holds $TRILLIONS in Treasuries. They breath tens of billions in any given month. Fear mongers always working. Five years ago it was the Euro bringing down the dollar – and USA. Before that it was the Yen. Now it’s China – or already “was”. Look at the Yen and Euro now! Now the Yuan has begun IT’S long awaited descent against the dollar. US will continue to lead the world for at least another generation – and likely much longer. Here’s a clue – the world’s reserve currency will NEVER be controlled by a dictator nation. So tired of the chronic irrational fear posted and pumped. Buy into it at your peril.

      • rc1269 says:

        while China does still hold a lot of UST, their recent selling has been far from meaningless. I’d wager their selling has probably kept the US 10yr about 10bp higher in yield than where we would otherwise be, maybe even 15bp. Considering the Fed has been himmin’ and hawin’ over 25bp in the front end for years, i’d say that 10-15bp longer down the curve shouldn’t be view as meaningless.
        the bigger concern is what does it do for our rates if this becomes a regular occurance in the following months/years. there are many economists who now view China as being in a long term state of foreign currency reserve liquidation. and that means more UST selling

  29. Some points I hadn’t considered that are hard to dismiss.

  30. This comment by Tony C from today’s post sums it up for me:
    “Overall it was a constructive day”.
    The NYSE A-D was + 1490, which is respectable for a first day rally off the higher double bottom evident in most, if not all of the indexes and indicators. Here are links to a couple of sample charts;$SPX

    Kudos to FRB for calling today’s rally. If this nascent bottoming pattern holds, then the decline of the SPX will remain at -12.55% for the correction. In my mind, that would keep alive a slight chance that we have just completed Major 4 of Primary 3 and are entering Major 5 (rather than Primary 5). Of course, that would be a very desirable outcome. I am hoping it is viable, but I am certainly not pounding the table about it. We should probably just consider ourselves lucky that we are not entering Primary I of a bear market (unless you’re a short seller)..

    • Page says:

      VIX will be coming down hard tomorrow. We may see SPX 2040-2050 before next leg down.

    • torehund says:

      Seems to be the conclusion, market is hesitant but many shares I follow don’t seem to have the force necessary to go further down. They just hoover between a possible bottom and small gains. Long term from 09, there are 2 large distinct “waves” up on macd, and the first one that ended in the flash crash corrected in an abc. The next on the macd (the one that we have labeled P 3), has its first part as an abc up on the macd until a final top formed. From there onwards the small end wave corrected in a small abc, then the whole complex of the second macd wave corrected in a much larger abc. Accordingly we can still look at this point in time as a primary 2 bottom, or 2 waves finished and corrected. If Primary 3 awaits we are talking of a monster, fitting with declining currencies and a tendency to hyperinflation. Wild may become much, much wilder still.
      Thanks also for the update Tony.

    • Thank you sir. After posting real-time that we got a major Buy signal at last Tuesday’s close (Aug 25), I’ve repeated that the market will not, cannot, breach the low other than a temporary (possible but unlikely) overthrow to shake out weak hands.

      Once I know this with a very high level of confidence, I like to take profits on half of my position: if market keeps moving in the predicted direction, my profits grow even bigger; if market takes a breath, I like to buy back what I recently sold and ride that higher on the strength of the original signal, then keep doing this until I get the next Sell signal, at which time I cash in all bullish positions and go bearish hard.

      It always amazes me when people get so nervous here, doom-and-gloom, conspiracy theories, etc., when the Dow was FOUR HUNDRED points (now 700) above the signal currently in force. It takes two too make a market so I suppose I shouldn’t look a gift horse in the mouth. GL all.

      • fotis2 says:

        FRB…B.SHIT you posted nothing real time You sneakily gave a maybe today maybe tmrw this thing ralies and once again you were magically on the right side of the trade After The Effect.Please keep your Bshit posts to 3 or less its becoming a real pain to skip all the crap you post.

  31. Sandra Dons says:

    I say sorry but si posible to know the target of the eventual P5 ?

    Thank you to mr TC and to all


  32. The new currency for the future

  33. C Wave to 2040 looks possible before Big C to 1730. 1914 was a .618 fib bottom

  34. EL MATADOR says:

    Here is the dilemma market price seems to be exhibiting lately. The bull crowd now is a nail biting nervous wreck that continues to believe and want the bull party to continue but almost none in the bull crowd want to pay any more of a premium for their stocks anymore. And this is a HUGE problem and explains why momentum reeks of !@$@! On the other side you have a very thin but growing bear crowd that is very anxious to short at each and every next resistance zone. So as you can see that 1867 SPX re-test seams like a sure bet eventually.

  35. kvilia says:

    Interesting times. I was very concerned PIV is not the valid count any more until I saw Tony’s message about market leaders. I dont track individual stocks, so this was very helpful to know. Getting more comfortable again to think PIV is in progress and/or ending soon. End of day seems to be promising, also VIX does start falling. Let’s see SPX attack 2040 and 200MA and this should give us a better idea. If we confirm PV, I’d be very cautious handling the last wave of the bull market. Seems like it’s already time to change the trading strategy for all bulls of the recent past.
    Thank you, Tony.

  36. mjtplayer says:

    Thanks Tony!

    The bulls have the calendar bias over the next 2-3 trading days into the holiday weekend and the Tuesday following, to try and get the SPX up and over the recent 1,993 high

  37. fotis2 says:

    Thanks Tony certainly not a boring Market.GL people, trade safe and don’t spend all the winnings on the weekend on stuff you don’t need.

  38. Page says:

    Thanks Tony.

    Bulls need to hurry next 2 days before Chinese come back next week. They will be shocked to see US markets up during their absence.

  39. Thanks TC. 3 of 3 into the close of this c of C wave. 1973 pivot looking okay to halt this move and thus keep the triangle in play. Triangle wave D back to 1929 possibly. Bulls will be getting excited after today. Best let’s see what happens at 1973. Could go considerably higher and still be wave 4 but not a triangle or c of wave B. Plenty of options. Still in the PIV camp. At the very least expect a retest of the lows. Good luck everybody.

  40. 56rambler says:

    Thank you, Mr. Caldaro,

    Does this increase the probability that we’ve completed Primary IV?


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