weekend update

REVIEW

Another volatile week! The week started off with two consecutive gap down openings after starting at SPX 1989. By late Tuesday the SPX was down to 1903. Wednesday and Thursday it reversed with two gap up openings, carrying the SPX to 1975 by Thursday morning. On Friday the market gapped down at the open taking the SPX to 1911. For the week the SPX/DOW were -3.35%, the NDX/NAZ were -3.15%, and the DJ World index was -3.60%. On the economic front positive/negative reports came in even. On the uptick: construction spending, factory orders, the ADP, the GDPN, plus the unemployment rate and trade deficit improved. On the downtick: the Chicago PMI, both ISM’s, the WLEI, payrolls, plus weekly jobless claims rose. Next week will be highlighted by the PPI, Export/Import prices and Consumer sentiment. Best to your week!

OVERVIEW

Last weekend we posted several points that we feel are worth repeating. Last 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.

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 last Monday’s/Tuesday’s SPX 1867 low, any time in the future, a long term downtrend could 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.

LONG TERM: bull market

We continue to label this six year bull market as Cycle wave [1] of the new Super cycle 3 bull market. Cycle wave bull markets rise in five primary waves. Primary waves I and II completed in 2011, Primary wave III completed in May of this year, and Primary wave IV appears to be still underway. When Primary IV completes, which we now estimate will be between the 1828, 1841 and 1869 pivots, Primary V will begin.

SPXweekly

Fifth waves however, during this bull market and others, 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 ends at SPX 1867 we have made some projections for Primary wave V. There is a price cluster between SPX 2214 and SPX 2219, if higher SPX 2302 or SPX 2397, then another 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

Primary wave II was a complex elongated flat. This pattern, while unusual, was exactly the same pattern that occurred during the 1987 crash and bear market. Since Primary waves should alternate in pattern we are not expecting an elongated flat for Primary IV. We are expecting a zigzag to alternate with that flat. The zigzag could start off looking quite similar to Primary II, since the first part of that correction was a zigzag. And it does!

SPXp2

When comparing the two Primary wave corrections we see lots of similarities. Primary I and III both topped during an extended period of low volatility. During 2011 the SPX had traded in a 121 point range for seven months, and during 2015 a 95 point range for six months. During this low volatility period Primary waves I and III both topped in May of their respective years. Then there was a downtrend low to start Primary waves II and IV, followed by a lower uptrend high into July, when the NDX topped. After that the SPX entered another downtrend. Then when the SPX broke six month support, SPX 1249 in 2011 and SPX 2040 in 2015, there was a quick and steep selloff lasting several days in August.

SPXp4

During Primary II the SPX went into a volatile trading range during September, then bottomed in October. Our current market is now in a somewhat similar volatile trading range, but we are expecting it to bottom this month.

SPXdaily

We have labeled the SPX 2135 May high as Primary III. Then the July SPX 2044 low and July SPX 2133 high as Major waves A and B. The Major wave C downtrend has been underway since that high. Major wave A was labeled with three Intermediate waves: 2072-2129-2044. Major wave C is also being labeled with three Int. waves: 2052-2103-underway. Medium term support is at the 1901 and 1869 pivots, with resistance at the 1929 and 1956 pivots.

SHORT TERM

Due to the recent activity, and the expectations of Primary IV ending within a week or so, we have shifted the Intermediate wave C of Major C count. We are now labeling the double bottom low at SPX 1867 as Minor A, and the rally to SPX 1993 as Minor B. Minor C, to retest the 1869 pivot, or decline to one of the two lower pivots, should be underway.

SPXhourly

Short term support is at the 1901 and 1869 pivots, with resistance at the 1956 and 1973 pivots. Short term momentum ended the week just above oversold. Best to your Tuesday trading!

FOREIGN MARKETS

Asian markets were all lower on the week for a net loss of 3.4%.

European markets were mostly lower for a net loss of 3.0%.

The Commodity equity group were all lower losing 3.0%.

The DJ World index is still in a downtrend and lost 3.6%.

COMMODITIES

Bonds continue to uptrend and gained 0.4% on the week.

Crude is trying to confirm an uptrend and gained 1.6% on the week.

Gold is also trying to confirm an uptrend but lost 1.0% on the week.

The USD is still in a downtrend but gained 0.2% on the week.

NEXT WEEK

Monday: holiday. Tuesday: Consumer credit at 3pm. Thursday: weekly Jobless claims, Export/Import prices, and Wholesale inventories. Friday: the PPI, Consumer sentiment and the Budget deficit. Best to your three day weekend!

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

About tony caldaro

Investor
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289 Responses to weekend update

  1. blubrd67 says:

    Tony you write
    “Crude is trying to confirm an uptrend”
    “Gold is also trying to confirm an uptrend”
    You don’t think gold and crude have another lower low to make before more serious uptrend begins?

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  2. timing101 says:

    Tony, any thoughts that 1867 was the end of Primary IV? And that Primary V might end in October of this year? The last wave of 2007 completed in less than 2 months, in Oct. also.
    So the count would be Major 1 at 1993, Major 2 at 1903, and in a subdividing Major 3 now?

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  3. tommyboys says:

    Strong insider buying past couple weeks – strongest in a while. These guys generally know more about their businesses than the layman…

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  4. mjtplayer says:

    I had changed my count to SPX 1,993 ended major B, now I don’t know; with the clear triangle that’s been forming. I don’t buy the wave 4 argument, which means a completed triangle has to be a B wave.

    What do you think Tony? Another 20-30pt pullback for a potential wave E to complete int B, then int C up to complete major B?

    https://www.tradingview.com/x/E5tLs5mW/

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  5. learnedmylesson25 says:

    One day wonder? Probably.I m on a weekly viewpoint now after last Fridays close below a long running bearish triangle at 16500ish.Still below that at this point.Unless we close above that on Friday this is just noise–LOUD noise.for sure…lol.Good luck all.

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  6. The professionals have returned from vacation and are making a statement. It looks like M5, I mean P5, could be rolling.

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  7. H D says:

    upside surprise, 1962.75 +(55), Friday low, has anybody mentioned a potential triangle pattern?

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