weekend update


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!


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.


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!


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.


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.


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.


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.


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!


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%.


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.


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

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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?

  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?

  3. tommyboys says:

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

  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?


  5. 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.

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

  7. H D says:

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

  8. A close at these levels would be bullish. Close under 1950 Bearish

  9. Gary Lewis says:

    Reestablished put positions (after closing out Sep positions Friday at 192.40) moving in to October at 196.40. And four handles higher. 🙂

  10. ewmarkets says:

    A few minutes ago, SPX 1-minute chart and SPX-60 minute chart are fractals–both a triangle. The triangle on the 1-minute chart has broken to the upside a few minutes ago.

  11. EL MATADOR says:

    I’m favoring this as a nested 1-2,1-2 and the famous 3rd of 3rd sell off coming overnight….anyone else seeing this?

  12. johnnymagicmoney says:

    I look at this pretty simple………….we had a wedge that ended in May that coincided with the top………………Then we had another wedge in mid August that preceded the huge drop from 2100…………………Now we have a third wedge occuring right now……………..Each wedge taking less time then the last……………………Once again it is getting very tight and I would assume it will drop sharply one more time here………..I am guessing that is the last drop here in the IV (assuming this isnt a bear). Could it be that it fits perfectly into pre FED? And the money whore Yellen saves the day one last time giving us V which ends early next year??? I would assume we would would undercut the 1867 number but maybe not


    • tony caldaro says:

      one could count a triangular B wave from 1867 to today’s highs

      • blackjak100 says:

        Agree TC, but movement out of triangles is usually swift & violent which leads me to believe it’s not a triangle or it’s incomplete

      • chrisk44342 says:

        If it’s going to happen this would be the place to short it. 15 pt stop with a very nice downside potential. I don’t believe in predicting patterns but I do believe in nice w/l ratios (:

        • blackjak100 says:

          Never was a good risk reward because it wasn’t a completed triangle and now doesn’t look like a triangle at all

    • spindoc73 says:

      My vague feeling is that this pattern has biased everyone to overweight quick resolution. On the topic of Yellen, the idea that she will save the day seems to require that she believes the day needs to be saved. What if she believes the day was already saved, and that market resilience in the face of inaction or raising will act as proof?

    • Dex T says:

      Entirely possible direction-wise.

      However, I doubt the Fed will do anything dramatic. The stock markets may be selling off but it’s hardly apocalyptic. Last October they took a similar dive and the Fed ended QE as promised without any trouble.

      They’re already gone on record saying that another round of QE is not an option and Fisher gave a fairly strong speech at Jackson Hole saying that rates will rise since GDP and employment are in line with expectations. There is only one Fed voting member (Evans) that is against the idea. Everyone else is open to it or in full support.

      We can’t keep going through these stupid “tantrums” just because another fund has a bad month. They need to join the rest of the US in tightening their belts and honing their skills or find other lines of work!

    • jwmcbride says:

      This is what the market sounds like when dumb money is in control of it.

      Hmmm I think I will go long the s&p. Or maybe I should short the s&p.
      Oh I have it I’ll short the s&p and go long the dow. That ought to work. Then again thats what they are e xpecting me to do. Hmm
      I’ll pretend to short the dow but I will actually go long the s&p. Or i’l pretend to go long the dow and short the s&p.

      Oh well I’m going long oil.
      Maybe I should not have quit my day job

  13. jeffbalin says:

    I’m going to ask this question to you guys, what I have casually noticed is when macd and or RSI makes a higher high and price does not, price seems to be headed lower. Right now on the daily Spx, RSI and macd have made a small higher high and price has not (yet). Clue that this a temporary upswing?

  14. sibyn says:

    DAX up now to 11000(short term) then top @13600/BAT 15502 year 2016
    EW cant see that.

    Regards NybisSibyn

  15. JeffMilano says:

    Does anyone have info on Chevron. Tx / jeff

  16. To me…smells like it won t hold.Just a gap fill, now on to the rest of our programme.

  17. Only last think. Entry point for the run is @ 1944.5 ES globex. Other than that frustration for bears

  18. I’m always skeptical of Monday morning (Tues in this case) rallies. It is going to pop on the open right to the 1956 resistance pivot. If rejected there, it could be the final leg of a 4th wave triangle. So since I’ve noted it it will probably blow right through. LOL

  19. jwmcbride says:

    Update from Friday. Trade setup divergence worked out great. Wave count not so much. I will leave wave counting to Tony.

  20. Gary Lewis says:

    What’s that they say about Bear Market rallies? Sharp and swift? Like today?

  21. argento1 says:

    Looks like that 1820ish low is only scheduled for beginning October and not September, charts indicating this run could have legs into end of September before the final drop!Emerging markets waves starting to play out and shows strength meaning their low could be in (Primary IV), although the states could make that new low we already in Primary V and aiming for a bullmarket top early next year!That answers the question on this being a Cycle 2 that it is not!


  22. I am sure many will deny this is the 3 of the 5, or the 3 of 1 of the 5 at any little fart……

  23. fotis2 says:

    Futures CH break above 1944 brings 1970 into play 30min chart.

  24. Trannies have formed a bear flag.Sitting at aprx 7800.A bounce should go no higher than 8125.A drop below 7760 sends it down probably below 7500.Futes up.Open gap at 1950 SPX…a small one possibly filled today…then back down.Good luck all.

  25. Phil1247 asked if I did any analysis on interest rates. So, I took a look at $TNX with unbiased eyes. While some have said the bottom is in for rates, this chart argues against it. I looked over the whole of the decline from the 1980’s and can not find a triangle. Yet, rates can’t go much below zero, so how does this decline end? There is almost always and ending pattern like a triangle before the last wave of a primary sequence, or the sequence ends in a diagonal. So ..

    Looking at the monthly chart, the best pattern I can find is that of theCcontracting Ending Diagonal, as below. (More text below chart)

    TNX - Primary Analysis - Sep-07 1640 PM (1 month)

    First, the two vertical arrows are the same length. So that means the second downward movement, (3) is shorter than the first downward movement, (1). In fact, it is only 78.6% as long, but I didn’t want to crowd the chart with a Fibonacci ruler. Next, wave (3) occurs in on a striking divergence from the Elliott Wave Oscillator. So, this fits the pattern of reduced momentum in downward travel. Third, all of the waves can be counted as simple zigzags, with wave (4) shorter than wave (2), and wave (4) overlapping wave (1). Fourth, there is a pretty clear Minor Degree Leading Diagonal for Minor A of Intermediate (5). Fifth, that diagonal was broken to the upside by a B wave. Sixth, each Intermediate wave appears on opposite sides of the monthly EMA-34, so each wave has good proportion and balance. Seventh, price is currently below the EMA-34, so there is no sign of a turn. And, eighth, (and Fibonacci last) there are currently no higher high candles. This tells me a wave Minor C of Intermediate (5) could come crashing down, but if it is the last minor wave in Primary sequence, it could truncate.

    Hope this helps.

  26. soulsurfer says:

    thanks for a wonderful update tony! i hope you’re enjoying the day off.

    Took a bit of a “attack it from the rear” approach this time and looked at the bullish percent index to get additional clues about the market. Worked IMHO very well, as it adds solid weight to the evidence that IV is underway: http://investingintelligent.com/2015/09/07/bullish-percent-index-reached-bottom-lows-what-does-it-tell-us/

    GL next week y’all. 4-day trading weeks are often up.

  27. wandering around the 50ma on the hourly chart and the 8 MA on the daily chart

  28. wandering around the 50ma on the hourly chart and the 8 MA on the daily chart

  29. Amazing as usual.
    Question: could it be 2011 correction was 2, and Oc 2014 correction was 4, and now we are in A which is trying to reach to 4 bottom, then B up, and C correcting to 1,500???
    Why is this count less likely than the one currently proposed? what am I missing?


  30. fishonhook says:

    Clearly the S and P count has confounded the best of them including our host, but two things Tony has nailed was the drop in commodities which he called two years ago and the $SSEC which he insisted was still going to go down even as it rocketed up past his original targets. He got that count right.

    Well we are getting closer to his 2250 line in the sand. That’s still 25% lower than where we are but closed than where we started.

    however I just read that the PE for Chinese stocks is still at a crazy 45
    It is bleeding money to support the exchange rate
    It may even shut down it’s markets if the drop gets too violent.

    So either we are at the low point when all the news is bad and so we go up, or 2250 may not hold. I have no idea, but the other thing to note is that the correct in China lead the major drop in the world in 2008 . The lag was about 6-8 months.

  31. Page says:

    I am bullish on US market until Tony’s Long Term trend continues to say “bull market”
    (LONG TERM: bull market)
    The day it changes to ‘downtrend’, I will run for exit so until then I am bullish on US market.
    On Sep 17, rate increase or no increase, doesn’t matter, markets will rally hard.

    • pooch77 says:


    • Page, Also imo, if fed is only focused on US economy then raising rates would be a no-brainer, but it is also considering global growth and sentiment.

      • Page says:

        Exactly. Fed is in very tough position, market is forcing Fed to raise rate even if they don’t want to due to global pressure and if they do it will get the monkey off their back and uncertainty will be over for market and US markets will rally. If Fed doesn’t raise rate then global markets will rally hard and take the US market with it. So Win Win situation for markets. I personally do not think Fed will raise rates this year.

        • opader says:

          No Page, end of “free money ear” is a game changer and there are consequences, 7% already done, 13% to go for a total of 20% bull market correction by mid to late October. A 20% correction from 2134 puts SPX at 1707 which is a bit north of 38.2% retracement expected by P IV. Cheers, VSG.

        • rc1269 says:

          In my opinion there are no win-win scenarios in the stock market. Most markets – certainly US equities – are far too efficient to allow a win-win type scenario. If you believe it is a win-win then we know you are already long. Same goes for anybody else with that view. Therefore market positioning will not allow it to be win-win. Behavioral finance 101. Just my opinion

  32. While most people are waiting for the over-night futures to resolve, the money managers to return, and trading to resume on Tuesday, I thought I would take a few minutes to present, “An Elliott Wave Lesson in the Nutshell”. The chart below is of the possible triangle in the Dow Jones Industrial Average, shown with 30-minute bars. Yes, we still have to say ‘possible’ because all five waves (a), (b), (c), (d) and (e) are not complete. But let’s look at two sub-waves an simply try to present some of the basic concepts. First, although your eye will go to the left and the wave labeled circle-A, instead focus on the wave labeled circle-C, below.

    DOWI - Hourly - Sep-07 0945 AM (30 min)_TC

    Circle-C represents a perfectly formed impulse wave under Elliott Wave theory. After wave 1, wave 2 makes a deep 61.8% retrace as is typically expected. The shape of the wave 2 is a common ‘sharp’ or ‘zigzag’ because it’s b wave does not equal or exceed the previous high. Then, wave 3, takes off in the upward direction and confirms it is wave 3 by crossing the 1.618 Fibonacci extension. After wave 3, having had a sharp correction for wave 2, one would expect a FLAT type of correction for wave 4, and this is exactly what happens. The b wave of the flat is higher than the wave 3 terminus. The simple, most common error, is to label all of the upward wave – even the portion that passes the 1.618 extension as wave 3. It isn’t, it’s the b wave portion of wave 4. Then, there are five waves down for c of 4. The five waves down is a ‘key’ to finding that flat. Of course, then wave 4 does ‘not’ overlap wave 1, and there is a new high for wave 5. This wave will form a perfect channel on a 5-minute chart, and wave 5 will end near the mid-channel. I encourage reader to plot this wave on a five-minute chart, and pin it to their wall, bulletin board or computer screen. This is what an impulse ‘should’ look like – Fed or not.

    Over on the left hand side of the chart, after the first wave up in ‘this’ sequence, there IS no 50-62% retrace, and that is a first clue that this wave is not going to be a clean impulse. In fact, if you follow the sequence closely, you can find five overlapping waves up, each shorter than the next. This wave is a perfect example of a Leading Diagonal wave, and ‘most’ Leading Diagonal waves are A waves. This one is too. It has been labeled circle-A for this example.

    Then, there is the widely expected “deep retrace” for the circle-B wave, proving out the diagonal. Keep in mind, the “deep retrace” is only an Elliott Wave guideline, but it does tend to happen more often than not.

    Keep these two examples in mind at all times, and you will find Elliott Wave analysis treating you more kindly than it ever has before. Here’s a tickler for you. Why is this working better on the DOW, than on the S&P? Cheers! TraderJoe

  33. As of this morning, looks like same old story…oil down 2%, Shanghai down 2 1/2%, bonds rallying, gold down slightly.Difficult to interpret any of that as bullish for equities.Another look tonight when Asia reopens.Have a great holiday Mr C and everyone.

  34. Lee X says:

    Thanks Tony

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