weekend update

REVIEW

Another wild FOMC week. The market started the week at SPX 1961. After a pullback to SPX 1948 on Monday, the market rallied to 2004 just before the FED announcement. After they announced no change in the ZIRP the SPX hit 2008, dropped to 1988, rallied to 2021, then dropped to 1987, all within one hour. On Friday the market was greeted with a gap down opening and the SPX ended the week at 1958. For the week the SPX/DOW were -0.20%, the NDX/NAZ were +0.05%, and the DJ World index was +0.20%. Economic reports for the week were mixed. On the uptick: retail sales, business inventories, the NAHB, building permits, leading indicators, plus weekly jobless claims improved. On the downtick: the NY/Philly FED, industrial production, capacity utilization, housing starts, and the WLEI. Next week’s reports will be highlighted by Q2 GDP, Durable goods and more reports on Housing.

LONG TERM: bull market

The five primary wave Cycle wave [1] bull market continues to unfold. Primary waves I and II completed in 2011, and Primary waves III and IV should be completing in 2015. While Primary I was a simple 9 wave structure that topped at SPX 1371. Primary III was a somewhat difficult, at times, 21 wave structure that topped at SPX 2135. Primary II was a five wave elongated flat that lasted five months. Primary IV should be a less complicated three wave zigzag that should conclude this month.

SPXweekly

When it does conclude, probably with a retest of the OEW 1869 pivot range, Primary V should carry the market to all time new highs. Over the past 30 years, fifth waves have lasted anywhere from two to six months. Unless the fifth wave subdivided into five waves of its own. This occurred once, out of six opportunities, and the fifth wave lasted 9 months. Price targets for Primary V, should SPX 1867 be the low, are posted on the weekly chart above. Overall it looks like this extended bull market should end either late this year or in Q1/Q2 of 2016. When it does conclude we would then expect the market to lose about half of its value, over the next one to two years, to complete Cycle wave [2]. Based upon these projections, it appears time to monitor and adjust one’s portfolio.

MEDIUM TERM: downtrend

In the modern world of computerized trading it is not too surprising that Primary IV has been a near perfect analog of Primary II. In May 2011 Primary I topped, and in May 2015 Primary III topped. These Primary wave tops were both followed by a six week downtrend of about 100 points.  Then there was a two to three week uptrend of about 95 points, ending at slightly lower highs, while the NDX made a new high. After that, a big selloff lasting six weeks for an average decline of 260 points. This represents the current SPX 1867 low. This was followed by a three week rally of about 140 points, i.e. Thursday’s SPX 2021 high. This brings us up to the present.

SPXdaily

What followed next, during Primary II, was a 156 point decline lasting five weeks. At this point we believe the time factor of the analog will end. We do not expect the last leg down of Primary IV to last five weeks. We expect it to end this month. Medium term support is at the 1956 and 1929 pivots, with resistance at the 1973 and 2109 pivots.

SHORT TERM

With the potential for the last leg down of Primary IV underway, we took a look at its entire wave structure to identify some Fibonacci support levels. Primary II retraced 42% of Primary I, or about 10% more than a normal 38.2% retracement. Currently Primary IV has retraced 25% of Primary III, or about 6% more than a normal 23.6% retracement. Should Primary IV also reach a 10% premium over 23.6%, support should arrive at SPX 1860. Major C, the current downtrend, will be three times Major A at SPX 1860. Intermediate c will equal 4.236 Intermediate a at SPX 1836. The last relationship is Minor a equals 0.618 Minor a at SPX 1875. To summarize, we have three wave relationships between SPX 1860 and 1875, which is the 1869 pivot. And, one relationship at SPX 1836, which is the 1841 pivot. This suggests a Primary wave IV low between the OEW 1841 and 1869 pivots.

SPXhourly

With this week’s wild market activity the short term wave structure finally cleared. After the Minor wave A low at SPX 1867, the market rallied in three Minute waves to SPX 2021. Minor wave C should now be underway to complete Primary IV. Short term support is at the 1956 and 1929 pivots, with resistance at the 1973 and 2019 pivots. Short term momentum ended the week with a slight positive divergence. Best to your trading in this volatile market!

FOREIGN MARKETS

The Asian markets were mixed on the week for a net gain of 0.6%.

The European markets were mostly lower for a net loss of 0.1%.

The Commodity equity group were all higher and gained 2.2%.

The DJ World index is still in a downtrend but gained 0.2%.

COMMODITIES

Bonds are trying to uptrend again and gained 0.4% on the week.

Crude is also trying to establish and uptrend and gained 1.2% on the week.

Gold is trying to uptrend as well and gained 2.8% on the week.

The USD is still in a downtrend and lost 0.2% on the week.

NEXT WEEK

Monday: Existing home sales at 10am. Tuesday: FHFA housing prices. Thursday: weekly Jobless claims, Durable goods, New home sales, and a speech from FED chair Yellen at 5pm. Friday: Q2 GDP and Consumer sentiment. Best to your weekend and week!

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

About tony caldaro

Investor
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304 Responses to weekend update

  1. fotis2 says:

    Never boring at TC’s always someone getting peed of at someone else , premabulls, Bears,day traders,swingers,a sprinkling of philosophers,I told you so sayers its a miracle we haven’t driven Mr.Caldaro to drink many thanks for putting with us all Tony… 🙂

  2. GYN LAB says:

    With 10mins remaining I practise squiggle counting – interesting close with a 3-wave advance 1956-1972. I see two options for tomorrow:
    1) If this is 1-2-1-2- then we gap above the 1973 pivot tomorrow.
    2) If not, we should be back down to 1956 pivot, probably breaking below the today’s low tomorrow.

  3. H D says:

    3 waves off 19(55) looks, 1973P w symmetry Door C for 5 points please

  4. madswiss says:

    ma clusters daily, weekly & monthly seem to be jelling around 204-207, the .768 off the ath is 206.5, .682 is 203.8, .6182 201.79….

  5. pugsma says:

    Something to keep and eye on the next few weeks.:

  6. Apple just announced an electric car will be out in 2019.Is that before or after they conquer the TV market?

    • tony caldaro says:

      Thought they were setting up a colony on Mars first 😉

      • Lee X says:

        I thought they were from Mars 😉

        • Right…do the impossible things first….lol

        • tony caldaro says:

          Nah, the land of fruit, nuts and apple pie.
          Guess these newbie CEOs do not know.
          The further they stray away from their core businesses the lower their stock multiple.
          Conglomerates, historically, do not carry high multiples.

          • johnnymagicmoney says:

            they have no choice of course. They struck ligtening with the Iphone and their entire market cap is built on it now. Lose their margin (which is ineviatble with any tech product) and they lose their market cap. Its why their valuation has always been so low given their growth. Awesome company awesome products but at some point they are no diferent than any other mature tech company. Cost erosion is inevitable. They will never have another Iphone profit margin product. Of course they may have so much cash at some point that they could just buy the world

          • uncle10 says:

            Very good johnny. I was getting ready to write just about the same thing.

    • EL MATADOR says:

      Not sure how they are going to be capable of passing all the govt tested required to meet production by 2019. Apple in a dream world to meet production by 2019

  7. Lee X says:

    T.Boone sez WTI going to $70

  8. blackjak100 says:

    TJ, I’m assuming you think 1956 was a very deep “I of a of v”?

  9. I looked at the spy opex for this coming Friday 9/25…from what I’m seeing …… from strictly from an opex point of view… there is no reason to trade below spy 195.00 this week and there are over 70,000 puts at that level that will act as support imo as it has already today low so far is 195.21…. I know the TL from the lows are in the same area. The other area to watch is the spy 200.00 level…there are over 60,000 calls and over 41,000 puts currently in the money at $4.09 that they would like to kill imo. Heavy volume can overwhelm the market makers at anytime but if we do break below 1955 I think the mkt makers will make an attempt to get back close to spy 200.00 by the end of the week. Good Luck https://www.optionsxpress.com.au/OXNetTools/Chains/index.aspx?SESSIONID=

  10. Lockhart says “US unlikely to be affected that much by China”.Wish I could post Leslie Nielsen in “Airplane”saying “Everything is fine….no reason to panic”

  11. rc1269 says:

    just my 2 cents from many anectodal conversations with professionals as well as blog readings of retail, but it seems like there are a lot of: a) some new longs that bought the dip hoping for the typical BTD bounce, b) many old longs looking for better levels to pare risk, and b) a lot of bears who missed the big move and are looking for higher levels to put on shorts

    one thing all of these parties have in common is a lack of buying power/interest at higher levels

    surely there are many other contingents to the marketplace; these just seem to be common themes i have encounted most frequently. fwiw. cheers

  12. Well, if we can get to 1993. looks like a great place to short

  13. i realize i am an infrequent poster here yet this is the only outside blog where i post my views. tony’s site is one of the few sites with receptive readers of unconventional views such as mine. i hope some readers are able to benefit from my views. i don’t use conventional charts or indicators and am therefore unable to post further details other than my “market calls”.

  14. madswiss says:

    you can also use a 2 in place of a 3 on the 5,3 slo sto, found it advantageous in certain circumstances…dollar to 128 or spx to 2102….

  15. i am afraid that most elliott based traders will miss one of the few lasting low risk opportunities to hop back on board to a s&p500 bull market that should run for at least another one to two years. sure, it is possible that the market may trade below the the 2015/08/24 spx lows of 1867.01 but the odds of that occurring are very remote. the remote possibility of a print below 1867.01 will likely be another buying opportunity given “proper entry and risk techniques”.

    HERE ARE MY PRIOR COMMENTS GIVEN THE PAST FEW IMPORTANT TRADING EVENTS:
    from caldaro.wordpress.com:
    standard_and_poor says:
    July 24, 2015 at 12:23 pm
    mid-day market update for friday,
    fairly sized downswing is likely within the next days to weeks, i am net short :
    https://standardpoor.wordpress.com
    see bottom of blog’s comment section

    standard_and_poor says:
    September 1, 2015 at 11:30 am
    real time tweet from twitter early this morning when spx was at 1930, i am adding longs agressively:
    “standard_and_ poor ‏@S_AND_P 1m1 minute ago
    #SPX excellent opportunity to begin adding longs with a defined risk of 3.16% here depending on leverage.”

    from twitter.com:
    standard_and_ poor ‏@S_AND_P Sep 1
    #SPX excellent opportunity to begin adding longs with a defined risk of 3.16% risk here depending leverage.

    standard_and_ poor ‏@S_AND_P Jul 24
    Odds of a sizable equities correction has been increasing for several days, extreme caution dear subscribers. #SPX
    1 retweet 1 favorite

    standard_and_ poor ‏@S_AND_P Jul 24
    Mid day market update is now on line, see bottom of comment section. Caution is warranted. #Spx #spy
    https://standardpoor.wordpress.com

  16. rc1269 says:

    Well that was fun.

    • blackjak100 says:

      Lol…still lots of fun…bull or bear I think 1980 gets exceeded first.

      • rc1269 says:

        perhaps. but i’d be adding some more shorts at 1990, if it gets there. still an outside chance we tag that 2030-2035 area before the next major leg lower, but last week’s move makes me more skeptical

  17. frommi2 says:

    Time to load up on shorts, biotechs are already showing the way. 🙂

  18. reddragonleo says:

    ES Futures Monday Morning Update September 21st, 2015: http://screencast.com/t/n6LKQjmnW

    • hkloon says:

      How high the vix will go to after the backtest? As high as in aug flash crash?

    • Hi rdl .. just trying to be helpful to your futures count because there are multiple labels on it. The chart below shows the ES 30-minutes from the last high. To me, it counts the same as SP500 5-min cash for these reasons. First and foremost, there ‘is’ no 1.618 extension in the waves. The count overall has the second downward wave equal to the first downward wave so that C = 1.14 x A (another valid Fibonacci relationship), but basically C = A.

      ESZ15 - ES futures - Sep-21 1049 AM (30 min)

      If you label the point shown as circle-ii as a wave ‘four’ of a downward count, then ‘four’ becomes larger then ‘two’ – which is where the B wave is. So, once again, even the whippy-ness in the overnight futures leads me to the conclusion the down move was corrective, rather than impulsive.

      Next, there is a higher high on the chart as of now. I know you could be thinking well that’s the c wave of a flat for wave four. But, usually in wave fours the EWO does not exceed +40% of the value of the maximum downward value for the proposed wave three, and clearly it has (-19 x .4 = -7), -7 x -1 = +7, versus current value of +11.5.

      Hope this helps.

      • reddragonleo says:

        Thanks Joe… I mainly focus on TA, trendlines, historical data, etc… and add in a little EW to match my TA work. So I’ll leave the EW counts to others better then me. My TA work tells me we put in a high last Thursday and will go down this week. It’s just what I see.

    • ewmarkets says:

      Thanks for you cogent analysis. One question, if SPX 2020 to SPX 1953 is a wave of your 4 of LD, is it possible for the c wave of 4 to exceed SPX 1953, even if it is just a spike down?

    • blackjak100 says:

      Thx TJ! Even if posters didn’t believe your wave analysis, simple TA provided clues. I mentioned the relative strength of NYAD along with double +div on 60min RSI all before the close. El mat laughed at me when I said the 96 RSI was a big clue your count may be correct. He said we saw that in P2 which was correct. However, the big difference was there wasn’t double divergence so quickly afterwards. GL and Cheers!

      • EL MATADOR says:

        BJ, I would like to clarify, I was not laughing at you. My point was that the RSI 5 reading of 96 alone does not matter to the bigger swing trade since, IMO, the bigger swing trade is down. The micro, nano, and pico counts are for the day traders. and when struck in a trading range even the minute waves are for day traders. Now for further clarification, we can now draw the line in the sand at 2020.86 vs 1953.45 and so if 1953.45 is broken before 2020.86 is exceeded then it would be fair to say that the RSI 5 reading of 96 did not matter to the bigger swing trade. Would you agree?

    • Igor says:

      Thanks TJ, keep up the good work.

  19. pruthvi says:

    In ‘C’ wave , always bounce didn’t close higer high, would turn negative at mid day and close negative a the end

  20. rc1269 says:

    ahhh Monday morning. a fresh new week. what were we all so worried about? all the retail guys are out there pouncing on the open.

    good luck trading this week all!

  21. lunker1 says:

    Zeroing out
    SPY 197
    DIA 165
    QQQ 106

  22. manunidhi21 says:

    Namaste Tony!
    You suggested about next economic expansion. This means from 2009( internet on the phone) Apple rally to date we are in a bear market ABC pattern or It is a Bull market ?
    What will bring the next expansion ? Low interest rates even negative, QE’s or something you forsee ?

  23. EL MATADOR says:

    So overnight ES was down 12 handles then media decided to release Goldmans talk of EU doing more QE and calling on US Fed to start up QE again, so futures start a reversal…go fooking figure.

    • mjtplayer says:

      Looks like Goldman was long into the Fed meeting, knowing the Fed wasn’t going to raise rates, but got caught when the market unexpectedly dropped after the announcement. They need to give markets a reason to rally, so that they can sell.

      The bulls praying for more QE is a pathetic excuse to be long.

    • M1s chart of 1998 Naz farther down,if comparable, would mean a second test of 200 d—2018ish on the S&P before a huge drop.If that doesn t happen, we can drop the comparisons to 98.

    • hkloon says:

      Hi matador, what do you think the bounce will reach b4 it meets its resistance and come back down again? 1990? Many thanks for your postings…

  24. Lee X says:

    Everything we hear is an opinion, not a fact.
    Everything we see is a perspective, not the truth.

    Marcus Aurelius

    Ahhhhhhh the internet

    Lee X

  25. I am re-posting this comment because I originally posted it in the wrong place. Apologies for wasting space.

    Tony: Thanks for the comprehensive weekend update which provides a big picture framework for us to operate in. This statement caught my attention:

    “Currently Primary IV has retraced 25% of Primary III, or about 6% more than a normal 23.6% retracement.”

    I have been trying to build a case for this decline being a Major 4 of Primary 3 based on the facts that the SPX has only declined 12.55% and that small and mid-cap growth sectors have been gaining in relative strength against the large cap S&P 500. Usually the large caps take a decisive lead in the final phases of a bull market. Perhaps I should be comparing the P4 decline to the P3 rise rather than to the SPX price. Under that criteria, as Tony pointed out, this P4 decline is already 6% greater than average. The very strong Primary I wave has made the decline of the SPX look smaller than normal for a Primary 4 because it contributed a proportionately large amount to the total rise of the SPX from 666 compared to Primary 3. Thus, the decline in terms of Primary 3 (25%) is larger than what might be expected with a total SPX decline of 12.55%.
    If my Major 5 scenario turns out to be an illusion, I hope that at least we get a subdividing Primary 5 to reward us for our perseverance in dealing with these difficult economic and financial market environments.

  26. uncle10 says:

    Thanks Tony.

  27. kjb0 says:

    Who said there’s no inflation in the United States. The prices are staying the same but you get less of everything or it is smaller in size. As an example, we used to get 24 pieces of American cheese in a package and now we get 22. The Hostess cupcakes and twinkies are now almost bite size. We do have some exeptions. Somehow Starbucks managed to con all idiots into paying $5.00 for a cup of coffee.

    • So true.Now the bottoms of containers of many items including yogurt are pushed up providing less room for the product.It s not a flat bottom…it s inverted.

    • kjbo and learned, Bingo! Paying the same price for less product is still inflation, which is why i have been buying with both hands into deeply distressed commodities, Agriculture, minerals, base metals, the whole shebang, now I wait. GL.

    • uncle10 says:

      I have chuckled for many years how people ( even seemingly rational educated people) talk of inflation being low. Most everything that people spend money on has gone up much more than “reported” inflation has. The government wants inflation to be low so they says it low and some people ( even seemingly rational educated people) believe them.

    • You get 1.5 qts. of ice cream instead of a half gallon–for the same or a higher price.

    • Tony: Tony Thanks for the comprehensive weekend update which provides a big picture framework for us to operate in. This statement caught my attention:

      “Currently Primary IV has retraced 25% of Primary III, or about 6% more than a normal 23.6% retracement.”

      I have been trying to build a case for this decline being a Major 4 of Primary 3 based on the facts that the SPX has only declined 12.55% and that small and mid-cap growth sectors have been gaining in relative strength against the large cap S&P 500. Usually the large caps take a decisive lead in the final phases of a bull market. Perhaps I should be comparing the P4 decline to the P3 rise rather than to the SPX price. Under that criteria, as Tony pointed out, this P4 decline is already 6% greater than average. The very strong Primary I wave has made the decline of the SPX look smaller than normal for a Primary 4 because it contributed a proportionately large amount to the total rise of the SPX from 666 compared to Primary 3. Thus, the decline in terms of Primary 3 (25%) is larger than what might be expected with a total SPX decline of 12.55%.
      If my Major 5 scenario turns out to be an illusion, I hope that at least we get a subdividing Primary 5 to reward us for our perseverance in dealing with these difficult economic and financial market environments.

  28. Page says:

    OK, I may be the only Bull left here but I think we will have very nice rally next week. 🙂

  29. H D says:

    Thanks Tony, you have everyone thinking, that is for sure.

  30. blackjak100 says:

    TC, some are talking P2 analogs and symmetry and I don’t quite understand it but that’s not the point of my post. Can you look back and see what the highest level the 60 min RSI(5) hit during P2?

    • tony caldaro says:

      96.97 on the on the July uptrend
      91.15 on the late-August rally

      • blackjak100 says:

        Thx TC, el mat was correct then. However, I will maintain a lower low will give it a 5 wave appearance on the daily chart especially from 2134 in July. This truncation is acceptable as they usually occur before a new trend. I just don’t see how a breach of 1867 is going to help the P4 scenario from an EW perspective. The one scenario would be a DZZ. However, DZZ x waves usually are shallow and this one has already retraced more than 50%.

  31. opader says:

    Thanks Tony and thanks everyone else with sharing their thoughts with great comments n this venue.

    Here’s what I think: YoYo Is Back In The Second Half , http://balancetrading.blogspot.com/

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