Monday update

SHORT TERM: gap up opening, DOW +126

Overnight the Asian markets lost 1.0%. Europe opened lower but gained 0.5%. US index futures were higher overnight, and the market gapped up at the open to SPX 1966. At 10am Existing home sales were reported lower: 5.31mn v 5.59mn. The market hit SPX 1980 at 10:30 and then started to pullback. By 1:30 the opening gap was closed when the SPX hit 1956. Then the market started to rally again. At 3pm the SPX it 1972, dropped to 1962 by 3:30, then bounced to 1967 to end the day.

For the day the SPX/DOW were +0.60%, and the NDX/NAZ were +0.15%. Bonds lost 17 ticks, Crude rallied $1.55, Gold dropped $7, and the USD was higher. Medium term support remains at the 1956 and 1929 pivots, with resistance at the 1973 and 2019 pivots. Tomorrow: the FHFA at 10am.

The market gapped up at the open today following Friday’s short term positive divergence at the close. After what appears to be five waves down from SPX 2021 to 1953: 1987-2000-1963-1979-1953. The market looks to be rallying in an a-b-c off that low: 1980-1956-xxxx. If the rally continues into tomorrow the ‘c’ wave should end between SPX 1980 and 2000. If the market fails to reach the SPX 1980 level tomorrow, then 1980 was the high and the next five down sequence is already underway. Either way expecting more downside pressure ahead. Best to your trading!

MEDIUM TERM: downtrend

LONG TERM: bull market


About tony caldaro

This entry was posted in Updates and tagged , , , . Bookmark the permalink.

197 Responses to Monday update

  1. I’m looking at the SPX charts (60 min and daily). They both look like they’re probably set up to display + divergence if the index price drops back to 1867.

    I thought we had a great buying opportunity back on Aug 26, and bought shares then at SPX 1941. If we get back to 1867 with + divergence on the RSI and MACD, I’ll buy more.

    And finally, thank to Tony, RC, El Mat and many others that provide comments. My only request is that your comments and advice have a time-frame associated with it. You guys are into the markets for a living, and trade every day. Many others that read your comments are only trading monthly, quarterly, or annually. Please help us look at waves and technical indicators from those longer time frames also. We would greatly appreciate your help.


  2. Anyone trading this bear move with options here? Even with these large price movements, buying puts is not exactly a winning strategy, as the Vix gets shot and premiums get taken out in the chop, and u end up requiring a much large move to make any profits.

    I am studying put-spreads and would love to hear from anyone who trades debit put spreads to counter the high price of the options, and hear their thoughts if at all possible.

    • Btw…i m looking for 1956 tomorrow to buy back my puts tomorrow, but could do a put spread instead if that’s a better strategy to counter the inflated premiums.

    • Depending on your timeframe, I would suggest either using weekly options that expire this Friday, or use options that expire 60+ days out. As you are probably aware, you are trying to manage your theta and delta.

      The theta decay of a long-dated option (30+ days out) is quite low. It’s delta is also pretty low, so you need a “large” move in-the-money (or deeper) to capture the value of the spread.

      For a short-dated option, the delta of a near-the-money option will rise quickly as it approaches expiration. Theta decay is also at its highest. However, you don’t need a large move (usually) to capture the spread value.

      So, your timeframe is key. I can recommend a couple of decent books. I like “Show Me Your Options!” by Steve Burns & Christopher Ebert. I also like “Options Trading: The Hidden Reality” by Charles M. Cottle. Check ’em out.

  3. Dex T says:

    Great turnaround day for one of the most bearish weeks of the year!

    We test the 1911 low set on Sept 4 within the next 2 days.

  4. Appreciate your posts TraderJoe, very thorough and thoughtful as bj said. EW has always seemed like a good backward-looking, rearview-mirror method, such that by the time a pattern is “confirmed” it’s either too late to play or at best you it leaves an awful lot of money on the table. Many here have noted such in the past. My question for you, and please disregard if you’d rather not disclose publicly, how good, what actual results have you experienced by following your method (interpretation/? Thx again for your thoughtful posts, they are interesting in any case.

    • Good enough for me to comfortably and securely retire from corporate life at “at very early age”. This was done using EW analysis only ‘part time’ a couple of hours per day. The biggest problem with EW is some people really won’t study it. And because they won’t, they have a hard time setting profit targets and stops that mean something relative to where the market really is. Most people want the goodies of EW with none or little of the work and little or none of the risk. The latter is a recipe for disaster. Hope this helps.

  5. johnnymagicmoney says:

    Tony – are you a Rams fan? If so what are the chances the Rams beat my beloved Steelers this weekend?

  6. fotis2 says:

    Its all about PP aka Pivot Power trade to your advantage.

  7. johnnymagicmoney says:

    Tony – Based on what you see now, I will ask you 3 questions in probabilities.

    What probability are we in a bear if we break 1867 with conviction?

    What probability are we in a bear market if we break the Oct 14 low with conviction?

    What probability are we in a bear market if we break through the 09 trendline of around 1770 with conviction?

  8. EL MATADOR says:

    bots trade symmetry

    • kvilia says:

      Thank you TraderJoe. This is interesting. Two invalidations point point to the lesser probabilities of PIV? So this wold be the difference bettwen your and TC’s assumption of PIV characteristics. As I have pointed out before, there are two potential outcomes: either we are still in PIV or already in bear market. If I’m reading your statement correctly, it advocates the later. After the missed meeting highs, I was hoping for the bounce strong enough to enter short positions without really a chance. Now I’m 95% in cash and waiting for the better clues.

      • Yes, P4 probability in US markets greatly, greatly, greatly reduced. Let’s say 5%. There is still one way to do it, but there is absolutely no price evidence for it yet. I will only address that one if I begin to see the price evidence for it.

        Probability of P4 in London FTSE is near zero due to overlap, already.

    • blackjak100 says:

      TJ, appreicate your EW posts since they are thorough and follow all the rules and guidelines. I’m really confused why you are taking P4 off the table. While I bought into your LD scenario, I had a plan B as well. However, the plan B is a DZZ for P4 which still shows alternation with P2. This would see a 5-3-5 (complete at 1867), X (complete at 2021), and followed by a 5-3-5. The purpose of a DZZ is to deepen a correction which this looks like it’s doing. I’m not sure why your Plan B has a 4th wave retracing more than 50%. Yes, it meets all the rules but not the guidlines. That’s an awfully deep 4th wave. IMO, a DZZ meets all the rules and most of the guidelines. Let me know if I’m off base here?

      • hi bj100 .. thanks for the comments on the posts. Here are just ‘some’ of the reasons why I am taking Primary 4 down to 5% probability. First, primary 2 would have been ‘shallow’ – less than 50% retrace : not typical of a second wave. Second, primary 2 would have been a flat, not a sharp : also not typical of a second wave. These were covered in the weekend video in detail. So, they should not be new to you. I hope you have seen it. If not go to my site:, and it’s on the front page.

        Third, a double-zigzag is currently an ‘imagined’ or ‘possible’ pattern – there is no price evidence for it yet (i.e. where is the a-b-c-Y ?). Fourth, a ‘double zigzag’ would create a ‘very deep’ fourth wave itself in U.S. markets, so that argument cuts both ways. Fifth, look at the London FTSE monthly. It has already overlapped. That spells trouble.

        Sixth, there is no overlap in the downward count of minor 4, with minor 1. Elliott tells us “to count like an impulse when possible”. Seventh, there is a very good channel in the downward direction. Eighth, and Fibonacci last, there is excellent alternation in this pattern with a FLAT wave for minor 2, and a double zigzag (sharp) for minor 4. To me, that’s as strong a case as any one can build.

        • blackjak100 says:

          Appreciate your thoughts. If your case is correct, I’m more inclined to say P3 ended at 2133 in July. This puts wave ii & iv more in proportion and the violent reversal we should see from an ED. That’s still an awfully large 4th wave retrace, but it’s a valid count which meets all EW rules.

Comments are closed.