Wednesday update

SHORT TERM: end of quarter rally, DOW +236

Overnight the Asian markets gained 1.8%. Europe opened higher and gained 2.5%. US index futures were much higher overnight, and at 8:15 the ADP was reported higher: 200k v 190k. The market gapped up at the open to SPX 1906 and continued to rally. The SPX had closed at 1884 yesterday. At 9:45 the Chicago PMI was reported sharply lower: 48.7 v 54.4. The rally continued until 10:30 when the SPX hit 1917. After that the market pulled back to SPX 1897 just before 1pm. Then it started to rally again. At 3pm FED chair Yellen’s speech: The market rallied to SPX 1921 just before a 1920 close.

For the day the SPX/DOW were +1.70%, and the NDX/NAZ were +2.35%. Bonds lost 2 ticks, Crude added 25 cents. Gold dropped $11, and the USD was higher. Medium term support rises to the 1901 and 1869 pivots, with resistance at the 1929 and 1956 pivots. Tomorrow: weekly Jobless claims at 8:30, then Construction spending, Auto sales, and ISM manufacturing at 10am.

The market gapped up at the open today following yesterday’s completed 5 waves down, a last hour rally, and a short term positive divergence. The rally continued to SPX 1917, gaining 45 points off yesterday’s 1872 low. This barely exceeds the SPX 1909-1953 wave 3-4 rally during the five wave decline. With today’s rally we now have confirmed uptrends in the four major indices. However, the fact that these four indices are all uptrending does not totally clear up the P4 – P5 count. Primary IV can still extend into November, unless Primary V starts impulsing throughout October. The current rally is quite important for the medium, and for the matter, long term. The 1+ hour surge from yesterday’s 3:30 low at SPX 1872 to today’s 10:30 high of SPX 1917 looks quite impressive for a kickoff. If the foreign markets can continue their rallies, the US market can continue higher as well. Thus far from the SPX 1872 low we have 1917-1897-1921. Short term support is at the 1901 and 1869 pivots, with resistance at the 1929 and 1956 pivots. Short term momentum hit slightly overbought at today’s high, and closed there. Best to your trading!

MEDIUM TERM: uptrend

LONG TERM: bull market


About tony caldaro

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200 Responses to Wednesday update

  1. tommyboys says:

    RC if you’re around what do you see spreads doing today ? TIA


    • rc1269 says:

      hey TB. in general i’d say pretty much mirrors how equities have traded – spreads a little wider, not much, with pretty low conviction either way. metals/mining is taking it on the chin a little more than the average credit today though. def some profit taking, de-risking into strength.

      there was a huge HP deal yesterday funding their split up and with the market raging green everybody got all bulled up and dove in. kind of a junky deal and big ($14bn+) and has been very sloppy since issuance. immediately underperformed and many people underwater on it already, so kind of left the market with a jittery tone. it was basically a big test for the “everybody jump back in the pool!” and then everybody did and discovered, “crp the water is still 54 degrees, this sucks.” hah very technical, i know.


    • uncle10 says:

      hey Tb, you going to get a chance to buy stocks much cheaper next week. 😉 gl


  2. pbnj123 says:

    Real question here – does this still look impulsive?
    I know very little about impulsive vs. corrective but just trying to figure out how today adds to yesterday
    Please advise
    Thank you


  3. GYN LAB says:

    Good day! I like MJT’s B-wave rally scenario, I just don’t think 1872 cuts as P4 bottom. Since 1872 rising in abc pattern with b potentially complete at 1901 and c=a projects right to 1956 (bullseye of the pivot) Also .618 retrace of 2021-1872 sits at 1964, looking at ES c=a projects to 1967 so it is also a potential target.
    After this should follow the final flush into low 1800s (C=A from the above targets handsomely points to this area) in 5 waves to mark the P4 bottom. Timewise around 9th Oct where there is a strong Bradley Turn. This means we should see a high into NFP tomorrow and then have a week’s decline into low 1800s.


    • Ryan Parker says:

      I was thinking of a similar scenario GYN. Sentiment is incredibly negative right now but it is pretty clear that the action off of the 1872 low isn’t impulsive after today. 1955 has been a key level going back a few weeks and is a little more than a 50% retracement of 2021-1872. So 1872-1927, 1927-1900, then 1900-1955?. Then down again and C=A in the low 1800’s.


  4. madswiss1 says:

    dollar daily h&s targets 88.5 zone 13,3 starting its roll


  5. Today’s decline seems to have the shape of a wedge.


  6. madswiss1 says:

    I am looking for the spx to bounce off the trendline connecting the prior 2 tops in the spx, a successful retest of that line will launch a 3 of 3 of pw 3 on my count, just so anyone who did not hear me before…look at the monthly and throw those wiggles away, the BIG money is made LONG TERM eom…….adios


  7. Market ramps up overnight on nothing in particular. As soon as Europe cash market opens selling begins. Thereafter as soon as Wall Street opens more selling from the outset. Is this how markets have now evolved? Rather bizarre. Nevertheless the important thing is to try and track this move now. I have looked at 6 indices very carefully including INDU/SPX and find myself having the same issues with the decline that culminated on 8/24. Specifically, very difficult to find where the count for the decline is at this stage. My guess is 3 of 3 of 1 and that is only an educated guess and may be way off the mark. If you bring up a 24 hour chart that includes the decline from Yellen’s top at 2020 you will notice how vertical today’s decline is relative to other declines since that time. There was the possibility the move after yesterday’s rally could be 3 of 3 down and it might be so. (Note: This is not the same 3 of 3 mentioned earlier. The earlier would be 3 of 3 of 1 [of 3 of 3]). Therefore bottom picking this decline may require extreme caution and significant nimbleness. Interesting how the reversal arrived on Armstrong’s long awaited ECM turn date 1 October 2015. The bullish case will be this a B wave to correct the rally of the last couple of days and the market will now go up 50 SPX points or so. The 1901 pivot might be the tell here. If that goes then the odds increase for the bearish count detailed above. Futures basis 1 of 3 was 84 points. This decline is only 38 points (so far). If it’s 3 of 3 and a 1.618 extension then we’re talking 1803 cash equivalent. Rather sobering potential. Let’s see if 1901 can put a floor in for the bulls.


  8. Just took a quick look at opex for tomorrow Oct 2 ….looks like the move down this morning was halted near spy 190.00…if they continue lower it will put the 31,537 spy 190.00 put contracts into the money so this level should act as support. Also the move down resulted in increasing value of the large qty of puts at a the 192.00 and 191.00 levels. Therefore I’m expecting for this move lower to reverse if not today tomorrow in order to kill these put contracts….Call contracts don’t seem to matter much for tomorrow since volume is low as well as value. From a opex point of view the market should reverse for tomorrow…..just remember that the market could overwhelm the market makers with volume and head lower….however if the market makers can play their usual games we will be higher.

    Also looked at the second week and third week (oct 16) opex there are fairly large numbers of puts and calls at the spy185.00 and spy 190.00 levels. Most likely, we will be bouncing around in that range until after the Oct 16 when the largest numbers expire. The market should then be more free to go where it wants imo. Good Luck


  9. Here is an updated article, including chart, just posted in my blog. Enjoy!


    • blackjak100 says:

      Thx TJ! I get what you are trying to show via the contracting rules. Don’t wave ii & in contracting diagonals usually retrace .66-.81 per EW book? Wave ii has not even retraced 38.2%. just trying to understand your thought. If you want to keep 2021 as wave iv, I’m more inclined to think wave v is subdividing as of now. However, this not my preferred view.


      • Hi blackjak100 .. yes, they often do retrace 66 – 82%, and for that reason there is no positive conclusion that the upward movement has ended. While it is very difficult to count a ‘five’ up to an A wave in cash (to make a subsequent A-B-C), it ‘is’ possible to count a ‘five’ up in the futures, almost retracing 61.8% as of this time.

        So, the way the day will end, and subsequent reaction to the employment report are telling. The problem with the ‘sub-dividing’ scenario is that the wave minuet (ii) would be ‘larger’ than wave minute ii, and that usually does not happen when impulse waves sub-divide: the interior waves are usually smaller than the exterior waves. In fact, that is what prompted me to add a post to the blog.

        Best wishes to all.


    • Igor says:

      Thanks TJ, your blog post are much appreciated. Interesting, that my calculations (I use multiple unorthodox P&F charts) have the first projected target from the Mar-Aug top at 1835-1870. So, the Aug low satisfies the conditions. The short-term redistribution in Sep has a potential to move the SPX to 1845-1860, within the bigger target area. That would create a bear trap with the following move back to the trading range. If the SPX reaches 1970 first, this scenario would be invalid.


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