Friday update

SHORT TERM: gap up opening faded, DOW -168

Overnight the Asian markets gained 0.2%. Europe opened higher but lost 1.2%. US index futures were higher overnight. At 8:30 monthly Payrolls were reported higher: 292K v 211k. The market gapped up at the open to SPX 1956, pushed up to 1960, the high of the day, then began to pullback. The market had closed at SPX 1943 yesterday. At 10am Wholesale inventories were reported lower: -0.3% v -0.1%. The pullback continued until the SPX made a new low for the downtrend at 1933 by 11:30. Then the market rallied to SPX 1950 by 12:30. After that the market did a gradual decline to 1918, the low for the day, just before a 1922 close.

For the day the SPX/DOW were -1.05%, and the NDX/NAZ were -0.90%. Bonds gained 13 ticks, Crude slipped 35 cents, Gold dropped $5, and the USD was higher. Medium term support drops to the 1901 and 1869 pivots, with resistance at the 1929 and 1956 pivots. Today the WLEI was reported lower: 48.6% v 49.1%, and the GDPn was reported lower: +0.8% v +1.3%.

The market gapped up to start the day, hit its high a few minutes thereafter, then headed down for the rest of the day. This occurred despite a terrific monthly payrolls report. Guess all news is bad news now. By the end of the day the market had lost about 6% for the week. One of the largest weekly declines of the entire bull market. Will review the charts and try to sort out what this week implies. But it appears for now the bears are in control and the bulls are on the sidelines. Best to your weekend!

MEDIUM TERM: downtrend

LONG TERM: bull market


About tony caldaro

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86 Responses to Friday update

  1. fotis2 says:

    I’ve been staring at the chart for days trying to decipher what did I miss? I can kick myself..missed the DT validation on the 11/12 on the daily further followed by 2 ralies both reversing into daily 3BR’s talk about the Elephant in the room geeez! the target would of been 1932….

  2. ewmarkets says:

    Downside target is certainly met. Will it induce a rebound?

    • ewmarkets says:

      Birds’ eye view of the pink channel line:

    • Not sure, since tracing other downline we discover an expanding diagonal down that is giving way to a free fall. Thats my major wary. The 15 mnts chart of ES Friday at the closure was indicating that path. I am paralysed :((. Hope not, seriously : ( would be a disaster.

  3. purplember says:

    does RUT or IWM chart count for much ? when looking at chart of these, it’s clear to me we had 5 waves down then 3 waves up. now implusing down for 3rd wave

  4. I don’t post often, but I have been saying for weeks. 2116 was a P5 failure. I’m not saying I’m right, just to much detoriatin in technicals. Also matador, tony and many others thought this market would crap out In January. So here we are 1922. If your a bull its show time. I closed out my short today. I’m neutral. Monday at some point will be a buy. Weather we gap up 30 it still will be a buy or we drop to 1750 will be a buy. Im open to M 3. Just can’t see it. Looking forward to weekend update. Thanks, have a nice weekend all, best of luck next week

  5. torehund says:

    Looking at Tonys 012-Weekly SPX, there is a Complex 3 down on the RSI (measured from the top of major-1. This is as low as it will go for now, looks and feels like major 2 bottom.

  6. uncle10 says:

    Thanks Mr T.
    Good buying opp next week, but need some real magic now to save the bull. time running out but there’s still a chance…
    good weekend all.

  7. I ll repost this to show how far down we could go.

    • fionamargaret says:

      I still have $SPX at 1890, but SPXU had a triple point breakout yesterday, and suggests $51- haven’t worked out yet if this meshes.

      (The afternoon I interrupted and asked if this could possibly be a failed fifth, I felt the cadences in the numbers had become quite discordant, so checked the $SPX which pointed at that time to 1903.)

      • Close enough I d say.If oil keeps dragging down HYG and goes to $25 a barrel imagine how low this could go.Fed would need to say “no rate increases” to kill the dollar and save the market (both oil and stock).Congrats on an excellent call Fiona.

        • fionamargaret says:

          DWTI is at $276, pointing to $485 (but with a treacherous tail), so that is a long way down still for oil – that is why when DWTI changes sides with UWTI, at least we can afford to buy the shares (about 2.75 today). UWTI still has a buy price of 3.50, but I like to do the coordinates. (DWTI/UWTI).
          I feel the paralysis Francesca describes when the rhythms get out of sync., and it seems so totally arrogant for my questioning waves, when it is quite foreign to me, and you guys are all so totally cool.

  8. Gary Lewis says:

    I know very little about EW but I did read the Prechter book recently. On thing that I retained was the concept of wave 2. Wave 2s are usually very deep retraces of wave 1, almost to the extent that the sentiment reverses, but somehow, price manages to hold above the start of wave 1. For awhile now, I’ve been anticipating this move down to the 191 level on a monthly close and thought that it would be the perfect wave 2 setup. I know you never bought into my idea that we could test 191 Tony, but now that we are here, could this be a wave 2? I like how the sentiment is doing a 180 from last week. Seems like text book wave 2. Thanks for your thoughts.

    • GYN LAB says:

      Agreed on the wave 2 and kudos for your call! .886 retrace at 1896 which is a must-hold for Major 2, ideally a quick morning trip down to touch below 1900 for sheep to throw in the towel and then rip off the face. meaningfully below 1896 IMO Major 2 dead. Will play long game 1890-1900

      • GYN LAB says:

        Also forgot to mention divergences in indicators such as HYG (making higher lows since december), NYAD today (+1750 in the morning down to only -1100, underlying stocks are not losing downside momentum), etc.
        If the market is capitulating to deceive bears it is doing a great job…

    • EL MATADOR says:

      Kudos to your call Gary on this one the others before this one.

      Also kudos to all the other contributors, we know who you are, that also saw this deep retrace for what it is.

    • The terrible doubt is this failed 5th wave of 1we have been following on and its starting to don’t makes sense anymore. Doubt arising that all could be upside down.

    • Hi Gary – glad to hear you have now read the Elliott Wave Principle. I encourage you to review the diagram on page 34 in the section on ‘extensions’. If you review that diagram you will see that when you have a 1-2-i-ii- count, then usually the second set of ii, and even the third set of (ii), if there is another one, all become ‘smaller’ as they progress up the ladder in an extension. So, that is what I see as the problem here. If the September bottom was 2, as this site claims, and this current down trend is ii, it doesn’t fit the picture of progressively smaller second waves. This wave being proposed for ii is now clearly larger than 2.

      This is a real warning for me and telling me that the impulse up count is not working. Doesn’t mean there can’t be up moves, retracements, but I do not expect new ATH’s as the result of an upward impulse. New ATH’s as the result of a triangle still ‘possible’ but odds are dropping on that one daily. Hope this helps.

    • aahmichael says:

      Gary, it’s impossible that this decline is a wave 2. It’s impossible for 2 reasons. First, there never was a wave 1. As I’ve been saying since August, the rally to the November high was corrective. It was not a 5 wave move. To count it as a 5 wave move would require breaking the most basic EW rules. Secondly, way too many indexes have already taken out their 8/24 lows. That includes the RUT, EFA, EEM, and Transports. In addition, as of tonight, NYA has now taken out its 9/29 low, which would have been the beginning of wave 1, had the rally to the November high been an impulse wave.

    • simpleiam says:

      All of what you’ve said/read about 2nd waves is true. In fact, I might rank them in such a way as being so strong to the downside, with such a deep retrace, many think the Bull is ending. That’s the general personality of 2nd’s. That’s why the line in the sand is important. Is it live, or is it Memorex… Will soon know.

      • bhuggs52 says:

        Ditto Simple on the read for Wave 2. Line in the sand, with the mkt to tell. Meanwhile, if it walks like a duck and quacks like a duck, it’s a duck.

  9. This is the way I think the Leading Expanding Diagonal may have ended it’s wave minute v (circle v) on the SP500 4-hr charts posted in previous days. It would be as the (c) wave in a “bullish falling wedge” pattern with a wave iv triangle, as illustrated. Wave iii = 100% x i.

    SPX - Intraday - Jan-08 1550 PM (30 min)_TC

    It needs to be clear, that such a chart is absolutely not a “buy signal” (this is not trading or investing advice – just a description of the chart mechanics). Because of the nature of “wedges” one waits for the upper trend line to be pierced, then for price to ‘snap back’ to the upper trend line, and hold there before ‘considering’ a long position. Target for a long position, if these conditions are met, would be back at the 20-day SMA, which is now approximately the 50 – 62% retrace of the entire diagonal. Once underway, this would be minor B of intermediate wave (Y), lower.

    • blackjak100 says:

      TJ, (a) looks awfully like a 3 not a 5.

      • BJ .. agree on the ‘look’ but counted live in real time on 5-min chart as a ‘five’, with just a longer fourth wave, and it is what gave me the confidence to claim lower waves. But, beyond that, we now know it simply can’t be a ‘three’ because of the ‘fives’ that follow it, and the (b) wave retrace is in zigzag territory, not second wave territory (i.e. less than 50 – 62%).

    • aahmichael says:

      I disagree with your count. The move down from 2082 is a cascade of subdividing 1-2s. This is what a real impulse wave looks like. It’s not close to being done. By the way, the wedge that was put in over the last day and a half was not a 4th wave triangle. 4th wave triangles do not go all the way into the apex. They stop well short of the apex. The triangle that formed today was the last part of a running correction (a-b-c-x-a-b-c-d-e) that started at 1942 yesterday.

      • We agree it ‘can’ be a cascading set of 1-2s; you think it is, and I respect that. The reason I have shied away from that position at this time is excessive sloppiness of the 1’s! downward. They still look corrective in nature. Or, the two’s are ‘all’ flat waves and that seems like a warning there, too. On the point regarding triangles, I would encourage you to read Neely on this point. He simply calls a triangle which goes to the ‘apex’ a ‘non-limiting’ triangle meaning price can exceed the ‘typical’ triangle target (of the width of the triangle from the breakout point) if it wants to because of the excessive coiling into the apex. This information can be found in Mastering Elliott Wave, by Glenn Neely, in the section on triangles.

        • blackjak100 says:

          The problem I’m having now is it does not ‘look’ like an expanding LD. Why? This wave 5 down extends well beyond the 1-3 trend line. Aren’t they suppose to stop short of that trend line?

        • aahmichael says:

          I studied Neely’s book in depth when it first came out, which was a very long time ago. 🙂 My point is that yesterday’s action was a ‘non-limiting’ triangle, which means it was not a 4th wave triangle, rather, it was just the end of a complex correction that had begun Thursday afternoon. In regard to all the countertrend rallies being flats, that’s the precise reason why I am calling the decline from 2082 a series of cascading 1-2s. There is no alteration, rather, there is only continuation of subdivisions…not to mention the fact that the impulse move down is so powerful that none of the countertrend moves have had the strength to be zig-zags.

          • Very cool that you have read Neely, too. Gives us a basis for discussion. We could completely agree on your interpretation – a cascading series of 1-2’s possible. Triangle and wedges of any type (contracting, expanding, etc.) can ‘indeed’ break down or up into other structures. While I don’t see enough price evidence for it yet, my count clearly does not resist further downside movement, as it projects a large minor C wave to follow-yet, at least, after minor B, up. The point is the call for a major 3 wave, up, does.

          • aahmichael says:

            I always tell people that Prechter’s book is like elementary school for EW, but Neely’s book is grad school. Anyone who hasn’t gone to that grad school is missing out big time.

  10. The current massive distribution pattern dwarfs 2000 and 2007 in time and volume. The bull market ended with 91 month time symmetry (3/2000, 10/2007, 5/2015) and at a 1.618 projection using the 2009 low and 2011 high. It ended when it should have ended and where it should have ended.

    The terms of engagement have now changed. Bull market rules are out. Bear market rules are in. Support is now less relevant than resistance. Oversold is now less relevant than overbought. Buy the dip has become sell the pop. Crucially, many indicators that have worked so well since 2009 will no longer work so well.

    The next rally will probably begin next week around 1900 +/- 10 and it should be a good one. But that rally will be a date, not a marriage, because it will merely represent a brief respite from the pain. The breakout point for the bull market’s climactic phase was 1576.09, and a retest would be a natural technical occurrence that nominally retraces .382 of our dearly departed bull market.

    • instigator928 says:

      Whether Bull or Bear, the typical TNA buy signal that I have used successfully in the past few years has failed three times in a row now. Your point is well taken…

      • instigator928 says:

        And by the way, the same signal worked very well for TZA this week…

        • fionamargaret says:

          …ditto for DWTI, knowing with the salt on the tongue, that UWTI will suddenly change sides again….and therein lies the prize…

    • DNA, your point makes sense, unfortunately. All indicators of many I am following are really failing now. I can’t even see a notable bounce coming up, last hour where looking preparing for a free fall day for Monday. Hope to be wrong…am fully unprepared for it, just paralysed. :((

  11. 4bolt says:

    SPX 1-Day ending 01-08-2016 :

    The projected c-wave down ( of Wave-IV ) has punched into the 78.6% retrace of the b-wave up … And the first red target box has now been firmly penetrated …

    A small bounce should be in order from this general area … Early next week …

    1/3 Shorts covered MOC yesterday … 2/3 Shorts covered MOC today …

    No change to expectation that this pattern is not yet complete to the downside …

    Target for Wave-IV at this time is still +/-1750 area per attached chart …

    Comments, Challenges, and Rebuttals that promote a mutual EW learning experience are always welcome …

  12. lunker1 says:

    Int C = 1.618A = 1918
    right on target 😀

  13. kvilia says:

    The bears are getting obnoxious – looks like a bottom today or Monday morning.
    Have a good weekend Tony and all.

  14. ekr123 says:

    Since the ’09 lows, this week was the 4th worst performing week for the SPX.

    Of the other top nine worst performing weeks, five have seen another decline between 3-8%. 3 of those 5 were in Aug and Sept ’11 (P2) …. A 3% decline from here gets us below the Aug 1867 lows.


  15. Long time reader/first time poster. I realize that EW counts are the name of the game in this blog… However, wondering if Earnings, starting soon, and how FANGs report will be the determining factor for a big up/down trendmaker move in this currently crazy market? Couldn’t that be what the market is waiting for?

    • Dex T says:

      Earnings and fundamentals have mattered little in past years.

      The waves predict the news, not vice versa.

      • Have to say…I ve heard a few “experts” say equities have sold off ahead of earnings the last few quarters in a similar pattern as this one.Low bar rally anticipated by them supposedly.Haven t seen a selloff like this one though ahead of earnings.Looks like Avi may have this one right…going to 1867.Fun times ahead.

  16. kevinm76 says:

    Come on now…. FOLKS! Are you still Bullish? How long will you take the pain? The writing is on the wall, you just have to agree to look past your narrow minds. Don’t go down with the ship!!!!

    P.S. Tony, join the BEARS for a cocktail, they are asking you to join their team. Will you do it? is the question.


    • HookEM says:


    • ekr123 says:

      I used to work and sit next to a know it all who was always right whether the mkt went up or down. By far the worst experience of my prof career.

    • With all due respect, you were pumping the market all through December and saying that Tony was wrong about his P3 labeling because P3 was not over yet and this bull market was going into 2017. Why the sudden flip flop? What did you not see last week of December that you see now? Also where do you see this market heading to 1800, 1750, 1650? Thanks in advance.

      • kevinm76 says:

        Matteo- Yes I did pump…I admit that but the market had a horrible 2nd half Dec on NO news and NO political deadline, like previous years. So NO rally and NO new All-time high. To me that’s the nail in the coffin. I had to switch fast. The October rally was very strong and looked like the real deal. Sadly it was Wave 1 of 5, in favor of the bear case. I needed a strong down move out of the gate in Jan to convince me it’s real. This week was all I needed. Dow theory, transports, R2k.., Manufac #’s, China etc….The list goes on. This is a BEAR and the next level is for sure 1867 but I have a feeling that it will give way and create a panic sell into the 1700’s, causing real panic and confirming the bear to most here and everywhere. At that point there should be a decent size rally for several months into the summer. I guess from there it depends if China has it’s lehman moment or not, in what direction it goes from there. One step at a time.


    • lunker1 says:

      oh Kevin….you’re such an Adventurer!
      swapping from Bull to Bear so quickly 😮

      • kevinm76 says:

        Linker-LOL!!!!!!! WOW! I thought I had the only name out there. Guess not….Hey…He seems like a fun guy.

        Nice search! Gotta love google

      • phil1247 says:


        they cant be the same guy…………….

        the one on the motorcycle finished high school

    • Gary Lewis says:

      You keep trying so hard to sell your thoughts but you don’t provide any charts or data to evaluate. It would be helpful to figure out what you are seeing. Otherwise, you know what they say about opinions …. Thanks

      • phil1247 says:


        have you ever seen a post of his that mentions any stock or long or short position or anything that shows participation in the market ? i have not which leads me to believe he is a teenager escaped from some yahoo chat room

  17. quantmaven says:

    S&P 500 Update:
    I think I finally understood what’s going on. The best way to reconcile what the S&P 500 is doing with energy price action is displayed on the charts below: As energy (XLE) began its bear market in August 2014, it created a corrective pattern on the S&P 500 that is now taking the shape of a large triangle. Both these indices are expected to reach the final low, possibly next week!

    XLE: Wave 5 of [A] ALMOST completed and expected to touch support channel:

    SPX: Wave E of [4] is a large triangle ALMOST completed and expected to touch support channel:

    Conclusion: There is a last flush to go before going risk-on again.

    • captbara says:

      Nice work. Would fake out a lot of bears too when it does a HnS after a bounce off (e)

    • agree…could be monday… a huge puke lower should toss remaining longs…the question i have is whether or not the coming multi day bounce will have too much overhead supply to fight through to sustain or if its just refueling the bear side…

    • CampFreddie says:

      Qtm, again great charts, and I also like your strategic forward thinking.

    • Hi Quant .. like your charts a lot. They show both a lot of thought and great understanding of Elliott Wave. They make me think! Only problem I have with this one is not the chart itself, per se, but the fact that a triangle like this can’t be counted on the Dow, the RUT, WLSH, or DJTran because of the lower lows at (C). Any thoughts on that?

  18. simpleiam says:

    Thanks Tony!
    This market is known for wild moves that haven’t been seen in many decades, or ever seen at all. Pretty sure Mr. Market will figure it out for itself, regardless of the intensive study we all try to put in. Hope those moves are for the better for everyone. WU should be quite a read in the morning.

    Member of OEW Coffee Club

  19. Justyn Byrne says:

    I would be wary of going short right now. My 10 minute chart of the Dow shows a downtrend full of gaps so is hard to count BUT today we had a triangle which has broken out to the downside. A triangle which is a long way down is often a wave 4.

    The triangle target is around 16240 so we didn’t quite get there by the close tonight. The bottom could be in at 16310 or perhaps there is a bit more selling first before we bounce. If price rallies above 16440 which is the bottom horizontal line of the triangle then it should keep heading North for a while.

    I’m not the best at EW counts but I have seen this scenario many times before on the Nasdaq, Dow and also the Dax.

  20. mike7x says:

    Last one (We need some good news/hope in the Weekend Update):

    • Dex T says:

      Thanks! Was interested in this.

      Worse than 2008 as well. I wonder if we will close the year down by a record amount?

      • mike7x says:

        You’re welcome Dex! Whether you’re a bull or bear there’s always been a very good chance 2016 ends in a bear market, including Tony’s forecasts. Not sure of a record amount, but down seems likely.

  21. mike7x says:

  22. tomasso60 says:

    should make for an interesting weekend as everyone pours over charts and the such.
    just purchased a small amount of puts for protection against a down Monday.
    and one powerball ticket
    have a great weekend to all

  23. mike7x says:

    Thanks Tony! We still have time to buy a Powerball ticket. 😉

  24. timmy321 says:

    Tony, looks like you are having second thoughts about this being major 2?

  25. Remain calm, the market is putting in a low for the year. I see us reaching 2288

  26. SPX extended channel valid back to oct 2014…..lower trend line is at 1889 area….another move like today would do it OR Monday we begin a big upside move into jan opex…. gl

  27. fotis2 says:

    What a week! First time round for me to see such strong move downside I’m sure Tony and the older hands have had previous exposure to these kind of moves anyway many thanks and looking forward to weekend update.Reminder to self: 100% attention required, this is the point where experience plays a big role.GL Ladies and Gents..

    • kevinm76 says:

      What? Were you 2 years old in 2008? LOL……Living under a rock? How did you miss that year? This is nothing compared to what happened back then.

  28. sweinv says:

    Looks moore and moore we are in a bearmarket. I think we had P4 in october 2014 and the bull finished last april 2015.

    • llerias7 says:

      Right! We are now on a vicious wave C down of Cycle 2 Bear for a couple of months. Might target 1600´s at the end. The sooner people understand it the better. Nevertheless next week may assist a powerful counter-trend move for weeks taking spx to 2040-2060 again (M2 of C). Take care. Nice weekend.

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