Wednesday update

SHORT TERM: gap down opening, DOW -249

Overnight the Asian markets lost 3.1%. Europe opened lower and lost 3.4%. US index futures were sharply lower overnight, but recovered some heading into the open. At 8:30 the CPI was reported lower: -0.1% v 0.0%, Housing starts were reported lower: 1149K v 1173K, and Building permits were reported lower: 1232K v 1289K. The market gapped down to SPX 1860 at the open and continued to decline. The SPX had closed at 1881 yesterday. The market continued to decline until 11am when the SPX hit 1825. Then after a brief rally to SPX 1837 by 11am, the market hit its low for the day at SPX 1812 by 12:30. After that it started to rally. At 1pm the SPX hit 1832, pulled back to 1820 by 1:30, then rose to 1876 by 3:30. After a pullback to SPX 1857, the market closed at 1859.

For the day the SPX/DOW lost 1.35%, and the NDX/NAZ lost 0.20%. Bonds gained 14 ticks, Crude dropped 90 cents, Gold rallied $14, and the USD was higher. Medium term support drops to the 1841 and 1828 pivots, with resistance at the 1869 and 1901 pivots. Tomorrow: the ECB meets, then weekly Jobless claims and the Philly FED at 8:30.

The market gapped down at the open today then worked its way down to SPX 1812 in early afternoon. Our potential five waves up for a C wave of a zigzag, from yesterday’s SPX 1865, was nullified at the opening. At today’s low the SPX hit 1812, which was in between the 1828 pivot and the SPX 1791 Fibonacci level noted over the weekend. The rally that followed from that low is the best rally since the Int. C wave began at SPX 2082. Also at the low there is a positive divergence on the daily charts, suggesting this 300 point downtrend may have just ended. A move into the mid-1880’s would add to this possibility. Short term support is at the 1841 and 1828 pivots, with resistance at the 1869 and 1901 pivots. Short term momentum swung from quite oversold to nearly overbought during this afternoon’s rally. Volatile market, best to your trading!

MEDIUM TERM: downtrend

LONG TERM: bear market


About tony caldaro

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273 Responses to Wednesday update

  1. cwallace90 says:

    Hello All,

    Please find an update on markets and a warning. Some tough times ahead for sure.


    • kvilia says:

      Can you possibly share what you are smoking? Are you forecasting an nuclear war scenario? In that case your target is too high.

  2. OneAndOnlyUniverse says:

    Oil is getting to go on a rip in the next week . $spx move to 1993 will have
    many questioning counts. I covered my shorts a week early & have gotten
    hurt buying energy but still buying.
    The r2k chart below is a minor example on why one should not freak (but you can trade l/s for 8% moves )

  3. Now at a critical level : note that price right now has ‘snapped back’ to the longer term two-weekly channel. There continue to be two applicable counts to this point in time; Primary 1,2,3 (circle-1,2,3) and Primary A,B,C (circle-A,B,C) in blue. Because the leg down to yesterday’s low was, in fact, longer, than the Minor A-B-C down to the August 27th low, there is a ‘possibility’ of a Leading Expanding Diagonal forming in the downward direction. An awful lot depends on whether price regains the two-weekly parallel channel or not. The bulls have the edge that the S&P500 did make Primary 3 > 1.618 x Primary 1 in this count. The bears have the fact that the Dow was almost precisely Primary C = 1.618 x A in this count. As others have said earlier – flexibility is the key at the moment, as 1,2,3 and A,B,C are equivalent until they are not.

    SPX - Two-Week - Jan-21 1349 PM (2 week)

    Cheers and enjoy the chart.

    • Thanks Joe. Was hoping to see something from you.

    • aahmichael says:

      Are you using a log scale chart?

      • This is currently arithmetic scale. The primary benefit of the chart, at this point, is that the ending contracting diagonal which ended is May, 2015, has now been “proven out”, as all major indexes have now closed below the intermediate wave (4) low. As you know, I was waiting for the the SP500 to do that, as well as the Dow.

        • aahmichael says:

          My arithmetic chart doesn’t scale the same as yours. My TL connecting 666 to 1075 is currently sitting at approximately 1745. That also means that the market broke out above the top of that parallel channel on my chart in Oct 13, and didn’t come back inside the channel until the August decline last year. At any rate, your 1,2,3 or A,B,C labels for the 6 year rally are the first time I’ve seen anyone (other than myself,) place those labels where you have them. Obviously, I think those are the correct placements. 🙂

    • tomasso60 says:

      thanks TJ
      always appreciated

  4. kvilia says:

    Something to consider – for the first time since Santa rally SPX has gone above, retested and bounced off of 18 day MA (1861) on daily, however that has not been confirmed. Watch out for the 1861, which is coincidentally Tony’s 😉 PP. I will be out of XIV if this PP is broken below.

  5. lunker1 says:

    5 up to 1876 for w1
    c=a ish flat to 1860 for w2?

  6. xuwu992000 says:

    To 1840, then huge rebound to 1920.

    • mjtplayer says:


      I have today’s high as minor A, now dropping in minor B, then C up to finish int A around 1,920+/-

    • rabbittrader1 says:

      Do not think so. At 12:10 PM gold to spx ratio was at 0.579%. Now at 0.59.12%. Gold at 1102 now up from 1092.8 low this AM. When gold breaks through trend line at 11o6 we will be in THIRD WAVE UP to 1135 then 1158 probable. Dont see SPX correcting upward in face of that reality. IMHO. Rabbit

  7. rc1269 says:

    anybody who remembers trading through 2008: many times we we open green and rally the first half of the day, giving everyone hope that some low was in. only to be aggressively sold down into the close. over and over. death by a thousand cuts.
    just keep it in mind and temper all rally enthusiasm. it’s a bear market now, so downside targets should be given more credence and upside/bounce targets taken lightly. GL

    • chrisk44342 says:

      If you’re a flexible trader this market is phenomenal (:

    • tony caldaro says:

      RC a bigger picture question.
      Have been reminded today that China and Emerging economy debt levels have become unmanageable. Much like the debt levels in the US during the great recession.
      Since the US took the world down into the great financial abyss creating a worldwide recession, and then helped them back above water. Are our trading partners about the return the favor to complete this deflationary period?

      • rc1269 says:

        kinda swamped with some trades so i’ll have to give you my short short answer for now: yes.

      • johnnymagicmoney says:

        Here’s my two cents on this ……………..yes!! Although which came first the chicken or the egg in this case. We went bonkers with QE and because we are the standard and the largest most sophisticated market, you can make the case that we are more responsible than anyone else due to the carry trades we created globally that are now being unwound, and the currency wars that are now being waged as a result of our QE coming to a halt. We also caused a lot of the crisis in 09 which spilled over globally which caused a lot of the stimulus and leverage elsewhere post 09. So we could be to blame more than anyone. That being said I often say whose fault is the pig getting fatter if the pig farmer feeds him nonstop? Is it the pig or is it the farmer. The pig doesn’t know any better does he? No one forced the Japs, the Chinese, or the Eurozone to do their stimulus and no one forced China to create so much supply. Chinese stimulated after 09 due to our mess but God the unregulated shadow banking they facilitated beyond what was needed is staggering. There is a constant debate if the Chinese know what they are doing. Well here’s the answer to that question – our Central bankers are much smarter and skilled than they are and look what mess they are creating???? HA In the end its like Enron, or its like the housing bubble. Enron doesn’t happen unless employees, investment bankers, rating agencies, auditors, and investors see what they want to see or look the other way. Housing bubble doesn’t happen without borrowers, investors, investment banks, lenders, Fannie Mae, rating agencies,and politicians in on the game. SO who will be to blame for deflation and this new crisis? Everyone except for Indians in the Amazon, people who live on Easter Island, and the Galapogos.

    • chrisk44342 says:

      excellent advice. I have to admit the vol is pretty extreme. It definitely has not been the norm to see the ES jump through 4-5 ticks at a time. Ultra short term traders really need to cut exposure and broaden stops to trade in this environment.

  8. johnnymagicmoney says:

    I have to say today’s action is extremely disappointing. The second to second correlation to oil has been completely and utterly retarded in the last few weeks but it is what it is. Now oil is up 5% and the market has already lost more than half its gain. Yesterday biotech was up big in a down day and the Russell was up yet today bio is down big in an up market and the Russell is lagging. No follow through on the names that helped fuel things yesterday. Maybe this is just a daily retracement and it closes strong but this isn’t a BTD ripper that normally is associated following a short term bottom. Maybe I should just let aaMichael trade for me =)

  9. Index depends on stock prices. In this rally, Facebbok, MSFT, Aaple, gogle, nflx, have not moved up at all till now.

    AMZN expect $900mln net, MSFT, Google, facebook not far benind. Apple better than expected. You know here it will end..

    2nd wave was result of EURO area concern, 4th wave will be China concern.,

  10. phil1247 says:

    bot 1869 es

    putting hedge back on that was sold in am surge

  11. johnnymagicmoney says:

    I keep looking at the VIX wedge dating back to October………The upper channel was around 29/30 and when it hit it yesterday it sold off. It had been getting less impulsive over the last week and so I thought it was coming to an end soon. Now it looks like it wants to head back down to 17/18 or so. Wherever that is where I see the “B” projection peak out. There are clean charts and there are confusing charts. This to me is one of the cleaner more orderly ones

    • mjtplayer says:

      I don’t see the VIX dropping that far till Primary B, probably this summer.

      I think the downside will be limited to the 20 area during this major B

  12. stan502 says:

    have not read the board so if this is already posted please excuse the interuption; interesting point of information, I walked out yesterday at 12:30 to go to the store – rip your face off rally, walked out today at 10 am, ditto; leaving again tomorrow at Noon fwiw (yes we are in the MidAtlantic blizzard zone). I on the other hand am looking for this corrective W4 to complete on Avi’s turn date Monday 1/25. Best

  13. aahmichael says:

    At this point in time, the ABC running correction count is still in play from 1901. (1935-1812-1890.) 2 touches at the top of the channel, and 2 touches at the bottom of the channel, and C would be a .618 retracement of B.

    • rain54 says:

      you mean 1890 could be the top here and the bear take over?

    • aahmichael says:

      Now we can add in an hourly 3br to the downside, which adds even more evidence that the one day bounce is over. It’s a carbon copy of last Thursday. That C wave bounce lasted 6 hours, and this C wave bounce lasted 7 hours.

      • hk1122 says:

        Hi aah, thnx for your insights. I am still confused.. I do not see 3BR on SPX. Even on thinkswim, that does chart n 30 mins increment (9:30/10:30 etc). What am I doing wrong

        • lcd00 says:

          can someone please inform, what is 3br ? thank you

        • aahmichael says:

          hk, without seeing the chart you’re looking at, it’s hard for me to tell you what the problem is. The hourly 3br reversal today occurred with the 12:30, 1:30, and 2:30 bars.
          Bar #1: Close > open
          Bar #2: Close close of Bar #1.
          Bar #3: Close < open, and close < open of Bar #1

          • hk1122 says:

            In the above I assume you mean Bar#2: close < close of Bar#1

            Here is the rule I was using

            RULES FOR SHORT
            1. Bar 1 closes up
            2. High of Bar 2 is above high of Bar 1 (and Bar 3)
            3. Bar 3 closes below the low of Bar 2 (and ideally also Bar 1)

            I think the difference is bar#2.
            wonder which one should I use
            Tnnx & Regards

            • aahmichael says:

              Your rules are not my rules. In my rules, Bar 1 has to be an up bar, and Bars 2 and 3 have to be down bars. The high of Bar 2 only has to exceed the close of Bar 1, and the close of Bar 3 only has to be below the open of Bar 1.

        • fotis2 says:

          I use the exact same rules for 3BR’s except Bar no.3 must close bellow low of Bar no.2 and Bar no.3 to trigger short.Good example of a long the one on the 2hour futures that just triggered.

  14. phil1247 says:

    buy coming up 1871 es

  15. stmro says:

    We’re skimming along the underside of a downward channel that has capped every bounce since the start of the year. The top of that channel is now between 1885 and 1890, depending on where you draw the line. This makes a low risk / reward short entry.

    However, yesterday we got the first bullish daily candle of 2016 (hammer). Today, if we CLOSE significantly above 1890 (say around 1900), that will be a strong piece of evidence suggesting the short term trend has changed and a cue to lighten up on shorts. There will be better levels to short from!

    • mjtplayer says:

      FYI: Yesterday was not a hammer candle, just a small bodied and long legged candle. The rollover in the last hour or so negated the hammer candle.

      • stmro says:

        Well, whether or not it fits the ‘official’ definition of a hammer, if there is such a thing, it was a violent rejection of the lows, as exhibited by the daily candle. We haven’t seen that since this downtrend began.

        • mjtplayer says:

          If anything it was a long-legged doji, which can be a short-term reversal candle.

          Question: are you using the indices in candlestick charting? If so, then don’t, always use the ETF’s as the indices (DOW & SPX) provide inaccurate opening data due to the time lag in the underlying issues opening.

      • ekr123 says:

        I thought rule of thumb was body needs to be < 1/3 of the range?

    • yes if SPX get out of fully Embedded stochastics on a daily basis than usually it goes to the 20 ma around 1950,that ‘s where it will make sense to short in my view as i write this

    • John Arella says:

      The hourly moving average has held back any rally attempt so unless its droken I think its a good bet to short the market here 🙂

  16. buddyglove says:

    No change of opinion from myself( charts already posted) and still believe we are seeing the mother of all bear-traps, and mkts are at, or close to the lows for 2016. Other global indices have a similar look, and I still expect to see a 4-6% up day very soon. Bull not ended imho.
    Aimho and Good luck/health/fortune to all.

  17. valunvstr says:

    Neckline at 1889/1890. bad news for bears (me) if it doesn’t hold at least in that area. And even if it does, I hate weekly hammer candles. They freak me out. So, end of day weakness or a sell off tomorrow is only comfort to bears short term.

  18. blackjak100 says:

    Since Gann seems to have nailed this short term low, the next area of concern would not arise until 3rd week in Feb during the Gann panic zone (49-55 days after pivot 2082 high). Will this correspond to major C/3rd wave down?

    • stan502 says:

      I was thinking that scenario; one reason why I was looking for a bottom yesterday and turn the other way on Avi’s 1/25 turn date, then down into panic zone

  19. prakashbkc says:

    TC sir,
    Does +ve div on daily chart had significance in this bear market cycle wave 2 ?

  20. USO hit the bottom of it’s channel on the 20 yr chart yesterday and now today is breaking up through it’s 30 min channel…..the upper tl of the weekl channel is 36.50 area…. small start but there may be something here… and 30 min chart….

  21. lunker1 says:

    SPY today so far looks like a repeat of yesterday 1PM to 245PM
    a dip, then HH, then diamond consolidation
    next breakout up?

  22. don’t we have 5 waves up to 1890. now working on the 3 rd wave of an ABC down of 3 waves . when complete, we should rally in another 5 waves?,

    • llerias7 says:

      Good to know…spx1940´s should do for this bounce…maybe will took a week to get there…

    • chrisk44342 says:

      Would it make any difference if I told you that what you are trying to do is an excellent way of losing $? Just because your count suggests it should conform to your analysis does not mean it will.

  23. phil1247 says:

    i think we have to retest extension LONG at 1857

    we closed a couple of points above it yest but dipped in today

    my prediction of the close yest was off by 4 points spx but

    my chart may not be exact its around 1855 to 1857

    when i have some time i will check it

  24. Thanks TC! I hope we can get to 600+ posts today. I want tick-by-tick calls darn it! 😀

  25. tomasso60 says:
    Martin A. on digital currency for china?

  26. kvilia says:

    Tony, do you agree the rally is loosing its steam?
    Following Fiona’s hint, my charts are showing 1900 or so for the short term top with next flush down to around recent lows or even just under 1800. This would correlate to low 19’s for XIV within a day or two if it gets there.

  27. Ryan Parker says:

    Any thoughts that DB could be the next Bear Sterns/Lehman? Its already testing its 2009 low, is down ~20% in a week, and failed a stress test last March.

  28. learnedmylesson25 says:

    Oil inventories…bigger build 3.9 vs 2.8.Not too bad probably.Not too out of whack.Market shrug it off? .

  29. John Arella says:

    Now market will go down with oil LOL starting at 11:00 am 😉

  30. H D says:

    Tony’s EMA 34 60 min has contained the crash, 1879 SPX. Wave get’s quantified right here IMO

  31. llerias7 says:


  32. fionamargaret says:

    ..think we have a date with 1779 or so……

  33. lunker1 says:

    3 or 5 up from 1801?
    3 down from 1876 to 1849 c=a into the .382/.447 box
    a solid long set up
    1876 top of 1869p
    pivot tough to crack

    • Millan Tomic says:

      Seems to me (I am a novice in EW), from 1811 we had A/1 into 1876, then irregular B/2 into 1848, and currently C/3 to probably 1900/1910, seems corrective so far

  34. After the hour of power it looks like the sell is temporarily removed. Later it will be about the 1880 level of the ES.

    For now, bear challenged at 1878.66 and a buy is triggered at 1890.27 with stop 1867.92. I continue to watch but am hopeful I can play along with the rest of you soon enough.

  35. learnedmylesson25 says:

    Big oil inventory report at 11am.All the positioning taking place as oil moves in a 30 cent range.That report should set the tone for the day–whether oil is bought or sold.But the dollar is the story today so far,Good luck all.

  36. learnedmylesson25 says:

    Well Draghi and Co trying to jawbone the euro down and thereby boost the dollar.Nothing new but gold taking a hit–which is what they want.Don t buy gold–buy equities!!For today-it s worked for the Central Bankers. (gold probably up everywhere but here).How long they can play this game of fraud is the question.

  37. rc1269 says:

    not the follow through i’d have hoped for so far. we need to get outside of yesterday’s range quickly, otherwise we may still need to revisit the lower 1800s again

    • alexhartley1 says:

      possibly a bit of chop RC before I believe a major turn coming around 26-27th Jan which may well stretch into Mar (talking upside)

      • mjtplayer says:

        I’d like to see yesterday’s low of 1,812 hold for major A and we rally over the next 2 weeks up into the mid 1,900’s in major B, into the Bradley turn dates Feb 3rd & 6th. That would be a nice set-up.

        • alexhartley1 says:

          I was thinking if we don’t bottom till 25-26th MJT (granted we may have already and possibly just need a re-test) then Major B could last through to Mar where’s there another important turn. 2 weeks seems very short for a Major B. I think Feb could see us push higher. Then from down hard again into either May or July for a Primary A bottom.

  38. phil1247 says:


    bond cycle due in a couple of days

    looks like this turn will be a low in rates….

    might mean stock bottom here

    i dont worry about correlations.. trade each market on what they show you

  39. pooch77 says:

    Futes took a big dump after Dragi pop

    • mjtplayer says:

      Futures are as volatile as the cash markets, overnight/this a.m. trading range has been 39pts, from up 18, down 16, unch this morning, then up over 20, now up just 4. Volatility continues.

  40. xuwu992000 says:

    @@@ Headsup guys: my model and count points to a 50+ points rally today, to 1910 area., then reversal. I am 100% long, starting from 1814.

  41. phil1247 says:


    bot long at 1850 es to hedge

    note the -23% target for this long from lows is 1892 es

    EXACTLY the same number as the 50% short entry for the extension short drawn from 1980 to 1804

    coincidence ???? you decide

  42. espanol says:

    DAX has good support on 9.400-9.500.

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