Friday update

SHORT TERM: gap up and go, DOW +211

Overnight the Asian markets gained 3.6%. Europe opened higher and gained 2.4%. US index futures were higher overnight, and the market gapped up to SPX 1896 at the open. The market had closed at SPX 1869 yesterday. At 10am Existing home sales were reported higher: 5.46M v 4.76M, and Leading indicators were reported lower: -0.2% v +0.4%. The market continued higher until 10:30 when the SPX hit 1907. Then after a pullback to SPX 1891 by 11:30 the market rallied to 1909 just past 2pm. A pullback followed to 1899, then the market rallied to end the week at 1907.

For the day the SPX/DOW gained 1.65%, and the NDX/NAZ gained 2.75%. Bonds lost 11 ticks, Crude rallied $2.70, Gold slid $5, and the USD was higher. Medium term support now rises to the 1901 and 1869 pivots, with resistance at the 1929 and 1956 pivots. Today the WLEI was reported lower: 48.1% v 48.5%, and the Q4 GDP estimate was reported higher: +0.7% v +0.6%.

Wild week! After opening on Tuesday at SPX 1901 the market dropped to 1812 by Wednesday. Yet after today’s gap up opening the market has made the round trip back to where it started ending at SPX 1907. Yesterday we noted a seven wave sequence up from the recent SPX 1812 low to 1890, then a drop to SPX 1860. After that we have rallied: 1877-1865-1907-1891-1909. If we tentatively count the rally to SPX 1890 as Minor a, the decline to SPX 1860 as Minor b, we are currently in Minor c of Intermediate wave A, of a Major wave B uptrend. More on this in the weekend update. That daily RSI positive divergence certainly has kicked off a good rally. Best to your weekend!

MEDIUM TERM: uptrend may be underway

LONG TERM: bear market


About tony caldaro

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64 Responses to Friday update

  1. kvilia says:

    Thank you Tony.
    I am a bit lost in the counts and scenarios. Once the trend is established, its easy but since the beginning of the year trend confirmation usually coincides with the trend end. Trying to be careful here and using stops but had so many cuts that as HD said feels like a death by a thousand cuts. Regardless of what one’s belief is, how one would trade this market from the swing trading perspective (2-3 days to 1-2 weeks)? All opinions are appreciated and welcome!

    • fotis2 says:

      Short term swing: on the daily the CCI triggerd a long on Thursday use Tony’s pivots and CCI 0-line and +100-line for targets ie: 1929 AND 1956.Important level to hold Monday 1848 close bellow and it is a 3BR to the downside.A bounce and close on the -100 line is another long.
      Long term swing:On the monthly all I see is a DT wich HAS NOT been validated a close bellow 1867 on monthly will validate for a longer term swing short carefull of the uptrend line on monthly as of 2009/03/02 to date I only get 2 hits with the 3rd coming in at 1780ish I believe Fiona is looking for that level.Can’t post chart ’cause offline but will do so Monday…

    • tony caldaro says:

      What took a week in bull markets can happen in a day in bear markets.
      Unless one is prepared for that kind of volatility a bear market will eat them alive.
      If not prepared, best to stay with the long term trend.

  2. captbara says:

    Interesting timing for this new movie coming out next week..

    Thought the permabulls might like this one 😉

  3. torehund says:

    Every turn is costly.

  4. Finally got the really we’ve been waiting for overnight last night with continuation today and likely over the weekend:

  5. Gary Lewis says:

    I find it incredibly hard to lay off these fast markets. Towards the end of the day, I was remembering a study I did in grad school. The results showed that when the market closes strong on Friday, the play is to buy the open on Monday and sell the close. However, this only worked when the market is in an uptrend. As I don’t believe that the market is in an uptrend, I bought some SH. (SPY Short). Just for fun. Taking it easy for a couple of weeks. Want to see if we hold 191 on SPY on the monthly close. If so, P5 to come. If not, bombs away !!!

    • kvilia says:

      I feel the same. Not a good month for me.

    • We are in corrective move of a very long time uptrend. So all is confusing. Better think we are in medium therm downtrend of a very major longer therm uptrend. So all corrective up moves are extremely fast since they goes with the very core uptrend but the volatility very high is because it is all a fight with the medium therm downtrend. So shorting is very hard and difficult to start and to catch the up move is a dreadful situation.
      Agree with Tony view of an uptrend corrective move and have rethink the 5th wave up. it is not the 5th up. This move behave as an all corrective one and could terminate abruptly or get long way up in an irrational way. Difficult and scary is the less can say.
      The confusion comes from this mixing up and down trends.
      To don’t forget that we still are in the heart of an uptrend. This will be calculated as a (4th corrective wave of a long time impulse wave up) and a corrective cycle 2 of a cycle impulse up.
      Better stay in cash till is finish ?
      Actually I am following Silver Surfer service and have to say he is doing very well with his spreads strategies. The actual volatility is paying out and he knows how to use those spreads, I am a zero on it.

    • rc1269 says:

      except, on all three of those charts the bottom line of the channel has been broken. joe friday needs to check his own facts

      • ewmarkets says:

        5 years is a long time. On log scale, the channel bottom line is not broken.

        • tommyboys says:

          This is correct and the log scale is the only scale you should be looking at over the longer term.

      • timing101 says:

        Nice channels he has there. We are still in the channel. It looks like PI and PIII rode the top channel, while PII and PIV pierced the bottom channel but recovered quickly. I’m in the same camp as HD, we just started PV. Time will tell. Do not want to see a close below 1879 now.

    • valunvstr says:

      Good luck with that. Only the bottom trend line in all the charts arbitrary starts with one low and connects to the most recent. It’s drawn to fit the narrative but is supposed to connect multiple bottoms first before the current low being only the second touch. Total joke.

  6. 3rd times the charm on +div.Would it be too much to ask for GDX to rally with SPX? (rhetorical question).

  7. torehund says:

    No rules apply for now 🙂
    Good weekend to Tony and the gang.

  8. mjtplayer says:

    Thanks Tony!

    Weekly bullish hammer candle in the SPY confirmed! It was close, as the SPY spent much of the day trading near Tuesday mornings’ opening of 189.96 but rallied to create enough of a “body” in the candle and not a long-legged doji. This signals that we should continue rallying, with pullbacks along the way of course, at least over the next couple weeks at least.

    • captbara says:

      NYMO divergence from Dec 14 is pointing to the same scenario.

    • EL MATADOR says:

      Day hammer on Wednesday
      Weekly Hammer this week
      and a rally next week, as it should be expected, could very likely record a monthly hammer

      • Was wondering if you would be so kind as to refer me to a good candlestick source. I’ve been following Stephen Bigalow but would welcome some additional resources if you are aware of any. I’m versed in the basics, just looking for some additional interpretations.

      • mjtplayer says:

        El Mat – if we keep rallying next week up to the SPY 195 – 197 area then you’d have a monthly hanging man candle – which is a type of hammer candle, but bearish.

        Remember the first rule of candlestick charting: weekly candles trump daily, but monthly candles trump weekly. Next Friday’s close will be interesting for the monthly candle.

        • EL MATADOR says:

          Agree it will be oh so berry so bearish.
          Also agree that due to it location it is hanging man.
          I just prefer to call that type of can hammer because as a stand alone candle it is a hammer and that means somebody is about to get hammered if they are careless. 😉

        • lcd00 says:

          The monthly candle you describe (Spy to 195-197) would be a hammer not a hanging man. It (the hammer) would be bullish, not bearish. It would be a replica of the OCT 2014 monthly candle which was bullish. You are describing the inverse of the candle’s implication. Simple definition from Stockcharts: “The Hammer and Hanging Man look exactly alike, but have different implications based on the preceding price action. Both have small real bodies (black or white), long lower shadows and short or non-existent upper shadows. As with most single and double candlestick formations, the Hammer and Hanging Man require confirmation before action. The Hammer is a bullish reversal pattern that forms after a decline. In addition to a potential trend reversal, hammers can mark bottoms or support levels. After a decline, hammers signal a bullish revival.”

          • The Oct 2014 candle on the SPY was at the top of the formation at the time, therefore a bearish hanging man not a hammer. Per your post above “The Hammer is a bullish reversal pattern that forms after a decline” In the Oct 2014 case confirmation did not come so it turned out to be a false signal.

            • lcd00 says:

              Yes you’re right regarding the OCT 2014 Monthly candle being a false signal. I shouldn’t have used it as an analogue because its context was different. Physically, however, that candle is what this monthly candle will become if spy hits 195-197 as MJT states, and, in the case of this January, such a candle would be bullish due to context (after a decline), not bearish. This was my primary point.

          • I’m on board with the formation aspect but feel a little uncomfortable with it being bullish. It certainly wouldn’t be a bearish hanging man and would indeed be a hammer. Where I’m having a problem is that while a hammer is valid after even a small pullback, I’m not real comfortable with the fact that it is preceded by only one down bar. It may indeed prove to be bullish bullish but I would want to see another bar (another month) with a close above the top of the hammer body before I traded it. At least on a monthly basis. Trading on daily candles for a shorter term is another story.

    • Yes I have the same opinion . we might get there because believe it or not the majority is still in denial! Many think the market will go up forever…..

  9. fotis2 says:

    Thanks Tony I’m guesing major a will confirm once we start testing next pivot 1929 at 38.2 retrace..

  10. Thanks TC and have a good weekend. Looking forward to the update.

  11. Caldaro!!

    U duh man!!

    Have a blessed weekend!!

  12. llerias7 says:

    Tony, if the Main trend is down should we not consider a set of five waves down for this Cycle 2? Meaning we are about to complete Major 1 down (currently minor 4 up) or in first stages of Major 2 correcting wave up this one a probable A-B-C structure?

  13. mike7x says:

    Thanks Tony! $SPX weekly chart. Big bottoming candle with a perfect tag of the weekly 200 DMA…

    • vmahambare says:

      its EMA 200. in 2008 it tagged MA 200. then it took around 6-8 weeks to come to MA 50 weekly. Lets see which line it comes back in 2016.

    • valunvstr says:

      What about the August candle that looks exactly the same only it wasn’t the bottom.

      • aahmichael says:

        The difference is that SPY wasn’t a hammer for that week in August. This week it is.

        • rc1269 says:

          The 8/28/15 weekly was indeed a hammer. Also 10/3/14. Just the same as this. Also, the week of 8/12/11 ended in a hammer, which was followed by plenty of downside retesting and then a lower low a month later.

          A hammer is merely an initial signal and means nothing without follow through. Hammers on their own fail nearly as often as they work. The key is whether next week opens above or below this week’s close.

          • aahmichael says:

            8/28/15 was a hammer in SPX, but not in SPY. This time, they’re both weekly hammers.That was the point I was trying to make. 8/12/11 was a red hammer, not a green hammer. There is a huge difference between green and red hammers that have bounced off of bottoms. Other than the 2nd week in September 2008, I’ve never seen a green weekly hammer in both SPX and SPY that didn’t have follow through. Having said that, though, the market is presenting very mixed signals as of the close today…not the least of which is the fact that we have rallied into a full moon, which should signal at least a short term top no later than Tuesday.

          • rc1269 says:

            understood. didn’t realize you were making the distinction between spx and spy. all good my man. thanks for the info!

    • tony caldaro says:

      so that’s where facebook got that term ‘tagged’ from =)

  14. simpleiam says:

    Thanks Tony! Life gets more interesting each and every day. Lots of cranky bloggers the past couple days; full moon tomorrow. (If you’re an astrologer, it’s in the sign Leo.)

    Kiddos, better be careful, as Mom and Pop might decide to come home and eat their young!

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