weekend update


The week started off at SPX 1880. After a Monday holiday the market gapped up to SPX 1901 on Tuesday, and then immediately headed lower. On Wednesday the market gapped down at the open, hit a new low for the downtrend at SPX 1812, and then began to rally. The rally continued through Thursday and Friday with the SPX clearing 1900, and ending the week at 1907. For the week the SPX/DOW gained 1.05%, the NDX/NAZ gained 2.60%, and the DJ World gained 0.90%. Economic reports for the week were mostly negative. On the uptick: existing homes sales and the Q4 GDP estimate. On the downtick: the NAHB, CPI, housing starts, building permits, leading indicators, the WLEI, the Philly FED, plus weekly jobless claims rose. Next week the FED meets Tuesday and Wednesday, and we get our first look at Q4 GDP.

LONG TERM: bear market

After a six year bull market it can be difficult to accept that we are now in a bear market. The market is being accommodative, as it has risen 1.4% since the bear market was confirmed a week ago Friday. This week we start off with the SPX monthly chart.


With the last three bull markets being three of the five longest bull markets in history it is a good place to make a technical point. The last five bull markets, the first two were short, are displayed on the chart: 1982-1983, 1984-1987, 1987-2000, 2002-2007 and 2009-2015. Notice the action in the RSI. During 1982-1983: the RSI got oversold only in the 1984 bear market. During 1984-1987: the RSI got oversold only during the 1987 crash. During 2002-2007: the RSI got oversold only during the 2007-2009 bear market. During the lengthy 1987-2000 bull market, the RSI got oversold twice: the 1990 and 1998 corrections. During the recent 2009-2015 bull market, the RSI got oversold twice again: the 2011 and 2015 primary waves. Now after rising back up during primary V, it is heading lower again with the bear market underway. A simple chart with a really good Fibonacci indicator.


The weekly chart displays the entire five Primary wave bull market, and just the early weeks of the new bear market. Primary waves I and II completed in 2011, and Primary waves III, IV and V completed in 2015. Since Primary V failed to make a new high, which we call a fifth wave failure, there must be something negative getting underway in the world’s economy.


Fifth wave failures of this degree, in the US, are so rare I do not recall ever seeing one. However, I might add, China’s SSEC experienced a fifth wave failure of one lesser degree in early 2008. This was an omen of the 2008 melt down. The fifth wave failure in the US may be an omen of another meltdown yet to come. As we have noted for several months, starting in October, it is time to prepare for a bear market.

MEDIUM TERM: potential uptrend underway

After the Primary IV low at SPX 1867 in August, Primary V kicked off in a somewhat choppy fashion. Major wave 1 rallied to SPX 1993, and was followed by an irregular zigzag Minor wave 2: 1903-2021-1872. After that Major wave 3 was quite a rally, hitting SPX 2116, for a 13% gain, in just 5 weeks. Then after an anticipated Major wave 4 to SPX 2019, Major wave 5 simply ran out upside momentum in its effort to make new highs. Not only did Primary V fail to make new highs. Major wave 5 also failed to make a high higher, and Intermediate wave v ended abruptly in a diagonal triangle. We could call this a triple failed top at SPX 2104, about 1.5% from the all time high.


The first decline from SPX 2104 was a complex three back to 1993 (high of Major 1). Then after a simple a-b-c rally to SPX 2082, the market headed sharply lower in another complex three down to SPX 1812. A level not seen since Q1 2014. At that low, which occurred on Wednesday, the market set up a positive daily RSI divergence from an extremely oversold condition and started to rally. In fact, using some metrics, the most oversold condition since the last bear market. We have labeled this low as a potential completed Major wave a, the first downtrend of the bear market. Medium term support is at the 1901 and 1869 pivots, with resistance at the 1929 and 1956 pivots.


If the downtrend actually completed at that low we have an a-b-c decline from SPX 2104-1812 to start the bear market, and this is labeled Major wave A. The current potential uptrend should also be an a-b-c, and will be labeled Major wave B. What would follow then is an equal, or nastier, downtrend for Major wave C, to complete Primary wave A of Cycle [2].


Thus far the uptrend also looks corrective, as it should. We have observed a double three rally to SPX 1890, a pullback to SPX 1860, and now an ongoing rally to SPX 1908. We are labeling the first high Minor a, the pullback Minor b, and the current rally Minor c of Intermediate A. Then after an Intermediate wave B pullback, the market should do another Minor a-b-c to complete Major wave B. Now for some calculations.

Minor wave a was 78 points (1812-1890), and Minor b  bottomed at 1860. If Minor c is 0.618 Minor a it already topped at SPX 1908. If it equals Minor a it should continue higher to SPX 1938. SPX 1908 falls within the range of the 1901 pivot, and SPX 1938 is just above the range of the 1929 pivot. If Crude continues its rally into Monday we are likely to see the higher target. Wherever it tops Intermediate wave B should find support around SPX 1860 (the 1869 pivot). Then Intermediate C should kick in for another rally.

Fibonacci retracements for all of Major wave B suggest three areas: SPX 1928 (38.2%), SPX 1964 (50.0%), and SPX 2000 (61.8%). Also when it does top I would expect the daily RSI to get overbought. Overall, this should be the last decent chance to exit or hedge equities for the next year to two years. Short term support is at the 1901 and 1869 pivots, with resistance at the 1929 and 1956 pivots. Short term momentum is beginning to display a negative divergence. Best to your trading this volatile market!


Asian markets were mixed on the week and lost 0.7%.

European markets were mostly higher and gained 1.0%.

The Commodity equity group were mostly higher and gained 2.4%.

The DJ World index may be in an uptrend and gained 0.9%.


Bonds are uptrending but lost 0.1%.

Crude is downtrending but gained 5.1%.

Gold is uptrending and gained 0.9%.

The USD looks to be uptrending and gained 0.6%.


Tuesday: Case-Shiller, FHFA housing and Consumer confidence. Wednesday: New home sales and the FOMC meeting concludes. Thursday: weekly Jobless claims, Durable goods, and Pending home sales. Friday: Q4 GDP (est. +0.8%), the Chicago PMI and Consumer sentiment. Best to your weekend and week!

CHARTS: http://stockcharts.com/public/1269446/tenpp

About tony caldaro

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528 Responses to weekend update

  1. reddragonleo says:

    Now the tough question… is the high in for this week or do we go up to that 1910-1920 area everyone is expecting?

  2. valunvstr says:

    Every technical person (including me) pointed to the weekly hammer candle. The ONLY thing that made me wonder if the market was going to head lower is the fact that I couldn’t find nearly A SINGLE technician looking for lower prices. And after today, I suspect most will be expecting upside. I wonder only because the huge head and shoulders neckline at 1890 failed again today which opens up the chance of a waterfall lower. This market is really messing with technicians, myself included. That’s why I am hedged and am just hanging tight whether we first go to 2000 or fall apart. Trading is SOOOOOO hard.

  3. lunker1 says:

    gto’s wpp 187.44
    yearly s1 188.0

  4. Lee X says:

    Nice job Pankaj

    The R/R you presented was stellar ..3 handles
    No matter where it goes now that was a bank call
    Cheers !

  5. blackjak100 says:

    CC guiding well…tweet from 5h ago. I saw many wondered who he was over the weekend. Very helpful at times like TC.


  6. johnnymagicmoney says:

    1873 and we bounce

  7. Dex T says:

    Draghi gives Janet Yellen an A+ for rate hike

    “We usually don’t comment on other central bank decisions, but one has to say that the decision the Fed took was appropriate given the position of the U.S. economy,” Draghi said at the World Economic Forum in Davos, Switzerland. “And it was perfectly communicated and flawlessly executed.”


  8. Jim Guthery says:

    I guess oil was a head fake on Friday?

  9. valunvstr says:

    As a bear it seems odd for me to say but today’s action is bullish short term I think. Small caps getting crushed again gives the maker a bit of a coiled spring. For large caps to lose much from here, small caps which have already cratered would have to really collapse. If small caps are to play catch up for the ultimate fall, today might be setting up for a BIG short term bounce in small and continued rally in large. I lean that way because I’m hedged and hedges never work out for me so I’ll assume the same this time around.

  10. captbara says:

    Smells like gap down for B or ii tomorrow.

  11. ariez5 says:

    Breadth pretty bad today. Lower lows. But Friday’s candle very positive. Looks like Int. B to me. Thoughts?

  12. johnnymagicmoney says:

    Russell about to lose all of Friday’s Gain

  13. mike7x says:

    More bearishness down the road? >>>

  14. EL MATADOR says:

    Just for fun what do year 2015 and the SPX ATH 2134 (ignore the decimal #s) have in common?
    2 + 0 + 1 + 5 = 8
    21 + 34 = 55

    The are all Fib numbers

  15. fotis2 says:

    Update on futus DT valid 1869 SPX?


  16. tomasso60 says:

    kind of cool chart on the consolidation of banking industry within the states
    from business insider

    • tradeanimal says:

      Too big to fail just got humongously too big to fail. So much for the regulators.

      • mjtplayer says:

        The regulators are fueling it. The more regulations put upon banks (Dodd-Frank), the more it benefits the large banks. They have the compliance departments and army of lawyers to deal with the increased regulations, the small banks don’t, putting the small community banks at a huge disadvantage. You’ve had the smallest # of new banks created over the past 5 years than over any 5 year period in US history. The more you regulate or tax something, the less of it you’ll get.

        The answer is simple: repeal Dodd – Frank and reinstate Glass – Stegal. This would cut the anchor off the small banks ankle and force the big banks to break apart into separate commercial and investment banks. If Glass – Stegal were not repealed by Bill Clinton and the Republican Congress in the late 90’s, the financial crisis would not have occurred.

  17. Igor says:

    Hey guys, if you are bored, read this blog post of Michael Harris “The Simplest Trading Edge and Peter Principle” , I think it’s interesting:

  18. Page says:

    If you are a Bull thenhave nothing to worry because Yellen will say Bear markets and Oil are transitory🙂

  19. H D says:

    18 (89) LOD, this has been very unique strategy, for over 1 year now. shhhhh. actually they don’t even try to hide it but everyone wants to trade off the FED or oil or VIX.
    1901P…. pivots and fibs.
    Only price pays.

  20. valunvstr says:

    1890 held as expected. Now the bulls on tv will say “oil collapsed today and stocks were up. This is proof of a booth and good for stocks”. Blah blah blah.

  21. phil1247 says:

    1892 es

    test … retest and test again … zzzzzzz

  22. Did this last Wednesday, we hit 1876, 1909 (CLose to 38% fib) and now a pullback. 1977-2000 still VERY possible before the next leg down

  23. Crack 1895.97 bearish cluster and we resume upward march.

  24. Millan Tomic says:

    Gold seems in a very interesting set up before FOMC.

  25. Tony and others. For 2016 does the market go down because oil goes down or does oil go down because the market goes down.

  26. johnnymagicmoney says:

    Tony – this intraday move down here. Assuming we move up from here and keep ascending short term with higher highs would this morning’s drop be Intermediate B or a smaller wave?

  27. Today Lots of people will get out of the train after boarding it……..Very few will wait till last station….

    • straight to 1560? or any meaningful retracement in between….

      • First of all do not trade both way….

        Second, after significant correction book ur profit and again wait to go short…

        third, being in cash does not harm…being in wrong trade harms significantly….

        I am having target of 1560….but if otherwise I may come at the right time again to predict the bottom…

        Lastly….I am making too many comments..people just waiting by to go it wrong….

        • amittsite says:

          Your puts on nifty have gone to 6 bucks..from 20…it’s a holiday tomorrow in india…your emotion is ruling your trades…the hammer is valid on t+1 time frame…there was a holiday on Monday…though I still know it’s a bear market..your argument against hammer is going against conventional TA.

    • jobjas says:

      Today that will be you .

  28. The bearish sentiment almost everywhere seems very pervasive. The fear greed index shows extreme fear. That concerns me somewhat about this gloomy forecast. It would be nice to hear some opinions about that.

    • johnnymagicmoney says:

      my general take is when there is fear of a crisis or recession you have correction type drops. When the expectation is a crisis or recession you have bear type drops, and when the recession or crisis actually shows up you have capitulation. I thought this year was overdone and see lots of cheap stocks out there. That being said I think the expectations change in the next few months as prices drop even more and you see some nasty moves down. All along the way you see lots of downgrades and the valuations don’t look so cheap anymore. This would all fall in line with the bounce and the nastier drop that Tony and others are calling for in the next month or so. I know a lot less than others on here but that’s my two cents in an overview fundamental type of way.

      • mjtplayer says:

        Correct johnny, the fundamentals always lag. Expectations for earnings, growth, GDP, etc will all have to be cut dramatically moving forward, making what looks cheap all of the sudden not so cheap.

        Also, be careful of the smoke and mirrors earnings figures. The bulls always use fuzzy math non-GAAP forward estimates. Forward estimates are always too high, plus the non-GAAP figures are complete nonsense, companies have learned to manipulate the EPS using the exclusions and “one-time” charges. If one uses actual reported GAAP earnings, which are currently $90.66 on the S&P, we’re trading at multiple of 21x – that’s not even in the neighborhood of cheap. If earnings just stay where they are, the S&P will need to fall by almost 30% from here just to get back to the historical average of 15x

    • purplember says:

      sheldon, keep in mind part of the earnings increase past few years is due to company stock buybacks. that will likely end or slow as well as earnings drop that Johnny mentioned. for whatever reason and it’s crazy to me, when stock prices are going up companies buy back shares. when stocks crash or go down, rarely do companies buy back shares. (holding cash is only logical reason i can come up with)

  29. frommi2 says:

    Int iv of Major 1 of Primary V should be nearly completed. Now up to ~1928 to complete Major 1.

  30. phil1247 says:

    first measured move short from high hit -23% target

    now bounce or go thru target …that is the question

    .50 extension short level at 1892 must act as resistance now to keep it going down


  31. phil1247 says:

    jumping the gun a little but added shorts 1888es

    • valunvstr says:

      Takes guts. 1889/90 is either strong support or market falls apart again at those levels. Takes courage. Already hedged 1877 and 1888 so I hope you’re right. I have a feeling it will hold simply because I am hedged there.

      • Gary Lewis says:

        I’m looking for a three day test of the low, around SPX 1859. If we can close the day at or above this level, a pop to 2000?

        • valunvstr says:

          I don’t think it gets there. They are defending 1890 here as I expected and doing it well. If it gets to 1859 I have a feeling you end up in the 1700’s. If 2000 is going to come it is going to be off a ramp today or tomorrow which is my best guess. 1890 was a wall of resistance, now the bulls are going to use it as a floor of support. We will see what the day brings but anyone going short around 1890 is gutsy. I did it on the way up as it was resistance but wouldn’t short unless support broke with conviction, which it has not yet.

    • excellent…will make a lot of money by next monday

  32. 1888 is very short term support…means support for just few minutes….


      • I am 100% sure that it will go down…It can not go against me…….Others may be in confusion …I am not

        • Be a bit humble just a bit…..And never ever pretend you know 100% what the market will do! This is the best way to wipe out your portfolio

        • rc1269 says:

          if you’re 100% sure of anything in this business, then you’re in the wrong business. GL

        • aahmichael says:

          Pankaj, I’d like to offer a friendly suggestion to you. When you come to this forum and simply make proclamations without providing the basis for those proclamations, then don’t be surprised if people ignore you. As it stands now, you’re a human version of a black box. On the other hand, if you would like to share how and why you come to your conclusions, then you might be able to start meaningful conversations, and everyone might be able to take something positive from what you have to share.

  33. 3 point stop loss still working…..ha ha ha

  34. Gotta love the influence of the Fed on the markets (snark). Maintaining hedged long position at this point. Ideal target for me would be 1964’ish. Stop has moved to 1884.49/1881.44 (if hit and reversed back above, would resume long position).

    A reverse of position would come in below 1872.84 and the Stop would be 1892.30.

  35. As many here discussing bullish hammer candle, I am giving my opinion about that:

    “Whenever any index or stocks breaks an important support during a week, it does not want to break that important support on weekly basis in 1st attempt. Therefore a rally comes to make weekly close higher than the important support. It will almost always happen. So hammer candle will be created. ”

    Now my understanding of market tells me that if in next week on Wednesday midday we are still higher than closing of weekly candle, then only it is bullish otherwise it is bearish.

    any wave or pattern always works better in the overall understanding of markets.

    sorry to say but this time it is not bullish hammer. This is only that important support protected on weekly basis.

  36. pbnj123 says:

    Good morning sir
    Two quick questions for you if you do not mind;
    1 – a year or more back you indicated you thought that oil and gas would be where the new job creation would come from after cycle 2 completed going forward – do you still hold that view?
    (I believe it would be very meaningful if it was)
    2 – you stated (also some time ago) that India would be the next great country to take off in a strong bull market (much like China had done previously) – do you still hold that to be the case.
    Thank you for your time and I look forward to your replies.

  37. Silver stalling at 14.25 AGAIN…gold must break 1110-1115.Silver must break 14.30 and 14.40 Then a little rally.Silver sells off again I d lighten up.

    • GDX 50d at 13.75.Must close over that also.Good luck all.

    • EL MATADOR says:

      Any thoughts on Gold’s rounding bottom (per daily chart)? where did we last see one of those, any thoughts? If gold is truly bottom basing the rounding bottom likely the Head of a potential IHS.

      • No thoughts.Taking it a little at a time.As long as gold doesn t break 1070 I ll hang in there.GDX I m hoping to see the 50d get taken out–for more than a day.Has a chance soon.Silver just went to 14.27.Silver dragging gold along today.If silver makes a move–gold will follow.Rounding tops in SPX mirror the gold pattern?

  38. Just an interesting thing:

    Today CNBC tv 18 channel in India has shown a poll for January Expiry of Nifty index. They have given following options:


    Everyone voted for these 5 options. But Nifty will expire at 7200.

    My analysis of the market says brutal crash in S&P on next Thursday, Friday and Monday…..Do not be long…Bulls will be almost crushed on these days…….

    Reason: Whatever FED does, it will be taken extremely negative..

  39. phil1247 says:

    treasury long bond cycles topping …selling bonds here

    • aahmichael says:

      Really? I’m certainly no expert on bonds, but I see the weekly chart of TNX being on the verge of a breaking down through the wedge support. That could easily take it back down to 1.40. I expect TNX move in lock step with SPX, just as it has ever since the SPX high in May.

      • phil1247 says:

        zb short from highs is trading….it would have to break that short to make me want to stop taking bond profits from much lower levels

        26 day bond cycle is due tue

        monthly cycle due mid week

        most important is 3.5 year cycle due in jan

        correlations work until they dont

        what if stocks and bonds go down together now??

        • phil1247 says:

          what if stocks dont cooperate and go up??…then where are bonds

          take profits first …. ask questions later is my motto

        • aahmichael says:

          I see the 10-year as a safe haven play. It’s done nothing since the May high to show me anything different than that. (BTW, the see gold as a safe haven play now, as well.) Remember, though, I’m not a daytrader.

          • phil1247 says:

            yes i was talking about selling my 30 yr bonds that i have as a speculation

            i am selling my 10 yrs but only into spikes because i can hold to maturity if wrong

            dont know how old you are but there is NO way i can hold a 30 yr to maturity lol

    • valunvstr says:

      trade or long term? EDV and TLT setting up for much higher prices after a back test of the break out. Short term agree.

  40. gtoptions says:

    Thanks Tony
    SPY ~ WPP @ 187.44 ~ WR1 @ 191.16 (Strong Resistance Above)
    It’s about ‘making money’ in the time frame you are trading.
    GL All

  41. rc1269 says:

    more thoughts on candles – regarding last week’s bullish hammer…

    rc1269 says:
    January 22, 2016 at 5:08 pm

    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.

  42. Looks like we may rise to 1922 and then have retracement to 1776 or 1577. 1017 seems excessive but 1231 may be the worst its gets.


  43. rc1269 says:

    aahmichael, regarding candles – also a reminder the bigger and longer the pattern, the better they are. you might recall this one from a few weeks ago:

    rc1269 says:
    December 31, 2015 at 3:47 pm
    My parting comment for 2015:

    All three major US indices concluded the year with bearish three-month (that is, a three month setup on the monthly candle chart) candle patterns. We have evening stars on NDX and DOW, and an upside-gap two crows on the S&P. Three month candle patterns are generally pretty strong signals.
    The DOW, for instance, concluded 2007 also with a 3-month evening star pattern (Oct-Dec ’07), which of course framed the top of that bull market.

    • aahmichael says:

      Hey RC. You’re preaching to the choir.🙂

      aahmichael says:
      January 1, 2016 at 9:40 am
      I have no changes to my bearish count. I still expect the next major move to be to the downside, and I think the odds are high that it has already started. It has taken a lot of discipline and patience waiting for the B wave (which began on 11/16 at 2019) to conclude. In addition to all of the bearish factors that I have detailed previously, we can now add in the fact that every index put in a weekly hammer to the downside this past week, which is the exact opposite of the weekly hammer to the upside that they all put in for the week ending on 10/2. The market was very resilient in 2015, as it hung on for dear life, but most of that resiliency was a facade, The averages were held up by just a handful of stocks, but most stocks closed off double digits from their 2015 highs. My expectation is that the market goes straight down starting on Monday, and that January turns into a blood bath. I remain short at 2063, with my stop still at 2105.

  44. pooch77 says:

    Tony should we see a lower low for oil this year if snp falls to your targets.$15ish

  45. phil1247 says:

    Tony and trader joe

    lively discussion you two are having

    my takeaway is either could be right

    i dont really care which it is because they both imply little upside with plenty of downside risk

    everyone should see that the outcome is uncertain here

    if tony is right we could still get a monster b wave up to near the highs just to have it collapse in a c wave later

    this is music to my ears

    ask yourself this question everyone out there…

    do you want to be right …..or do you want to make money??
    this is your chance no matter who is right
    good luck to all

  46. stan502 says:

    GM Tony – after reviewing your charts, note you have an A on wkly for Gold, NatGas and $GKX; any thoughts on B wave targets? Triangle formation at 1300 on GL, 4 on NG, 400 on $GKX?

    • tony caldaro says:

      not really, been too busy to even look at them that closely

      • BDUBS says:

        Thanks for a really great source of info. I rarely comment as I don’t think I can add much. That said, I think the very restrained behavior of the VIX throughout this recent decline is a “tell” (complacency) here that has gotten little to no attention.

  47. phil1247 says:


    extension short traded .50 level

    target 25.20 if long from lows fails

Comments are closed.