weekend update


Another wild week! The market started the week at SPX 1880. After a gap down opening on Monday the market dropped to SPX 1828, but reversed course in the afternoon. By Wednesday it turned slightly positive for the week when hitting SPX 1882. Thursday, however, started off with a gap down opening as the market hit a new downtrend low at SPX 1810. By late Thursday into Friday the market was rallying back up again, and ended the week at SPX 1865. For the week the SPX/DOW were -1.10%, the NDX/NAZ were -0.55%, and the DJ World index was -2.70%. Economic reports for the week were biased negatively again. On the uptick: retail sales, business inventories, GNP, plus the budget and weekly jobless claims improved. On the downtick: wholesale inventories, export/import prices, consumer sentiment, investor sentiment and the WLEI. Next week, after a Monday holiday, we get reports on Industrial production, FOMC minutes, the Housing market and it’s Options expiration.

LONG TERM: bear market

Bear market wave patterns are difficult to anticipate ahead of time. Just like corrections in bull markets, they can unfold in many possible wave forms. Since the most common wave pattern, historically, is a series of a-b-c’s. We always start labeling the first downtrend of a bear market, and the overall bear market structure, using that assumption, while keeping an open mind to other alternatives. In recent years, with the NDX/NAZ playing a bigger part in the overall US equity market, another pattern has emerged.

During the 2000-2002 bear market, while the SPX/DOW were bouncing around in a series of a-b-c’s, the NDX/NAZ completed a very clear 5-3-5 zigzag into the October 2002 low. Then during the 2007-2009 bear market, all four major indices completed a clear 5-3-5 zigzag into the March 2009 low. Since a Cycle wave [2] bear market does not have to alternate in pattern, it is possible this zigzag pattern will appear yet again. Project, monitor and adjust.


We continue to count the orthodox high of the 2009-2015 bull market as a failed Primary wave V ending at SPX 2116/2104. The actual price high of the bull market ended at SPX 2135. From the secondary high this new bear market has only had one downtrend, which we have tentatively labeled Major wave A. We continue to expect this bear market to last for a year or two while the market loses 45% to 50% of its value. This may appear far fetched, but historically it is quite normal for a Cycle wave bear market.

MEDIUM TERM: downtrend

We had noted last weekend that our tentative Major wave A and B labeling was in jeopardy because of the activity in the NDX/NAZ. After Monday’s decline in the market we updated the SPX daily chart to display a potential five Intermediate waves down from the bull market high. With the NDX/NAZ leading on the downside this pattern looked more appropriate than the count we had been tracking. On Thursday our suspicions were confirmed when the SPX actually made a new downtrend low at 1810, slightly exceeding January’s 1812 low. At this point the five wave downtrend looks quite compelling for Major wave A, as three of the four major indices have indeed made new lows.


During the downtrend decline none of the three down waves, i.e. Int. i, iii and v, looked at all impulsive using the metrics we had used during the bull market. Naturally, each bull and bear market has its own set of characteristics, as we have noted from time to time. Should the downtrend be complete, as we suspect, we will start to hone into the characteristics of this bear market. However, this will take at least a few trends before the overall bear market pattern starts to take shape. Medium term support is at the 1841 and 1828 pivots, with resistance at the 1869 and 1901 pivots.


On Thursday we updated the SPX hourly chart to match the five Intermediate wave down sequence posted on the daily chart. At the same time we posted a tentative Major wave A label at the SPX 1810 low. At that low the market had done the minimum to complete the downtrend, was quite oversold short term, and had positive daily RSI/MACD divergences on the SPX/NDX/NAZ. The DOW had a positive price divergence by failing to make a lower low.


While the declining waves of the downtrend, as noted above, looked choppy. The entire structure displays a short first wave, a very long third wave, then again a short fifth wave. Typical impulsive looking activity. With a potential Major wave A low now in place, a potential Major wave B uptrend can now be anticipated. Normally uptrends during bear markets last from two to four weeks, and retrace from 50% to 61.8% of the preceding downtrend. This would project a rally to between SPX 1963 and SPX 1999 within the next month. Since Int. iv topped at SPX 1947, and Int. i bottomed at SPX 1993 this would create another potential range. Within both of these ranges there are the 1956 and 1973 pivots. With this market having a fondness for the pivots we should start looking for an uptrend high once the 1956 pivot range has been reached.

Short term support is at the 1841 and 1828 pivots, with resistance at the 1869 and 1901 pivots. Short term momentum ended the week quite overbought. Enjoy the three day weekend!


Asian markets were all lower for a net loss of 5.2%.

European markets were also all lower losing 5.0%.

The Commodity equity group were all lower losing 4.6%.

The DJ World index remains in a downtrend and lost 2.7%


Bonds continue to uptrend and gained 0.6% on the week.

Crude, despite gaining nearly 8% Friday, lost 5.0% on the week.

Gold continues to uptrend and gained 5.6%.

The USD remains in a downtrend and lost 1.1%.


Monday: holiday. Tuesday: NY FED at 8:30, then the NAHB at 10am. Wednesday: the PPI, Housing starts, Building permits, Industrial production and the FOMC minutes. Thursday: weekly Jobless claims and the Philly FED. Friday: the CPI and Options expiration.

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

About tony caldaro

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444 Responses to weekend update

  1. torehund says:

    Thanks for the update Tony, think a B-wave is in the cards and then as it unfolds, then the P-5 discussion will heat up at the next junction. As it looks currency-wise the dollar could keep calm for a month or zoo too, justifying the B-wave. When the Euro plummets that will be the W-3 down.
    Its OK to have a roadmap which will be adjusted if the gross count doesn’t fit.
    Trump could inadvertently abolish NATO, no better Dinosaur to succumb if you ask me 🙂
    Taking care of your own home, and success follows also on the grand scale of things 🙂
    Somebody have to return to the kitchen, and it aint me, mind you I have been wrong before 🙂 🙂 🙂
    Good weekend all.

  2. EL MATADOR says:

    Bull crowd just lost a willful bidder ….

    Japan’s state pension fund blocked from direct stocks investments

  3. johnnymagicmoney says:

    This market is funny. Does not want to go down right now. Bots are buying any meaningless inconsequential drop. Rigged as usual. On the bright side Chinese and Japs are doing more stimulus. Thank God they solved everything

  4. captbara says:

    Gold looks impulsive down.

  5. blackjak100 says:

    Biggest rally in this bear market so far albeit on very light volume. BB are getting tight again suggesting a larger move could be on the horizon. The rally has stopped right at 21 ema or middle BB. If green close tomorrow, it would be first 3 day rally this year and since late Dec. Daily RSI reached 62 I think @ 1895 which doesn’t allow a lot more upward movement (maybe 1910-1915) if this is a bear.

    Point of my post is with 5 waves up from 1810 and BB tightening again in a bear market, my bet is the market moves lower from here and an expanded flat played out from 1828. Don’t forget the DOW has 3 waves up from its low which could be a subtle hint. Gl and Cheers!

  6. lunker1 says:

    SPX one more abc down to 4 to prior 4th? and then push for 1810+89=1899 and 1901 pivot and gto’s s2 189.82. seems spy overshoots the s/r ‘s so 1899/1901 works.

  7. Dex T says:

    Fed’s newest member suggests breaking up Wall Street banks

    “In his first speech as head of the Minneapolis Fed, Neel Kashkari urged a radical shakeup of Wall Street’s banks, straddling the line between the Fed’s policymaking remit and political advocacy.”

    “A set of regulations introduced after the financial crisis, known as Dodd-Frank, did not go far enough, he said in prepared remarks.”

    “He said Congress should consider compelling banks to hold so much capital that they can’t fail.”


  8. GDX about .25 from filling 17.13 gap.Last time I thought(from a lower level)we might go right to 15.31 but it didn t happen.Maybe not this time either?Maybe they don t want to take that out until the big -div selloff after new highs on the move.I might nibble a bit today.Good luck all.

    • Jim Guthery says:

      I had gold going down to around 1190? I think the miners might get smacked hard come earnings time?

    • kvilia says:

      I bought DUST after the close last friday and just sold. Positive divergence on daily SPX, yet I’m a bit out of my comfort zone holding more than day or two. If bud is right ( feels that way despite a positive SPX divergence on daily), we should get another flush down, in this case gold may jump one more time before any meaningful down trend.

  9. mjtplayer says:

    Nice point gain today, most of which on the opening gap-up, but volume sucks. SPY on pace for the lightest volume day of 2016. If you’re a bull, that’s not what you want to see…

  10. Caldaro… move PIV to 1810

  11. Here is a clear count on this market, using the methodology of the Eight Fold Path, I have delineated here before. This count is from the recent 1812 bottom. It does, indeed, look like five waves up to this point. For now, who says, “Elliotticians can’t agree.”? I will address the longer term count in my blog later tonight. Remember, the first step is to “select the time frame that provides 120 – 160 candles on the chart”. That time-frame is the five-minute chart in this case.

    In this chart, wave 3 is shorter than wave 1, so it makes a specific prediction that wave 5 should be shorter than wave 3. That is the benefit of Elliott Wave counting : being able to make predictions.

    SPX - Intraday - Feb-16 1415 PM (5 min)_TC

    Cheers and enjoy the chart!

    • fishonhook says:

      “being able to make predictions.”

      And for the more obtuse of us, pray tell what that prediction is?

      • The prediction is that 5 will be less than 3. That means that wave 5 should not exceed that 100% marker, above, or (i.e.) that wave 5 will remain less than 1903.27. Any further movement above that – without an intervening 38% retracement – would mean the count would be incorrect – and a third wave was still in progress. And, further, once wave 5 is complete, there will be (at least) a three-wave decline.

    • aahmichael says:

      I certainly can’t agree with that count at all. Your wave 3 of 1 is extremely forced and tortured, and it makes no logical sense. When a wave 2 is an irregular failure, then that implies incredible inherent strength, yet you immediately follow that up with a wave 4 that overlaps b of 2, which implies incredible inherent weakness. The simple count is a 3-3-5 from 1810. (1859-1850-1895)

      • blackjak100 says:

        or better yet…a 3-3-5 from 1828 (1882-1810-1895).

      • First, I attempted to force nothing. I had count off the bottom going since Friday. Second, this is a ‘five minute chart’ in which overlaps are almost irrelevant. There is no ‘closing’ overlap on any bar within the minute iv and minute ii you are referring to. Third, wave 3 is on the maximum of the EWO. This is an objective placement of it – when the first wave is extended. Fourth, the implications of the 3-3-5 are ‘worse’ than the implications of a ‘five up’, and, so far, at this hour the market has not displayed the weakness the 3-3-5 would suggest.

  12. rc1269 says:

    still waiting for this uptrend to impulse. don’t see anything yet.

  13. tomasso60 says:

    by the way the chart is from Lance Roberts –

  14. tomasso60 says:

    thought that this was an interesting chart

  15. stmro says:

    People expecting this bounce to end after only 2 days are over-eager I think. As Tony says, a Major B should take a lot longer and go a bit higher.

  16. Tony,

    Second comment here not as lengthy as first comment left yesterday morning. Since not sure you saw will say again THANKS or all you provide.

    Quick newbie question(s) – using your metrics/filter can 1810-1888-1874 be labeled as ab of current counter trend rally or still in “a” of abc ? or alternatively, does this wave not need to subdivide before resuming downtrend?

  17. CampFreddie says:

    Bears, look away now … Contrarian bulls, keep smiling and keep on buying.

    • spindoc73 says:

      Interesting chart CampFreddie, thanks for sharing. In bear markets, (%)bulls seem to trend lower in this volatile metric. To be this low this early could be a canary in the metaphorical coal-mine along a trend that is poised to fall deeper than prior bears. Or, as you say, considering contrarian extrema also does not seem unreasonable. This paradox can also be resolved by a near term bottom that has either already occurred, or as my preferred guess, would materialize over the next few weeks. gl

    • rc1269 says:

      i really try to find value in that data, but i can’t. for instance, the market peaked on May 20, 2015. The bull reading that week? 25.21. Barely higher than we are now.

      Recent index peaks and trouphs and corresponding SPX levels:
      11/13/14: 57.93 / SPX 2040
      6/11/15: 20.04 / SPX 2100 (low bull reading close to the present reading)
      10/29/15: 40.39 / SPX 2090

      yes, the point on the chart looks low (an 8 wk avg, fwiw). what does that tell me, other than it’s low? dunno. kinda like that CNN Money fear/greed index. it gives so many false positives i dont know what to do with it. it looks spot-on every time in hindsight, but doesn’t every help you pick the bottom (or top) realtime. IMO. thx for posting tho

    • Dex T says:

      Nobody is denying that there are more bears but so what? It doesn’t negate the U.S. indices being in a bear market.

      This rally will ease some of the bearishness and reset the indicators. As the chart shows above elevated levels of bearishness can persist for years- and should in bear markets.

  18. Page says:

    Last chance to get out of Gold and miners.

  19. bud67 says:

    We are now moving toward a price high, or W2.
    That said, Ideal time to enter the SDS, or VXX
    bear positions. IMO..

Comments are closed.