Wednesday update

SHORT TERM: another gap up and go day, DOW +257

Overnight the Asian markets lost 0.5%. But Europe opened higher and gained 2.8%. US index futures followed Europe and were higher overnight. At 8:30 the PPI was reported higher: +0.1% v -0.2%, Housing starts were reported lower: 1099K v 1149K, and Building permits were reported lower: 1202K v 1232K. Then at 9:15 Industrial production was reported higher: +0.9% v -0.4%, and Capacity utilization was reported higher: 77.1% v 76.5%. The market gapped up at the open to SPX 1910 and continued to rally. The SPX had closed at 1896 yesterday. The rally continued until 12:30 when the SPX hit 1928. Then after a small pullback to SPX 1923 by 2pm the FED released the FOMC minutes: http://www.federalreserve.gov/newsevents/press/monetary/20160217a.htm. The market then rallied to SPX 1931 before having a larger pullback. At 3:30 the market hit SPX 1923, then bounced to close at 1927.

For the day the SPX/DOW gained 1.60%, and the NDX/NAZ gained 2.25%. Bonds lost 13 ticks, Crude rallied $1.60, Gold rebounded $7, and the USD was lower. Medium term support rises to the 1901 and 1869 pivots, with resistance at the 1929 and 1956 pivots. Tomorrow: weekly Jobless claims and the Philly FED at 8:30.

The market gapped up at the open for the third day in a row. This time gapping right over the OEW 1901 pivot, after closing at SPX 1896 yesterday. The market has now had gap up openings over three consecutive pivots: 1841, 1869 and 1901. The SPX then rallied to the 1929 pivot in the afternoon and ended the day below it. This has been quite an interesting three trading days, since the SPX 1810 low late last Thursday. We continue to count five Minor waves up from that low: 1836-1822-1888-1875-1931. At today’s high short term momentum was displaying a very slight negative divergence, and the daily RSI has just hit overbought. This suggests a more substantial pullback, possibly back to the SPX 1880’s, could be next. Short term support is at the 1901 and 1869 pivots, with resistance at the 1929 and 1956 pivots. Best to your trading!

MEDIUM TERM: uptrend likely underway

LONG TERM: bear market

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

About tony caldaro

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213 Responses to Wednesday update

  1. Here’s a last update on the intraday count. Bears can claim, “waves are out of channel”. Bulls can claim, “doesn’t look impulsive, lower, yet”, and “no overlap”. Still ‘can’ count a wave (4) as a W-X-Y, a FLAT-X-ZIGZAG. If this does wind up being a horizontal wave (4), it would help illustrate more clearly the idea of the “fourth wave conundrum”. It’s not clearly down. It’s not clearly up. Either could a occur. The move lower could be ‘grinding’ lower before a gap lower. But, an overnight gap up can make the count into a clear “five”. The EWO still supports a wave (4).

    SPX - Intraday - Feb-18 1506 PM (10 min)_EOD

    In the cash market, the potential stop was hit, In the futures market, depends how many ticks you leave for execution (i.e. two ticks? five ticks?). If the stop did get hit, and market heads higher, that is quite common in fourth waves.

  2. kvilia says:

    Acquired a very short time frame interest in DUST@4.70. What would Fiona say about this?

  3. OneAndOnlyUniverse says:

    AB CHART-
    Your best resource about oil is a fellow frenchman . One of the best . +200% in 08 . Good Luck
    http://www.bloomberg.com/news/videos/2016-01-22/meet-an-investor-who-made-money-as-oil-fell

  4. spindoc73 says:

    With 91 strike puts trading at 1 penny, a $50 bet at 86 = AAPL would payout 30,000 minus broker commissions. I don’t play the lottery formally, but with the market in this setup and AAPL at that long term trend line, seems like an entertaining way to spend the evening. No offense AAPL, but I hope the feds announce a lawsuit tomorrow for 500 billion in back taxes, ha.

  5. rc1269 says:

    The NAZ is working on a dark cloud cover candle today, if we were to close right here. fwiw

  6. chrisk44342 says:

    looks like another hourly close will define what to do overnight

  7. ko68 says:

    Tony, what is the must probable count for DAX right now?

  8. OneAndOnlyUniverse says:

    Expecting a move $spx 2003-8 , Iwm 106.85 before end of lent –
    Gdx getting ready to bang top of megaphone -19.08 – short

  9. some last minute head fakes before it heads lower into the close. my 2 cents

  10. rc1269 says:

    factoring out gaps, looks like we’re up about 33 points on the SPX since the close on 2/11. interesting

  11. john b says:

    weirdly slow, not like it wants to go down,

  12. Is today the day to buy Dust? It seems like GDX run up is getting Extreme overbought, but we have seen gold and minor get in extreme oversold conditions as well. Still think DUST RS 1:10 this time. Itching to pull trigger to but DUST but now holding back since I am a Goldman Contrarian for short terms 🙂

    • kvilia says:

      I can’t believe I made over 30% on DUST in the past week. It certainly is oversold and looks very attractive. I am very interested in dipping my toes again.

  13. lunker1 says:

    SPX hit the .447 of Major A and reversed (within the .382/.447 box). also spy weekly R3 192.60. now expect abc down maybe another 55 to 1875? spy r1 188.12

  14. soulsurfer says:

    Deja Vu??? Off the cycle A low made in mid-March 2008 the S&P 500 rallied initially 6.7% in about 2 days before retracing 50% of that rally. Translated to the current market a 6.7% rally off the SPX1810 low made last week translates to…. wait for it…. SPX1931… What did we hit yesterday? Yes, you guessed right… 1931 🙂 But wait, there is more: I already suggested this on Monday 😉

    http://investingintelligent.com/2016/02/15/2001-and-2008-all-over-again/

  15. H D says:

    For the life of me can’t see what’s holding it up?…. I think it’s the hardest transition, from a time of extreme volatility to none! Mistakes were made. How they stop the tape will always be a mystery to me.

  16. SPX channel at .5 of the channel from the top….back to the bottom?… or upper channel tl? Thinking….with Feb opex tomorrow we stay near spy 193.00 …below spy 194.50 and above spy 190.00 due to over 213,000 put contracts which should act a support. With light spy contract option interest for next week, the market can move more freely to where it wants. http://tos.mx/dms/configShare/itemData/y/f/yfvWSy.png

  17. johnnymagicmoney says:

    Bit surprised the market is not selling off more to be honest. Following 3 days of 6% you would think a decent retracement would be easy to muster. Bot dippers must be at work. That being said still short IWM at 101. Utilities super strong today, financials super weak today, along with Apple, Google, Facebook, and Biotech.

    • I think the april oil contract becomes a front end contract from monday and will be around 33ish in price which will trigger the next wave D down, which will take the overall markets down assuming 1930 of yestereday holds as an high.

  18. simpleiam says:

    A little wry humor here. Use of F word, so if you’re easily insulted, don’t watch:

  19. simpleiam says:

    Okay, let’s muddy the waters even more! Here’s an astrological forecast someone posted on another site:

  20. ABchart says:

    Some informations:
    – Saudi Arabia will not cut production – AFP
    – Iran will not cut production – AFP
    – Iran have 51 millions stored barrels
    – Debt Issued for energy exploration sector is $5 trillion at end of 2015
    – Corporate debt issued for emerging market denominated in $ is 9 trillions.

    • tony caldaro says:

      – Russia and Venezuela will only agree to freeze, but will likely pump more 😉

      • ABchart says:

        Yes Tony, everyone pump more. Parallel market is estimated at +12/13% (plus Iran who want now produce 5 millions barrels instead of 2.5 actually).These quantities are sold at below market prices. We can expect prices between $10 and $40 for many years.

  21. mjtplayer says:

    The light volume continues. Tuesday’s rally was on the 2nd lightest volume of 2016, yesterday was a bit better, but still far lighter then what we’ve been averaging of late. Volume today is very light yet again, with a shot at being even lighter than Tuesday.

    Volume should be stronger heading into OPEX, perhaps tomorrow we’ll finally see some decent volume? Clearly today is just a sideways digestion day, looking for the rally to top-out either tomorrow (OPEX) or Monday (full moon).

  22. Here is an update of the previous chart. Nothing has changed overall. Because there is now a countable downward wave to (4) .. which is three-waves down to A, three waves up to B, and five waves down to C of (4); this suggests ..from a trading perspective to place a stop or stop and reverse below cash 1916.34 as a ‘wave-based’ method of calling a turn. In other words, “let the market call the turn”. One of the reasons such a decision is the market is clearly out of the upward channel, and this is always a key warning sign.

    SPX - Intraday - Feb-18 1113 AM (10 min)

    This is not trading or investment advice, I am only trying to show you how simple trading decisions can be made using the Bill Williams method of counting the Elliott Wave.

  23. kvilia says:

    Avout miners – they are getting yet overbought again on hourly and very overbought on daily. How long can this be happening? I think next drop in SPX will take miners along the ride. DUST will be looking attractive again below 5.

  24. 123 abc says:

    Tony, in regards to 50% to 61.8% retracement for Major-b wave, which of the following upper limits is this taken from ?:
    a. 2134 : The all-time high
    b. 2116 : Primary-v high
    c. 2104 : Primary-v high (orthodox)

    Also, since the DOW had a failed-fifth for Major-a wave, which of the following is taken as the lower limit ?:
    a. 15370 : Primary-iv low
    b. 15450 : Major-a low
    c. 15503 : Major-a low (orthodox)

  25. llerias7 says:

    Dive! Dive! Dive!

  26. Arthur Knopf says:

    Good description of current markets at RightSideOfCharts:

    My view. Looking for a drift lower into early-mid Mar, possible IHS at SPX 1820-30. Fed announces second rate hike, then pauses until after election. Stocks stage strong rally, SPX 2000+ Apr-May. Then crash down into 1700s in summer swoon, aka 1957, 1969.

    • rabbittrader1 says:

      More like , “then crash down to 1475 in summer/fall swoon” I into October as first leg A of crash, before B correction ,then final C wave to 975 to 1000 SPX or lower by late 2017. . IMHO Rabbit

      • reddragonleo says:

        Top of this rally should be next week and then down most of March and into early April. Then I could see a nice bounce and then more down into June. After that we could get a multi-week or month rally, but I’m with you on a crash to 1000 or so on the SPX.

  27. Again, using the methodology of the Eight Fold Path (my term for the Bill Williams’ method), first pick the time time frame for which there are 120 – 160 candles on the chart (in this case it is the SP500 cash 10-minute). Wave 3 – not shown – of (3) is on a peak of the EWO, and wave (3) on a divergence. For wave (4), the EWO comes back to +10% to -40% of the wave (3) peak. Wave (4) can still travel lower as there is no overlap and none of the EWO parameters has yet been violated.

    Then, if this wave is a true impulse, a fifth wave up should be made. You’ll note none of the original wave labels from the 5-minute chart of “five up” have been changed. If the wave does break, and overlap results, or the EWO goes below -40%, then the analyst objectively accepts that the wave ended at 1930, counted as A,B,C with a truncation (but we’re not there yet).

    SPX - Intraday - Feb-18 0954 AM (10 min)

    Cheers, and enjoy the chart.!

    • H D says:

      2 first names always weird me out. I wouldn’t have read his work on that alone. the 134 bars is interesting though.

      you think not even a 15 point hit?

  28. rabbittrader1 says:

    THE CHART SHOWN BY ABchart on Feb 17 2016 with SPX topping at 1973 to 1978 is EXACTLY CORRECT. Short SPX then BUY GOLD NOW for further upside to next target at 1340 per OZ>\.

  29. EL MATADOR says:

    NIRP + QE coming just not yet but you better believe it

    Ray Dalio: What Monetary Policy 3 will look like
    http://www.valuewalk.com/2016/02/monetary-policy-3-ray-dalio/

    • purplember says:

      if FED does QE4, does it take stocks to new high or will bear market continue because FED looks desperate and past QE haven’t been successful. ??

      Opinions ??

      • ABchart says:

        Maybe for Primary B from 1600+/-

      • rabbittrader1 says:

        That will be the straw to break the camels back on confidence in the US dollar and continued currency problems. Stocks will continue to drop (although there could be a short rally on this in late March . BUY GOLD and junior gold stocks. Rabbit

    • simpleiam says:

      Great article! Thanks El Mat.

    • Dex T says:

      It will come after the bear since the markets always move first and, as Dalio points out, will be less effective since interest rates are rock bottom.

      “As a result, Monetary Policy 3 will have to be directed at spenders more than at investors/savers. In other words, it will provide money to spenders and incentives for them to spend it. ”

      The rationale behind this is questionable at best. Dalio is basically saying that “spenders” need to receive the QE because they are the ones who will recycle it in the greater economy. But this is basically long term welfare since spenders cannot hold onto money by nature and are already deeply in debt.

      It honestly sounds like the system he feels will arise is akin to socialism however instead of going to large banks via QE it will go to the general population (spenders) somehow so they keep spending and keep the economy going.

      I get the feeling from reading the article that he believes the Fed is pretty much out of options and will have a limited impact going forward. That QE’s 1, 2, and 3 were their best and QE 4 will be “underwhelming”

      • EL MATADOR says:

        Notice that the analog he points to Y1937-1938 was the start of a 5 year Cycle Bear Market and the PPI decline -15.1% …. CB’s around the world have lost the battle against Deflation

        • purplember says:

          since 2009 our fed gov’t has added about $8 trillion of debt or $70,000 per household. i always have said, if gov’t gave every household a fraction of this and said YOU MUST SPEND IT. the economy would be alot stronger than it is right now.

          • Dex T says:

            Maybe, but once spent it is gone and increasingly ends up in the hands of “savers”. Most of the money is in private hands or in private corporate bank accounts and the Govt. will have to change the tax system to get it back. I don’t think that would help the markets much.

            Margin debt hit record levels last Spring so a lot of the cash in the markets was/is borrowed anyway.

            Dalio is making the argument that QE should go to “spenders” but there is no guarantee that these spenders would invest in the stock market. QE to big banks helped boost the market and it seems that QE to the public would boost the economy but maybe not the market?

        • Dex T says:

          Agreed. It’s points like that and the language he uses which is saying that the Fed is limited going forward. They can impose negative rates and start more QE and this may temporarily boost asset prices but not for very long or that much higher.

          I addition, I posted an article here a few weeks ago in which he thinks that this bear is going to be longer and more severe than many people suspect

  30. kvilia says:

    Ha-ha, I have not seen flip-flop accusations on this board since Mitt Romney ran for president 🙂

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