Friday update

SHORT TERM: decline resumes, DOW -185

Overnight the Asian markets lost 1.2%. Europe opened lower but gained 0.7%. US index futures were lower overnight. At 8:30 Retail sales were reported higher: +1.3% v -0.3%, and the PPI was reported higher: +0.1% v -0.1%. The market opened three points below yesterday’s SPX 2064 close, but immediately bounced to 2067 in the opening minutes. After that it started to pullback. At 10am Consumer sentiment was reported higher: 95.8 v 89.7, and Business inventories were reported higher: +0.4% v -0.1%. The market hit SPX 2057 by 10:30, rallied to 2066 by 11:30, and then headed even lower. Around 2:30 the SPX hit 2043, then bounced into a 2047 close.

For the day the SPX/DOW lost 0.95%, and the NDX/NAZ lost 0.40%. Bonds gained 12 ticks, Crude slid 45 cents. Gold rose $5, and the USD was higher. Medium term support remains at the 2043 and 2019 pivots, with resistance at the 2070 and 2085 pivots. Today the Q2 GDP est. was reported higher: +2.8% v +2.2%.

The market opened lower today, rallied to SPX 2067, dropped to 2056, rallied to 2066, then dropped to the low for the week at the 2043 pivot. Looks like the next decline is underway from Tuesday’s SPX 2085 high: 2053-2071-2043 so far. More on this and some other observations in the weekend update. Best to your weekend!

MEDIUM TERM: downtrend probable

LONG TERM: bear market


About tony caldaro

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57 Responses to Friday update

  1. All Chinese stats came in as a minor miss. Let’s see if that can add some fuel to the fire come Monday.

    Have a nice weekend all. Summer was short in Sweden and it seems autumn is back from looking out the window.

  2. rd3777 says:

    Looks like all the smart money left Dodge @the 5th top. Crude might have a little more to go but I think it’s done.We finally have 7 waves up to complete (B) and (C) for 5 waves down to follow $20

  3. ajaysinghi says:

    Spx counts from 1810:

    A) 1810-1931

    B) triangle that finished at 1931

    C.1 1931-2009

    C.2 2009-1969

    C3. 1969-2111

    C4. 2111-2040

    C5. (0-3) 2040-2085

    C5.4 triangle

    C5.5 to start next week and make a new high above 2111 but not to exceed 2133.

    This will mark the end of primary B and c wave will start, targeting 1730 as the end of c1.



  4. beginner101 says:

    BJ, did you try to nibble on longs at the close? A almost equals C at the lows

  5. torehund says:

    Quite possibly migrants might already know something that the West doesn’t know.
    Tide might be turning to the amazement of politicians.
    Peak chaos might have already been reached for the Middle east, and a hammock close to Tigris (minus the tumults) beats what we can offer up here….
    Trumph better hurry up building that wall; if the dollar skyrockets it will tough keeping folks from leaving🙂

    • blackjak100 says:

      yes, exactly what I’ve been pounding home the last few months. This reading has enough energy to carry this bull market to its target end of 2400-2500 sometime next year. IMO, this pullback is going to be the last great opportunity to get long in the right spots for quite some time.

      • fionamargaret says:

        ….seems to me I have been given a really hard time for even thinking this…..

        • Igor says:

          When most people agree with me I feel uncomfortable and start doubting my own analysis🙂

        • Velocity Too says:

          Fiona, can you point to another time when the market has had a multi-month (two-year, really) inverted ellipse like it does now and managed to come back to higher highs? The economy is in an absolute shambles, regardless of what all the pundits exclaim. You can certainly bet on the Fed, but that is only going to last so long before everyone gives up (and super risky at this point in the market cycle). My two cents from way on the outside.

      • blackjak100 says:

        One last comment…please don’t try and tell me earnings matter and there’s no way this will happen. Earnings do not matter in a NIRP environment. They matter in a normalized environment. It’s common sense…if they mattered with 3 consecutive quarters of declining earnings, the market would be nowhere near an ATH. Cheers and GL!

        • johnnymagicmoney says:

          I think the truth lies in the middle BJ. Price is king right? Right. But let’s be honest with the squiggle counting. Squiggle counters are right often and wrong often and one things which is a constant without question is the counts change after the market has already moved explaining everything. There is a down move you can explain and an up move you can explain so to be so confident of 2400 to 2500 is foolish until 2135 gets taken out with force. Until then 2400 is a dream. How does this relate to fundamentals? Fundamentals are like winds and the likihood of your bullish count being fufilled is higher with those winds and visa versa. If per say nuclear war started tommorrow a bear would be confirmed and you’d have your count changed and it would all make sense. Obviously under this scenario the fundamentals ie nuclear war and destruction of earnings (and everything else) would in fact matter. They always matter. If earnings were great and risks weren’t in abundance not only would your bullish count be filled but it would be filled soon. Maybe 2400 is met anyway but there’s a reason it hasn’t been already and that’s been because of fundamentals. Price doesn’t make sense until it does and the lack of logic applied is tired beyond tired. The inability to hit new highs and fall from the downward trend lines like clock IS the fundamentals. I think you change your count when the selloff ensues and you end up saying oh yeah that was a count it just didn’t reveal itself yet. Price sound the story but I think the story helps explain the count too sometimes. I think price and fundamentals always matter over particular periods of time it’s just figuring out the time period where fundamentals don’t. Fundamentals not mattering is elastic and the longer they don’t matter the more elastic it gets until it gets to the point that it IS what matters. I just think it’s at its tippy tippy elasticity. You may argue it gets tighter for just a tad longer but that’s a risky venture. I bet me house that this doesn’t go to 2500 into 2017 without a huge price reset first…..huge. Maybe an exhaustion move a but beyond 2135 like some have suggested like Fiona at 2185 but then reality will set in and fundamentals will still be the same and valuations more stretched and bullishness more complacent and conditions more overbought and huge monthly divergence. You can’t squiggle count to 2500 on market breadth. You said the same thing last time before it dropped. You kept pointing to the breadth cause I went through the comments. Bulls have one more slightly higher high if that. I’d like to see the averages talks out 2040 and 2019 first and with follow through but you have things like Apple and Gilead already doing that. You have the banks looking like crap on longer time lines and you have things like Microsoft not looking so hot. Even GE Is rolling over short term. Then you have Exxon and chevron that are so utterly ahead of themselves and facing other longer term resistance. Biotech as a whole look scrappy and small mid caps and energy longer term look crappy. It’s being held up by Amazon Facebook and staples but most of the stocks look crapoy short term or long term. For the market to be close to highs too many big names that make up the indicies you are squiggle counting on are broken rolling over or facing huge short or longer term walls. This is not healthy at all

    • Eric Wiseman says:

      “More importantly, while the RASI may top out and lead to a corrective period, we are promised a higher high after that correction.” Fade it. He has been a fade for years. A broken watch he is.

      • fionamargaret says:

        …”not always right” is what I usually add….have a nice weekend Eric.x

    • The author jumps to an unfounded conclusion in my view. If anything, the recent peak points to a sizable correction on the near-term horizon. That’s the only thing one might conclude from the past performance of this indicator. There is nothing in that chart – nothing – that indicates there is “definitely” higher highs on the horizon. The indicator has simply bounced up and down as the market has steadily gyrated higher, and the author seems to take that to mean it’s going to go on forever that way.

      Now if they could use the MCO behavior as some sort of indication that the bull market is continuing or it’s changing in character, well that might be of value. But saying that chart will just continue forever is not very helpful.

      • Looking closely at the chart, the points circled don’t show the same behavior compared to each other, and many similar points not circled show contradictory behavior, meaning there’s no correlation, and nothing magical about the +500 level. Maybe with some statistical analysis one could parse out some kind of meaningful conclusion, but the only conclusion one could really draw from this is that the indicator climbs steeply as a rally gains traction. What happens after that is something this indicator is probably not going to predict – like most indicators which are calculated from or are net resultants of the price action. When the markets have big rallies, most sectors and issues participate, so this indicator going higher is neither surprising nor very interesting.

      • Tom McClellan himself on that same site, as he complains that people don’t appreciate his genius, basically points out that its only predictive ability (as I first said above) is that it shows when a rally runs out of steam. His Friday article claims it can do things it cannot. I’ve never liked this indicator, one of the worst offenders of pretending to see something that just isn’t there.

    • Bob Sagget says:

      January 2016 he predicted Treasuries would fall off a cliff in February 2016…because they fell off a cliff in February 2015. Treasuries are headed to new ATHs.

      If earnings don’t matter, why did Apple, Macy’s and other recent earnings blow-ups draw the indexes down? I am less certain the PE ratio of the S&P matters. I am more confident future guidance delivered during an earnings call is interpreted as head lights to the economy which then draws the indexes down.

    • Tom McClellan was calling for a large correction in April, anybody can be wrong twice…

    • mcgcapital says:

      McClellan is clearly a very smart guy but I always have difficulty following his analysis. With market breadth, I get that it’s been strong and more stocks have been rising than falling during the rally. However, it would be useful to know what that looks like underneath as lots of stocks have rallied sharply but still look to be in longer term downtrends. Magic indicators can never be that accurate otherwise they would be competed away. It’s always difficult (and counterproductive) to say ‘this indicator is doing this, therefore price must do this’. Price can do anything at anytime. The facts around price are 1. We’ve not made a new high in a year and every rally towards 2100 has been sold into. 2. the last 3 times we’ve taken out the 2000 area we’ve headed into the 1800s in short order. 3. We’re chopping up and down in a narrow range and the price action here looks more similar to last summer and December than it does to anytime during 2010-2014. To get bullish, we would need to see volatility subside and a steady grind up through 2130. Otherwise it’s just a sideways market with a bias towards breaking down again. It just doesn’t make sense try and run an intermediate term long here, in the same way that it won’t make sense to short 1830 until 1800 is taken out.

    • 9pin says:

      +1 thanks fiona

  6. prakashbkc says:

    TC sir ,
    Downtrend still not confirmed withv) today’s fall? When confirmation will come by breaking 2034 or fall to 2019 pivot required?

  7. vivelaamo says:

    Told you couple of weeks ago we had a sexy H&S in play. Neckline to be tested next week.

  8. EL MATADOR says:

    Today’s Global Currency War appears to be reaching a inflection….Does 1936 Currency War inflection point ring any bells, maybe…Only this time it’s EU and Japan in lieu of France and UK threaten to pull the trigger and causing the domino effect.

    Jacob Lew warns of risk of currency battles hurting global economy

    • simpleiam says:

      Agree, this is a huge risk; fortunately, in watching the debate from UK, the vote, thus far, is against Brexit. However, I don’t expect China, Japan, or any of the other countries involved to live up to their promises; they haven’t yet. If pushed far enough, and hard enough, Brexit could become a reality. Some bloggers here keep pushing U.S. conditions improving, blah, blah, but don’t realize how problematic this global situation is to U.S. economy. Many just don’t get it…

      • mcgcapital says:

        On Brexit, the bookies have the ‘in’ vote as favourite by some distance but it’s probably much closer to a 50/50 shot. Those voting out are probably more likely to turnout on polling day than those maintaining the status quo, and you have to be a British citizen to vote which will skew towards an out vote vs the whole population voting. There’s a significant proportion of the population who have been adversely affected by open door immigration policies and they will use a vote as a chance to go against this. In London, owning property has become the preserve of the wealthy given a combination of massive population growth and low interest rates. Most people here realise that leaving will be bad for the UK economy in the short term, but to suggest that we will be unable to negotiate our own trade agreements within a reasonable timeframe feels a bit unrealistic. The elite (politicians, central bankers, IMF etc) seem set on doing whatever they can to encourage a no vote. I think this has more to do with its potential to be a catalyst for a disintegration in the failed European political project rather than any real concern around the UK to prosper outside the EU.

        • tony caldaro says:

          certainly makes sense, thank you

        • simpleiam says:

          Interesting! Thanks for that info, much appreciated!

        • torehund says:

          Selling snake oil, public sniff it guaranteed…..we are all like kids, we tend to do the opposite🙂
          Thinking the same about the open Europe a la Merkel; when somebody offer you something for free it surely doesn’t have the value it once had, if any.
          If a fruit hangs low and isn’t already eaten, don’t eat it🙂

        • ostealth says:

          I would say its high income/well educated vs not, more than London vs the rest.
          In my company, in Cambridge, the choice to stay is unanimous.

          • mcgcapital says:

            Agreed. The wealthy have done well from cheaper labour and soaring house prices, but the inequality gap has grown a lot over the last 20 years

  9. 123 abc says:

    Thank you Tony et al, look forward to the OEWcc (coffee-club) this weekend.

  10. fishonhook says:

    Now Tony…what is that positive divergence arrow you have drawn on the 60 min?

    That is not a nice thing to do to friends when the market closes near the lows.

    I need it a lot lower to bring my puts back from the dead🙂 Have a good week-end

  11. scottycj1 says:

    Pos Divergence in Dow daily RSI

  12. Jack Sparrow says:

    so sometime my IQ is slow to kick in but it does eventually kick in -given it bounced of today from trend line of the move down from 2085 opens up a possibility that move from 2040 to 2085 was the first leg of B and what we saw today was/is the second leg of B (abcde channel- d in play now) then third leg would take us to another high od 2090/2100 region before C starts…

    • Jack Sparrow says:

      or we already had a e of second leg of B today. but seems like the third of B is in play as long as today low is not taken out

  13. EL MATADOR says:

    Thank Tony;
    “…Today the Q2 GDP est. was reported higher: +2.8% v +2.2%.” So it seems the Atlanta Fed starting out with very bullish GDP similar to the way they started out with 1Qtrs 2.7% GDP.

    But Atlanta’s sibling FRBNY seams to be less optimistic this time after being too optimistic with their 1Qtr GDP.

    May 13, 2016: Highlights
    The FRBNY Staff Nowcast for GDP growth in 2016:Q2 remains moderate at 1.2%.

  14. kvilia says:

    Thank you, Tony. Have a good weekend.

  15. rd3777 says:

    Thanks Tony,with the tepid decline in the NDX…which will accelerate down as crude declines I can’t see the market count as bullish…but who knows. We should smash lower.

  16. simpleiam says:

    Those amazing pivots. Thanks Tony!

  17. It was quite the spicy meata ball today, as my count projected.

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