weekend update

REVIEW

The market started the week at SPX 2037. After a gap down opening to start the week, and a decline to SPX 1992, the market reversed and rallied quite strongly for the rest of the week. The two day post Br-exit decline from SPX 2113-1992, was nearly fully retraced when the market hit SPX 2109 on Friday. For the week the SPX/DOW gained 3.2%, and the NDX/NAZ gained 3.4%. Economic reports for the week were positive. On the downtick: pending home sales, construction spending, plus weekly jobless claims and the trade deficit rose. On the uptick: Q1 GDP, consumer confidence, personal income/spending, the PCE, the Chicago PMI and ISM manufacturing. Next week’s reports will be highlighted by monthly Payrolls and the FOMC minutes.

LONG TERM: neutral

Took a look at the history of the DOW from 1900-present. Found two periods when the DOW confirmed a bear market, then spent over one year flirting with potential new highs. The two instances are of different wave degrees, but are similar to the current market we have been experiencing since the May 2015 high.

DOW1956

The first one is the 1956-1957 bear market. After a three year bull market in which the DOW doubled, the market spent 15 months attempting to make new highs. Notice it had four uptrends during that period, and all failed to make new highs. Then after failing on its last, and strongest, attempt it broke to lower lows.

DOW2000

The second one is the 2000-2002 bear market. This bear market followed an extraordinary, record breaking, 13-year bull market when the DOW rose from 1,616 – 11,750. Notice after the top it had five uptrends during the following 16 month period, and all failed to make new highs as well. Then after failing on its last attempt, and strongest, it broke to lower lows.

SPX2015

Our current market has done something quite similar. After a six year bull market in which the SPX tripled, the market has spent the last 13 months attempting to make new highs. Notice since the May 2015 high at SPX 2135 the market has had four uptrend attempts to make new highs and all have fallen short: 2133, 2116, 2111 and 2121. Until the market breaks through to new highs we remain long term neutral.

SPXweekly

MEDIUM TERM: uptrend probably underway

This weeks activity generated a WROC signal. These signals usually occur before OEW confirms and uptrend, and are 96% accurate during bull markets. During bear markets the accuracy drops to about 75%, as some bear market rallies can trigger WROC signals. As a result probabilities suggest an uptrend is now underway.

SPXdaily

We continue to count the three wave advance from SPX 1810-2121 as an a-b-c Major wave B. The recent decline to SPX 1992 should have started Major wave C. But the market rallied strongly this week, nearly retracing that entire decline. Should the market confirm an uptrend, and exceed the actual SPX 2135 all time high, then Major wave B is probably subdividing and extending. This would also suggest Primary wave V is underway in the NYSE index.

NYSEdaily

As we have been noting for a couple of months now. A Primary V in the NYSE to new highs, and an irregular Major wave B in the four major indices, would put all five of these indices back in alignment. Even though the SPX/DOW/NDX/NAZ would be labeled B wave advances. The NAZ daily chart is carrying this potential subdividing/extending Major wave B count. Medium term support is at the 2085 and 2070 pivots, with resistance at the 2131 pivot.

NAZdaily

SHORT TERM

The market has been quite volatile since the June uptrend high at SPX 2121. The market first declined to SPX 2050, rallied all the way back to SPX 2113, then declined to SPX 1992 just this Monday. We labeled that decline with three Minor waves creating Intermediate wave A. Then from Monday’s low to Friday the market rallied back to SPX 2109. We had anticipated an Intermediate wave B rally if the market cleared the 2043 pivot. But thought the rally would be limited to the 2085 pivot range. When there wasn’t even a notable pullback at that area we knew the market was heading higher.

SPXhourly

Thus far we can count four waves up from the SPX 1992 low: 2027-2016-2109-2099. Should the market rally back to SPX 2109, or higher, then the entire rally would look impulsive. If not, then it is just another corrective rally in this ongoing choppy market. With US markets closed on Monday anything is possible by time it opens again on Tuesday. Short term support is at the 2085 and 2070 pivots, with resistance SPX 2113 and SPX 2121. Short term momentum ended the week declining from an extremely over bought condition.

FOREIGN MARKETS

Asian markets were all higher gaining 3.3% on the week.

European markets were also all higher and gained 4.2% on the week.

The Commodity equity group were all higher gaining 2.6% on the week.

The DJ World index gained 3.5% on the week.

COMMODITIES

Bonds continue to uptrend and gained 0.5% on the week.

Crude still looks like it is entering a downtrend but gained 3.0%.

Gold continues to uptrend and gained 1.5%.

The USD is also uptrending and gained 0.2%.

NEXT WEEK

Monday: holiday. Tuesday: Factory orders. Wednesday: ISM services, the FOMC minutes, and FED governor Tarullo gives a speech. Thursday: the ADP and weekly jobless claims. Friday: monthly Payrolls and consumer credit. Best to your weekend and week!

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

About tony caldaro

Investor
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631 Responses to weekend update

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  4. fotis2 says:

    Reversed at 38.2 exact 2091.41.

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  5. Scott C says:

    Guys – did we get a 5 down there on the spx… please tell me we see a five down.

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  6. johnnymagicmoney says:

    here come the idiot buyers

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  7. johnnymagicmoney says:

    No idea if we hit new highs or not short term but the more I read about Brexit, political risk, Italian banks, global deflation in some parts and global deflation in others, declining productivity, debt to GDP levels, China, Brazil, FED incompetency, commodity imbalances, Japan, negative rates, PE’s, and a slew of other factors not mentioned the more I am convinced that it is the fundamentals that will bring this market to its knees again. It has gotten to the point where it is mathematically impossible for the collective interconnected risk to not rear its ugly head without a crisis which will lead to a reset in risk assets. Impossible at this point. Price has gotten bulls to believe this is not true. Without question this is a game of musical chairs and each time the music stops something gives way (like commodities over the last year). The contestants left include the large indices but at some point they will be left out as well. The game always ends the same. The rules of musical chairs is the rules of musical chairs and the game accelerates as the contestants drop out. People who believe that the market will continue for years at much higher prices based on great global conditions make me shake my head. I don’t even feel sad for them because they are responsible for their ignorance and greed.

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    • wanderer says:

      I agree with your take on the fundamentals, but I still think it’s all about the *relative* valuations, not the *absolute* valuations. That is, the value of a given asset class is seen as high/low relative to the other asset classes. Bonds look to me much more overpriced that stocks. So I would *not* bet on the U.S. stock market decline.

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      • johnnymagicmoney says:

        price tells me bonds are overpriced but what do central bankers know how to do? Print money. What is Asia doing to the rest of the world? Exporting deflation. Knowing a crisis is around the corner and the propensity for Keynesian absurdity some could argue that bonds are underpriced (short term I think they have gotten ahead of themselves). All depends on the time frame……………..right now bonds are over priced……………next couple years they are underpriced. Over the course of a generation I would say overpriced.

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      • vivelaamo says:

        I agree but I do think there will be one more test of the Brexit lows before they pump in to the moon!! ( hope there is anyway).

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  8. fishonhook says:

    Hi Tony

    I see you quietly removed the B wave from the $SSEC and relabeled it with a c of B to come and also changed the downtrend to ‘uptrend’

    You pretty solid on that change? I have some shorts on SSEC

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