Monday update

SHORT TERM: pullback resumes, DOW -78

Overnight the Asian markets gained 0.4%. Europe opened higher and gained 0.1%. US index futures were about unchanged overnight. The market opened one point below Friday’s SPX 2175 close, and continued lower. The market declined, with only two point bounces, to SPX 2162 by 12:30. Then it tried to rally. The choppy rally continued throughout the afternoon as the market rallied back to SPX 2168 at the close.

For the day the SPX/DOW lost 0.35%, and the NDX/NAZ lost 0.05%. Bonds slipped 4 ticks, Crude dropped $1.10, Gold slid $9, and the USD was lower. Medium term support remains at the 2131 and 2085 pivots, with resistance at the 2177 and 2212 pivots. Tomorrow: Case-Shiller at 9am, then Consumer confidence and New home sales at 10am.

The market opened lower to start the week. After coming within one point of matching the all time high at SPX 2176 on Friday, the market declined today to within two points of Thursday’s SPX 2160 low. The choppy activity that started last Thursday, 2160-2175-2162, still looks like a Minor wave pullback within Int. wave three. Unless the market breaks much lower it looks like that is the best possibility at this time. Short term support remains at the 2131 and 2085 pivots, with resistance at the 2177 and 2212 pivots. Short term momentum hit oversold and rebounded to neutral during the day. Best to your trading!

MEDIUM TERM: uptrend

LONG TERM: uptrend


About tony caldaro

This entry was posted in Updates and tagged , , , . Bookmark the permalink.

73 Responses to Monday update

  1. vedana2016 says:

    I’m a follower market breadth and generally adhere to the principal that breadth deteriorates substantially in advance of major declines. Thus, when breadth is strong, as it is now, probabilities favor continued advances in the major averages. I’ve developed the following chart using % of stocks above their 50dma to assist in identifying when to become defensive.

    It may take a bit of time to decipher the chart when you view it for the 1st time, but the buy and sell signals on the SPY (red and green vertical lines) show that this indicator has done a reasonably good job of staying in sync with the larger trend. When the 2EMA of the indicator is above 80, as it is now, breadth is very strong and any price weakness should be temporary.

  2. torehund says:
    2 waves up since late June 2015, notice time-wise the upturn is = to the following flattish correction…and Rut turns up anew 🙂

    Look for yourself at the 5h chart.

  3. mcgcapital says:

    Here are some thoughts on the longer term picture, and why I don’t feel any regret at moving my long term holdings to cash when the spx was 2070ish. I don’t feel any need to dip back in, even if this goes higher as I ultimately believe these levels will be revisited on the next down turn, so it’s unattractive being long as a buy and hold investor. That being said, the trend is currently up, from a swing trade perspective I’m selling into 2175 and looking to buy 2100-2130 area. From a day trading perspective, obviously none of this matters and as always opportunities both ways.

    1. Fiscal QE, or helicopter money, is some way off in the US and Europe. Japan will be the test case and we’ll see what the impact is. Europe will have difficulty getting it past the Bundesbank. There will need to be recession in the US and all other measures used up before the Fed tries it, so although I think it’s coming sometime, it won’t happen with markets at these levels.
    2. Earnings will continue to be weak. We’ve seen a bounce this quarter on a weaker dollar and rising oil, but both are trends that are unlikely to continue. Looking at GAAP earnings, the picture is dismal. We have the standard Wall Street trick of showing earnings beating in the current quarter whilst simultaneously revising down next quarter. There’s only so long valuations can remain this elevated in the hope that earnings lift off, which never comes.
    3. Political risk is growing globally. Whether it be brexit, trump or nationalists in continental Europe. People want change away from the status quo. And that probably means an increase in the proportion of GDP received by labour and a fall in capital’s share. That’s not good for stocks.
    4. Bond yields have fallen to very low levels, which has supported stocks via the equity risk premium. Markets just don’t believe the fed will raise. Any moves back towards normalising policy could cause a sharp rise in yields and that’s not good for stocks. They’re running low on excuses not to raise, the US economy is doing ok and market volatility has dried up.

    In summary, the trend is up, but there are plenty of reasons why it’s unlikely we’ll keep going up and up. Time to be cautious, as it has been for the last 2 years.

    • bhuggs52 says:

      Mc, cogent considerations. Thank you.

      • fionamargaret says:

        absolutely…and I thought McG might get his 2130 today, with oil a bit higher…..maybe later…

    • vivelaamo says:

      Great post. Any idea whats helping the DAX move higher is this climate. Is it a weaker Euro?

    • Thank you for the info sir.

    • captbara says:

      The irrational period of the tops can last for quite some time. But yes it’s good to start being cautious.


      The other argument. It’s a strong one. I’ll stick with the markets interpretation since we had a classic breakout after a 2 year transitional phase. To look for reasons other than the daily domestic cumulated reports is foolish since that’s how the market interprets a trend 6 months out. A 13 percent increase in earnings is STILL expected over next 6 months. Jobs, housing, even spending is hitting 8 year highs. Me, I’ll trust these reports and it’s implications. The technical picture matches this interpretation as well. Sitting on the sidelines during a breakout wastes most of the possible easy money. Why do people insist on their own interpretation of how the economy works instead of trusting the street? The latest on new home sales suggests there will be no recession for at least 6 months out. In fact such a high pace has always produced accelerated consumer spending. But hey, I have been pounding this message a long while ago and laughed at as if I had no idea what to expect. the last 2 dismal GDP reports I used as proof of what to expect. It was bad but in reading the health of the consumer it showed a strong improvement during that same period. Imagine seeing very weak earnings and corporate and consumer spending but noticing a future trend that was explosive. Exploding it is. That’s why I use fundamental data. It gives you an edge in interpreting choppy long period. Was adamant 2035 would be breached. just as adamant we are in a new up channel that’s well established from mid-February on.

      • mcgcapital says:

        Well done on your trades Gary, you’ve been spot on the last few months. That article actually says most of the surprise is because of low expectations being exceeded rather than data being very strong. And will the expected rise in earnings materialise or will it be pushed back again? On past form there’s a big risk it doesn’t come through. My point was more around being happy with the gains made over the last 5 years and to wait for the next compelling buy and hold opportunity, which I accept could take years. Despite the technical breakout, most of the issues that have caused volatility over the last 18 months haven’t been resolved so it leaves the market vulnerable. We had a fakeout down out of the range only a month ago. If we have a pullback of 3-4% in August it would then potentially look like a fakeout up. Swing trading longs yes, invest and forget is a big no for me given where we’re at.

        • purplember says:

          for 8 years, they kept saying strong GDP growth. it never makes it; however, they say in 2 qtrs strong GDP. market chasing a carrot.

          He will be first president in USA history to never have 1 year of 3% GDP growth. even after a low bar due to recession. think about that !

          • Forget charts and stats that pertain to an environment pre-mortgage debacle. Dynamics changed. Huge overshoot on the downside that is slowly rebounding. zero rate environment, while rare, does have parameters that fit with current situation. Clearly in an accelerated phase from consumer buildup. GDP was dismal when I made my observation. Quarterly earnings in-line with past hits and misses. market is setting up for an explosive earnings growth of 13 percent in next 6 months. Earnings do matter and it had better come thru or the bears will rejoice. Environment suggests we are entering accelerated spending phase which will help the earnings portion somewhat but bring in play the longer term damaging affect of rising rates. I believe when rates start to rise the street will react unkindly, despite the economic numbers.

            Waiting for the pullback on fear we are once again about to crash is unwarranted. I myself am surprised we didn’t retrace already some of the gains. The other option is a slow churn setting up the next surge. that now is in play. The bias bear has a tendency to look at the trajectory and height of the move and see only a chasm awaiting. The bull sees a 2 year ceiling that broke thru and rejoices that the surge will continue. I try to temper the two views and become devils advocate against my natural inclinations. caution is always good. Can’t let it stop you from playing the game at the moment of strongest action.

            Immediate action: How will the street interpret the FOMC announcement along with key players in SP500 earnings announcements. AMZN and AAPL are two such names. Current action looks to be consolidation and not topping. Way too controlled and with a slow grind up after the initial surge. Odds favor another move higher respite everyone’s angst and lack of retrace. Should have a strong clue tomorrow leading into Thursday.

  4. Thank you tony for all of your work!
    Some interesting point of view…
    Considering world growth is based on more consumers… it paints a very grey picture.

  5. captbara says:

    E wave drop of the triangle?

    Too many important meetings for the chop not to continue. Fed tmrw, BoJ Fri.

  6. Take a look at how narrow the the Bollinger Bands have become on an logarithmic all data monthly chart for the S & P 500. Then look at what happened the last two times that occurred. Judging by historical data, it is a pretty clear what direction the market will go in — unless you believe the fatal last words, “it’s different this time.”.

    • Despite reports to the contrary, the monthly MACD has also not yet crossed upward (and it falling backward at such a juncture has occurred at the beginning of the 2008 and 2000 crashes), the stochastic on the monthly charts is giving a sell signal, directional indicators are signaling a change in trend, and the volume on this “breakout” has been dismal. In addition, according to Factset, many companies are revising earnings expectations for Q3 downward. Also read an interesting comment that although some analysts are saying this is the beginning of a secular bull market, that historically such markets do not start with valuations this high. In fact, they start with valuations LOWER than what they were in 2009, at the start of this bull market.

    • vivelaamo says:

      Hi Christine, good post. Would you also agree that we could see a few months of consolidation or even creep higher yet before such a big move played out?

      • Hi Viv,

        Yes, a major change in trend can take time to play out by moving sideways or making a nominal new high over the next few months. I don’t think the S & P 500 will exceed 2250, though, since that is about where the apex of the giant rising wedge (which is also a bearish pattern) that has formed since 2009 is. However, the VIX is very low and in a pattern that looks similar to where it was in November, so it looks as if it can move up sharply and cause a selloff similar to what we saw between Nov-Jan. Honestly, it looks to me like the “breakout” was simply a break upward to the upper trendline of both a small and large megaphone pattern, which if the market reverses and makes a lower low or breaks through the lower trendline of the megaphone, is bearish. Someone posted a chart showing the megaphone pattern below. The only thing that makes me hesitant to be bearish is that there seems to be evidence accumulating that the central banks are manipulating the stock markets to keep them high. This is supported by the fact that the huge bounces in the market correspond with increases in central bank liquidity. Also, every time there has been a large sell-off, a HUGE buy order has been placed in the S & P futures market which triggers all the buy algorithms, causing a sharp recovery Apparently the S & P futures order is so large, that it is likely being placed by a government/central bank since no other entity has resources large enough to place such an order. If this is occurring, I’m not sure it can go on forever or that it can’t be overcome, but it certainly seems to be preventing the market from falling to more reasonable levels.

        • locanbbs says:

          Agree, the CBs are running the market now. Running scared and hooked on their own dope! Like terminal patients with a eternal supply of medicine. Sometime they just collapse without warning.

          • vivelaamo says:

            They’ve been running it is since 2009. Can they really continue this kind of internvention what feels like indefinitely. I’m no economist so it really makes no sense to me. Who is actually benefiting from CB inflated stock markets?

            • They are trying to keep the recovery going long enough until it gains more traction and is self-perpetuating. Keeping the markets elevated theoretically creates a wealth-effect, which should encourage citizens and companies alike to spend more. The problem is that not everyone has money in the stock market (or enough to have such a wealth effect) and companies are not reinvesting money from increased share prices in ways that grow the economy, instead they invest in share buybacks. Apparently there has also been a drop in corporate spending recently due to Brexit and other concerns. Although consumer spending is strong, much of it is related to interest-rate sensitive expenditures such as automobiles, homes, and home furnishings, which may dry up as interest rates rise. The CBs are close to being out of ammo and if the markets collapse and the economy slows substantially, they will have no good tools left. That is why the CBs have an interest in keeping the market afloat, not to mention “saving face.”

              • vivelaamo says:

                Thanks. I guess the last few lines is a good as any to stay long.

              • All I can say to make an impact is always review your written assumptions, look back 3 to 6 months, and see if there is a pattern that should be followed or changed. Review basis for opinion and determine if that opinion had merit by actual events in market. You can’t excuse or dismiss facts. You certainly can’t declare the market wrong and your assumptions correct but street reaction delayed. that gets you in a whole lot of trouble. Understand the current environment and how the market reacts off that. If anything the BREXIT and setback for EU drove our bonds to absurdly low levels. So low that the dividend yields in SP500 NOW exceed the 10 year note. I mentioned this as soon as it happened and the bias interpretation of everything being negative suggested a crash was imminent. I saw the complete opposite. Obviously the breakout even leans credence to my macro view.

                As for earning announcement I see no such revisions for next 3 to 6 months out. perhaps you can guide me to a report? Not logical to assume lower earnings on higher domestic activity. Jobs, housing and zero rate policy has had a long and lasting affect. Hard to imagine the rise in discretionary income these last few years when GDP was in the dumps will not continue to show improvements on spending and earnings. Any revisions to my macro view and I change assumptions along with it. No pride in switching sides Gladly do it if I can make money.

                So I do agree that earnings had belter come thru soon. Spending had better hold up also and corporation need to start to spend also or it will not be sustainable.

              • The tools I use have been validated over decades. That is proof enough for me that they work. I am quite confident in my ability to analyze the market and don’t need tips nor to hear the same opinion over and over again.

              • I mentioned the report regarding downward earnings revision in my post. It is the Factset Research earnings report which comes out every Friday. The latest report summarized the earnings report for Q2 to date and said that many companies are revising Q3 earnings downward. It is a very well respected resource in the investment community. I also have no clue why you’re proposing that I or anyone else look back 3 to 6 months and revise our opinions when many of us, including me, trade long term trends.

              • Consumer spending is concentrated in interest rate sensitive areas. So much for the consumer spending boom lasting. Just read a report about how the Fed doesn’t like the fact that people are complacent about interest rates and that the entire world has rushed into our bond market. Thus, they are expected to make hawkish statements on interest rates in preparation for a September hike. As I’ve said before, although you INSIST that no one else is using facts but you, there are plenty of facts that point the fact that the market is extremely inflated and poised to correct. Also just read an article saying that both housing and stock assets are in bubbles as large as they were in 2000 and 2008. Look at the article that says “One Scary Graph’ on Also, every single parameter that I mentioned in my original post is a FACT. For someone who has no idea how to use indicators or read charts, then perhaps it’s not considered a fact. However, for someone who understands technical analysis and realizes that these indicators are valid and how dangerous the charts look, these are facts. In fact, they are more factual then saying I predict, and I see the consumer doing this or that in 6 months, and once before during low interest rate period this or that happened. The truth is that the markets are WAY ahead of where they should be based on chart analysis and several diferent measures of P/E (i.e. MATH not opinions not a prediction of a future trend). It is a FACT that what is going on presently is not necessarily going to continue, especially when earnings are declining and interest rates are climbing Even if spending and the economy pick up, because of this reason the market can still correct harshly.

              • It is also a well known fact that market tops can take years to build, so suggesting that ta delayed market reaction is a ridiculous concept has no validity. There are delayed market reactions ALL the time in the market, especially at market tops. As for the “break-out” a 1% rise on the S & P 500 above the previous resistance level on paltry volume that has stalled is hardly a breakout.

              • tony caldaro says:

                please people just state your views
                no need to critique others views if they disagree
                opinions make markets

              • With all due respect Holly, I’ve made it very clear to you that I have no desire to debate you, especially about the same thing over and over again. If you have a legitimate question to ask, then you are welcome to do so. Otherwise, please stop challenging me and confronting me constantly on my opinions. You have left posts elsewhere today that make it very clear where you stand and what your outlook is. You don’t need to reiterate it in a challenging and confrontational manner in response to my posts. Perhaps you say the things you do with good intentions, but you also don’t seem to realize that a lot of what you say proves that you don’t understand the markets. I’ve mentioned a couple of things today and several other people have mentioned other things to you previously. As another example, the fact that the S & P 500 dividend yield is higher than the 10 year bond means nothing since there is a risk of a 50% drawdown in capital since stocks are overvalued. The frantic risk taking without regard for such things IS A SIGN OF A MARKET TOP, not a sign that the bull market is going to continue. Have you heard about contrarian indicators? As I mentioned, it has also been reported that the complacency about interest rates will spur the Fed to raise them sooner. As I said, I’m not interested in debating you. If you have a legitimate question, you are welcome to ask me. However, I would appreciate if you would have the grace to stop posting confrontational posts in response to the information I am leaving for other people, who obviously think it has value.

              • tony caldaro says:

                excuse me was my post not understood
                you two (Christine and Gary) are wasting people’s time with these long drawn out posts
                if you have an opinion that cannot be expressed in a few sentences
                don’t post it!

              • Tony, Yes, sorry. I did not see your previous post on this thread until just now. I didn’t think it mattered that much since this is yesterday’s blog. I have also asked Holly/Gary many times to not leave confrontational posts since we’ve already established that we differ in our opinion. I have mostly been posting in response to questions. As I said to Holly/Gary, I have no desire to get into a debate and this will keep my posts fairly brief as they were earlier.

  7. vivelaamo says:

    Tony can I just thanks for opening the comments section. I enjoy reading points of view and articles on here and this new look comments section is refreshing. I’ll be the first to admit I was one of those guilty for it becoming out of control. All the best to you all.

  8. XJY is moving 1.39 at the moment back above 95.Tremendous move,but gold is sitting there.Hopefully by tomorrow it gets into gear.If not….
    Right now pretty disappointing considering the move in XJY.

  9. NEWBIE says:

    Interesting commentary here; wow can you believe Caterpillar in 43rd straight month of declining sales..

  10. John Arella says:

    Something to look out for, not sure if it will happen

    • Should all be about oil and apple. Oil breaks 40 and apple misses tonight look out below for Wednesday. I’m expecting 2110. Re evaluate if and when we get there. Big move up in search of dividends. Earnings and oil need to hold at least reduced expectations. Any miss by Apple, Google etc could be painfull

  11. cosmos77 says:

    Thanks Tony for opening the blog back up. I really missed it. Great comments by everyone. I’m bullish, but it looks like the SPX is in another flat minor wave 4 with a short minor 5 next (short/weak wave 5’s have been a characteristic of this bull market) Then I’m expecting a tradable a-b-c pull back to go long.

  12. NEWBIE says:

    All blogs I follow think downside is limited to 2130 before final move to 2200+ Is everyone right? Or will the market bend over the majority as usual? Many are very complacent after a long bull run at all time high = recipe for disaster.

    • stmro says:

      Newbie, please, youve been making these kinds of comments for YEARS. If you want to be taken seriously, give a target AND a timescale.

      • ariez5 says:

        Agreed this comment is not helpful, but please no targets or timescales. Just charts or observations of market behavior.

  13. locanbbs says:

    UPDATE: Now it seems to be clear: The markets are back in sync–downwards.
    Rut (hourly, futures):

  14. lcd00 says:

    An Observation: virtually everyone and everything I’ve read here and in many other sources over the last few days has SPX as a killer buy at 2120-2132 and Oil an equally strategic buy at approximately $41. Almost no exceptions to this. If this pans out, however, it will be the most telegraphed move of the year, without question. So, does that breed confidence?

    • bfquant says:

      Icd. Is it not valid to treat a backtest of a year’s worth of resistance in the S&P as likely support? Can’t speak to oil.

      • lcd00 says:

        Totally valid, but a massive throng of people are approaching it as essentially a done deal before the backtest has even occurred which has me wondering. The last such major backtest was at the end of June 2013, when the high of 1576.09 from October 2007 was successfully tested with a minor pierce of 16 points at 1560. Of course an equivalent overshoot would put the presumed upcoming test of the prior major resistance at 2119. If that area holds, I agree, who would want to be short? Currently, I’m short.

        • The disbelievers will always find reason to doubt the market. A 2 year hurdle has been decisively breached in every imagined fashion. Domestic economy is still improving in a zero rate environment. So much emphasis was placed on the 2 year barrier for the bears arguments and now you want to reverse that supposition? The reason people see a continued run is exactly because it broke out after a long consolidation period. You think there is some mystery to this? If you are a technical investor use the exact same tools you used in bull and bear markets. The same analysis should be placed whether we are in a 2 year sideways action or a breakout or breakdown trend. You don’t decide to switch your method just because the market defies your logic. Whatever technical indicators you already use as your primary investment choices should still be used. Play the market where the indicators lead you. You want absolute confirmation all the time? How many bets were made with those conditions being met. No perfect system so there will always be one person that sees a dire outcome while the other sees clear skies based on preference to technical indicators. Find what works more frequently.

        • vivelaamo says:

          A valid point but I do think in this low rate environment the market is actually more predictable than we think. It is the large number of contrarian traders that keeps the moves up even stronger. There are still a lot of bears out there.

  15. ajney says:

    Based on astroanalytics, we are projecting change in intra-day trend between 10:30am-12:30pm Eastern Time for US equity markets tomorrow. Our bias is that the next bullish major trend begins on July 27 followed by a secondary thrust on August 1. In any case, bullish/bearish we expect the above dates to dictate short term trend.

  16. 123 abc says:

    Thank you Tony et al, a good evening to everybody.

  17. locanbbs says:

    SPX/Dow in downtrend

    Ndx/Rut still undecided

  18. rcp54321 says:

    Am most recently fascinated by the relationship between Sterling and the Euro. Some years ago Tony wrote of the long term effect of the then forthcoming US Dollar strength and noted certain targets. I’m reminded the Yen number has recently been reached. Amongst others, Sterling and the Euro are approaching their goal – but at a different pace. The initial Sterling/USD target was near parity at 1.05 (and subsequently revised to 1.20.) The Euro, which then bought $ 1.40, now buys $ 1.10 and is thought to be on its way to around 0.85c. On this basis the Pound would fall a further 10% while the Euro would fall over 20% against the Dollar. My assumption, therefore, is there will be more pressure on the Euro ahead than on Sterling and that from todays GBP/EUR relationship at around 1.20 we ought to see a re-test somewhere just above 1.40 within the next six to nine months.

  19. vivelaamo says:

    Thanks Tony. Could really do we this pb continuing to 2135 range. Will be a very good opportunity to go long in my opinion.

  20. stormchaser80 says:

    Hello everyone!

    I wanted to let you know about my model which does a great job at removing the volatility seen in the markets to clearly show the trend. I will soon have BUY and SELL indicators for this model. It does not try to predict the market explicitly, rather I will use numerous technical indicators on this model the same way you would on a stock.

    This is a completely free site. If you want daily content, all you have to do is register for a FREE login. Weekend posts are open to the public without the need for a login.

    Good luck with your trading!

    • guavaghaut says:

      St80. Please stop posting here. It’s better without self promotional posts.Thanks.

      • stormchaser80 says:

        I’ve posted here for years, way before I even had a blog. The blog enables me to discuss things at a length that is not suited for a comments section.

        • guavaghaut says:

          To me it’s blatant self promotion, note my objection.

          • bud67 says:

            Understand, but that is Tony’s responsibility.
            I’am done,

          • tony caldaro says:

            appreciate your observation and objection TY

          • stormchaser80 says:

            I’d like to post a chart too, but afraid I don’t know how with the standard wordpress commenting software. Can I just include a url to the image and it show up automatically? Thanks to whomever can assist me with this!

            • tony caldaro says:

              You can post a chart, by just posting the specific chart’s link.

              • stormchaser80 says:

                Thanks Tony 🙂

                This chart shows the last year of the model (cumulative) in blue vs. SPX in black. Notice in late June when the market had a panic selloff, the model was only going sideways. This divergence was a huge buy indicator which I show in my blog post.

                The model which only goes backwards, is based on the technical health of each SPX stock. I will be putting BUY and SELL indicators after I am able to backtest it to 2006.

                Lots more details at my site. Sorry if this post was not for you.

Comments are closed.