Tuesday update

SHORT TERM: market drifts higher, DOW +46

Overnight the Asian markets gained 0.7%. Europe opened higher but lost 0.3%. US index futures were higher overnight, and the market opened 4 points above Friday’s SPX 2180 close. Right after the open the market started to pullback. At 10am ISM services were reported lower: 51.4 v 55.5. Around 10:30 the market hit a low at SPX 2175 and started to rebound. By 12:30 the SPX hit last week’s high at 2185. Then it entered a 3-point trading range into the last hour of trading. Then moved higher to close at SPX 2186.

For the day the SPX/DOW gained 0.25%, and the NDX/NAZ gained 0.55%. Bonds gained 23 ticks, Crude added 40 cents, Gold rallied $22, and the USD was lower. Medium term support remains at the 2177 and 2131 pivots, with resistance at the 2212 and 2252 pivots. Tomorrow: the FED’s beige book at 2pm.

The market opened higher today, pullback back, and then hit SPX 2186 at the close. Not much has changed from Friday’s close and the weekend update. The market still has a potential pullback low at SPX 2157, with a potential uptrend extension underway. Potential the key word. With a two month 200-point uptrend already in the books it seems a bit odd to just go sideways for a few weeks and then move even higher. But it has been that kind of market. Short term support is at the 2177 pivot and SPX 2157, with resistance at SPX 2194 and the 2212 pivot. Short term momentum is displaying a potential negative divergence, but not much of a pullback so far. Best to your trading the FED’s beige book!

MEDIUM TERM: uptrend stuck in trading range

LONG TERM: uptrend

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

About tony caldaro

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106 Responses to Tuesday update

  1. johnnymagicmoney says:

    The market’s direction is solely based on one thing and one thing only at this point – BELIEF! Whether raising or not raising are both deemed bad, sentiment will be lost and the top will be in. Right now both dovish and hawkish comments are met with higher prices with narratives that simply reflect faith in the FED’s abilities. You cant spin it both ways forever. In fact, the fact it is spun both ways is a reflection of the delusion and denial. If logic and reality prevailed their would be opposite effects on the markets for opposing stances especially when both hawkish and dovish narratives are consistently accompanied by the same data. Wage pressure, poor disposable income, falling productivity, depressed GDP, poor manufacturing, poor business investment, poor corporate profits and a consistent and continued increase in worldwide debt should not support higher prices when opposite stances are taken. Nothing has materially improved. With all of the support and jawboning and sentiment in the world we are left with blahhhhhh. You would think that the market was beyond ready to fuel the fire but as evidenced of prices it simply just isn’t ready. At what price point or time the elasticity of delusion is simply too tight is the million dollar question but sentiment will shift. Many believe now that it simply won’t and that is part of the delusion – to think that this time is different and that a new paradigm is in effect. The data is already there. The risk is already there. Sentiment and belief in a historically inept and arrogant FED is absurd but its what we have and it is what’s left. To me that’s frightening. Musical chairs folks. Musical chairs.

    • The market is also trading 2 standard deviations above its mean, which is where previous tops were and which for the SP500 is 1140. The markets are wayyyyy overvalued by historical standards, and when they correct the average move below the mean is 40%. This means when the SP500 corrects, the potential trough for that correction may be as low as 700. Hard to believe, but then again, Nasdaq losing 80% of it’s value in 2000 was hard to believe to. I posted a link to the source of this information below on todays blog.

      • If it’s not clear, I meant the mean for the SP500 is 1140.

      • ajaysinghi says:

        By virtue of the fact that the SPX made an irregular flat, even in the worst case scenario, SPX below 1400 is not possible now.

        • Sorry I don’t believe in EWT.

          • Tony also said that 1150 is still possible, just later than he had expected.

          • ajaysinghi says:

            If wishes were horses, we could all do timetravel and see the future. Unfortunately, we can’t. So, our best bet is the use of available TA tools to understand and forecast the future moves.

            Choice is yours. My responsibility was to just let you know that no amount of bearish articles/data can change the outcome now.


            • So you’re more of a master of EWT than Tony is? I trust historical data and math more than opinions, thank you. And with, over 150 years of history, billionaires, Nobel Prize winners, Stanford Ph.Ds in economics, and Tony who is a recognized master of EWT saying the market can drop to 1140, that’s what I believe. If you trust your own opinion and only your own opinion, then maybe it’s you that has the wrong handle on things. I believe that the patterns in EWT are valid, but since it is a tracking tool, rather than a predictive tool (as Tony himself has said, and since everyone who uses it has different opinions, then it has little value. Tony is a recognized master of EWT, so I think I’ll believe his opinion on the matter. Using regression to the mean and trendlines, stochastics, oscillators, etc., IS TECHNICAL ANALYSIS, which is based on math, and is much less subjective than EWT. So, maybe it’s you that has the wrong read on the marketS?

              • tony caldaro says:

                Opinions make markets, best to leave it at that.
                As long as the SPX does not exceed 2336, it could drop back to 1810 or even the 1100’s.
                But if it does exceed that Fibonacci level it will probably hit 3000, or even 3600 before we see the next bear market.

        • johnnymagicmoney says:

          I actually don’t think valuations aren’t that high on a number of firms. Its just that when the whole thing creates a crisis things are sold off strongly. I believe that asset prices will be at incredible levels that just don’t make sense and it will be a huge bull market afterwards so I don’t think valuations are high (outside of bogus stuff like Amazon) I just think an overshoot on the downside due to a global crisis whether it is Japan, Europe, China, or here will cut valuations down to a 10 or an 11 – that’s all.

          • With earnings dropping, P/Es will become more overvalued. And, on some measures like Price/GDP and Price/Sales, the markets are overvalued by 40%. They do overshoot to the downside, so 1140 is entirely possible. This is the target people have arrived at using various measures (including EWT), so I wouldn’t be surpised if that’s where the market ends up. Even by your estimates, if P/Es drop to 10, that is more than a 50% correction for the S&P500, which would land it somewhere in that area.

  2. fotis2 says:

    Geez Louise IF this ever goes down could someone please ring the bell

  3. 248 new highs,94 new lows–Nasdaq.Another pseudo-Hindenburg on that index.

  4. Peter Sliney says:

    Serious drift mode until Friday.

  5. phil1247 says:

    crude oil

    prepare for upside explosion

  6. kvilia says:

    NUGT – after the impressive rally I took part in for the whole 6 hrs yesterday🙂, today it did 5 down and 3 up, so I’m looking for another 5 down to get back in.

  7. Lacker says,”What are we waiting for–raise rates!!!”I guess,never be long PMs day of Fed BSers.GDX worse than gold…I’ll give it one more day of a little selling (Thursday)before buying resumes.Good luck all.

  8. H D says:

    $SPX 87.87, little clues? before the sell program runs. :mrgreen:

  9. lcd00 says:

    On August 9, I posted this Weekly NDX chart showing the last 5 surges since Oct 2014. The first four gained 647, 664, 684, and 685 points, with an avg of 670 points, and the longest duration was 11 weeks. We are in the 11th week currently. The current run is at 660 points.

  10. magnus1234 says:

    DAX30: I put my neck on the line and state DAX30 is in P5.3.3. P5.3.2 ended in some sort of Irregular-X-Flat. Shows best on the 1h chart (my tool is not good enough). Keep on to your winners.

    DAX30 1h: http://www.screencast.com/t/9GcNgmOxmN
    DAX30 Daily: http://www.screencast.com/t/ueUqz5eQkptp

  11. mjtplayer says:

    I’m surprised more people aren’t talking about a potential ED, hard to ignore at this point and one more push up to SPX 2,200 or perhaps 2,210 would do it. Martin Armstrong has this week as a turn in markets, perhaps a rally into Friday/Monday and make a top? Down we go into Oct?


  12. gtoptions says:

    Thanks Tony
    SPY ~ MR1 @ 219.12 ~ YR2 @ 219.42 ~ WR2 @ 219.51
    GL All


  13. The price of food has been dropping in the US since overseas demand has been reduced by the strong US dollar. This has noticeably affected the price of beef, eggs, and cheese since farmers planned for the same strong trend in exports, resulting in a glut of these things. I saw one rancher say that he used to get $3000 per head of cattle, and he now gets $1500. And, the US government just bought 10s of millions of dollars worth of cheese to be donated to food banks (which was just a drop in the bucket compared to the amount of product available) to help stem the glut. I wonder what effect the apparently drastically reduced food exports will have on GDP?

  14. This is a paragraph of Fed gov Williams tonight.
    Good evening; it’s a pleasure to be here to discuss the economy and monetary policy with the Hayek Group. I’ll start with a quick overview of the U.S. economic outlook and what it means for monetary policy. Spoiler alert: The punch line is that the economy has climbed back to FULL STRENGTH, and it therefore makes sense to move monetary policy gradually back to normal. That brings me to the second topic of my talk: What is “normal” monetary policy? After nearly eight years of very low or even negative interest rates and massive doses of quantitative easing around the world, it’s not clear that we can, or should, go back to the old ways of doing things.
    No comment from me…lol.

  15. torehund says:

    Market abhors to make a decision, especially at major inflection points. Look no further than the Eur/USD.
    IF Europe chooses to rise rates it saves the Euro and hinders stagflation, however rising rates will make interest payment on debt intolerable and EU goes BK.
    If Europe prints unequally much the Euro will sink and contribute to stagflation. If Europe attempts to balance their budget through “steals” from Corporate adipose tissue ala Apple, corporations will flee Europe and further their unemployment problems.
    Maybe the Eur/Usd pair will just Zombify or ankylose itself going flat until eternity, just like the flat line on an Electrocardiogram. Economy is dead🙂
    If there is no viable solution, keep going straight ahead until “something” start oscillating from out of nowhere.

  16. chicotheman says:

    Thanks Tony.

    Looking for the big green candle in Sept, big drop in Q4, starting early. For the fun of the very short run, I think might have done 5 up from 2157 into today’s close or tomorrow’s early minutes, implying minus 10-20 SPX before the breakout higher. Any more than tiny gain from here puts this idea under pressure.

  17. mike7x says:

    The next time this 100 year trading range thing happens we should be more prepared for it. Hope I will…

  18. locanbbs says:

    Why US markets moving higher, Europe & Japan moving lower now?

  19. Really Interesting 1 wk old article analyzing historical chart of S&P500 dating back to 1874 and the typical standard deviations the market oscillates between for above trend periods (like now) and corrections. The mean trendline for the historical chart places the S&P500 at 1140. We are currently trading around 2 standard deviations above the mean, which is where most price peaks occurred during the 20th century. During the 20th century, troughs have occurred around 40% below the mean trend. Amazingly, the 2008 crash only brought us 15% below the mean trend.

  20. bouraq says:

    Chart of the day is $NZDUSD by http://www.tradingchannels.uk

  21. fionamargaret says:

    Tony, what happened to the replies from Camp Freddie, Fotis, Sparrow and yourself this afternoon….to show on the Weekend Update….Thanks.

  22. rd3777 says:

    Thanks Tony, final wave up?

    • Scott C says:

      Would be happy to see it… this whole trip burnt me bad. Wouldn’t mind seeing tones initial forecast work

  23. mike7x says:

    But when will the (+/-) breakout occur? Sooon…

    • tony caldaro says:

      took out last week’s high at the close
      opportunity ahead

    • CB says:

      It’s a bull flag, imo, Mike. Also growth stocks are leading for now… So I’m not getting paranoid just yet. Although my computer crashed briefly today and I got the “blue screen” thing (with a ‘friendly message from Microsoft that they were just spying on me😉 …are they in cahoots with the Saudis too now? … 🙂
      GL everyone! Thanks Tony!

  24. Ajney says:

    Gold and silver were star performers zooming as gold bottomed after the energy date last week. This uptrend may last till Sep. 8 closing as Sep 9. is the next energy date. Details at https://astroanalytics.wordpress.com

  25. mjtplayer says:

    Thanks Tony. Huge miss for ISM non-manufacturing this morning, 51.4 vs. expectations of 55.0 – that’s gonna take a bite out of Q3 GDP

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